Top UK Stocks to Watch: Dunelm’s deputy chairman sells £192 million of stock

Dunelm’s deputy chairman cashes in on a number of his investment, Serco buys Whitney, Bradley & Brown, Glencore and BHP provide excellent news on dividends, Safestore continues to grow, and Playtech seals a replacement partnership with a US casino.
Dunelm’s deputy chairman Will Adderley, the son of the company’s founders, has sold a piece of his stake within the homewares company for around £192 million.

He sold 15 million shares, adequate to a 7.4% stake in Dunelm, for 1,280.0 pence each. The shares are bought by institutional investors.

The company said the Adderley family still hold a 43.2% stake within the business following the sale which Will ‘remains fully committed to Dunelm in his role as deputy chairman also as remaining a really substantial shareholder within the company.’ Dunelm has stressed that the sale is being made because Adderley wants to diversify his portfolio.

Last week, Dunelm reported strong growth in revenue and profit during the primary half its fiscal year as demand delayed over the ultimate months of 2020, allowing it to continue generating cash and reinstate its dividend.

Sales rose 23% within the 26 weeks to December 26 to £719.4 million. That, combined with a rather better margin of profit or 52% versus 51.5% the year before, allowed pretax profit to leap over 34% to £112.4 million.

Free cashflow improved significantly to £98 million from £63.9 million the year before, pushing it into a net cash position and allowing it to restart dividends with a 12.0 pence payout. It ended the amount with net cash of £140.9 million compared to a net debt position of £67.7 million a year ago.

Last week Dunelm pushed back above a descending trendline resistance which dated back to mid-October. The share price rallied to a 3-month high of 1420 struck yesterday.

Today’s 7% decline has taken the share price back to the descending trendline resistance turned support at 1260. The RSI has also removed of overbought territory and is heading back to wards neutral ground at 50. Whilst the 20 & 50 sma on the daily chart also show a neutral bias.

If the trendline support holds, an in depth above 1260 could see an attempted recovery back towards 1420p.

However, an in depth below 1260 brings 1225 support the 20 & 50 sma on the daily chart into play. Should the bears break through here the selloff could gain traction towards 1100 A level which has offered support since mid-December.

Glencore said it’s decided to resume dividend payments after strong cashflow in 2020 allowed it to pay down debt to more sustainable levels.

The miner said adjusted earnings remained broadly flat in 2020 as a robust recovery in commodity prices within the last half of the year offset recessionary conditions within the first. Revenue fell 34% to $142.33 billion from $215.11 billion in 2019. Adjusted earnings before interest, tax, depreciation and amortisation were flat at $11.56 billion and adjusted Ebit was up 6% at $4.41 billion.

However, internet loss at the bottom-line widened significantly to $1.90 billion from $404 million.

Glencore said the increase in Ebit was right down to a an ‘outstanding’ performance from its Marketing arm that trades in commodities round the world, which offset weaker earnings from its mining arm due to lower coal prices. Earnings from its Katanga mine within the DRC also resulted in earnings from its African operations quite double during the year.

The recovery in prices fed through to cashflow within the last half and therefore the company said this allowed it to finish the year with net debt of $15.8 billion compared to $17.55 billion at the top of 2019. Net debt is now within its desired range, equalling 1.37x adjusted Ebitda, allowing Glencore to resume dividends with a 12 cents per share payout.

Glencore shares were up 3.5% in early trade at 291.55.

BHP Group said it’s paying a record interim dividend for the primary half after profits jumped on the rear of an improved performance from its ore and copper operations.

The miner said it had been returning over $5 billion to investors with a record interim payout of $1.01 per share, an outsized 55% lift from just 65 cents the year before. That rise represents an 85% payout ratio and is underpinned by a 26% rise in net operating cashflow to $9.36 billion.

‘Our continued delivery of reliable operational performance during the half supported record production at Western Australia ore and record concentrator throughput at Escondida,’ said chief executive Mike Henry.

‘Our operations generated robust cash flows, return on capital employed increased to 24 per cent and our record remains strong with net debt at rock bottom of our firing range . The Board has announced a record half year dividend of US$1.01 per share, bringing BHP’s shareholder returns to quite US$30 billion over the past three years,’ he added.

Profits from operations rose 17% to $9.75 billion because of higher ore and copper prices, which it capitalised on with record production of ore in Western Australia and record average throughput at the Escondida concentrator.

Underlying attributable profit rose to $6.0 billion from $5.2 billion but attributable profit, which took under consideration an outsized $2.2 billion write-down of its coal assets, fell 20% to $3.87 billion.

BHP tweaked its production guidance for the year, narrowing its range for Escondida and inching up its ore target to require the restart of Samarco under consideration .

BHP shares were up 0.5% in early trade at 2244.0.

Serco Group said it’s agreed to shop for Whitney, Bradley & Brown for $295 million from HIG Capital, boosting its presence in North America.

Whitney, Bradley & Brown provides engineering and technical services to the US military and can provide Serco with ‘a strong platform from which to deal with all major segments of the US defence services market.’

The company said the acquisition will immediately boost earnings when it’s completed within the second quarter of 2020, subject to securing the regulatory clearances. The deal is being funded with debt.

‘We expect WBB to be immediately accretive to earnings following completion and to reinforce Underlying EPS by around 10% in 2022, the primary full year of ownership. The return on invested capital is predicted to exceed our weighted monetary value of capital within the third full year of ownership,’ said Serco.

Serco said Whitney, Bradley & Brown is forecast to form $230 million of revenue in 2021 and earnings of around $29 million. Serco said this increases its total revenue from North America defence contracts by around 20% and double revenue from the United States Army and Air Force, building on its existing strong relationship with the United States Navy .

Serco shares were up 6.4% in early trade at 127.5.Gambling software maker Playtech said it’s signed deals with Greenwood Racing to licence out its products to the US company’s casinos in Michigan, Indiana, New Jersey and Pennsylvania.

The company said the partnership would start with the launch of a web casino in Michigan.

‘This strategic partnership with the Greenwood companies represents a serious milestone for Playtech and i am excited to figure with them to assist achieve their growth plans within the coming years. The US may be a highly strategic market and this multi-state, multi-product agreement highlights the demand for the complete breadth of our product offering. this is often subsequent step for Playtech within the US and that we are delighted to figure with the Greenwood companies to capture this exciting long-term opportunity,’ said Playtech’s chief executive Mor Weizer.

Safestore said the strong momentum experienced last year has continued into early 2021 because it reported strong growth in revenue because of letting out more room at higher prices.

The self-storage space provider said revenue rose 11.2% within the three months to the top of January 2021 to £44.4 million from £33.9 million. Revenue partially benefited from favourable exchange rates but still rose 9.8% even when this was stripped out.

That rise was driven by an 11% surge within the amount of space it’s leased out. Notably, it’s many space left to let and has continued to expand during the amount . Just over 80% of its total space was let at the top of January compared to only 74% the year before. Plus, the typical storage rate has inched up 1.5% to £26.27 from £26.07. On a like-for-like basis, revenue was up 8.1%.

‘I am pleased to report that the strong performance of the ultimate quarter of our 2020 fiscal year has continued throughout the primary quarter of 2021 driven by a superb UK result, complemented by solid performances from Paris and Spain. additionally , our venture with Carlyle, operating in Belgium and therefore the Netherlands, is performing in line with its business plan,’ said chief executive Frederic Vecchioli.

‘Our recently opened developments within the UK in Carshalton, Sheffield and Gateshead are performing well and our Birmingham Middleway and Paris Magenta stores are thanks to open within the half of 2021. We anticipate that our new store pipeline will grow over the approaching months and our strong and versatile record provides significant funding capacity, allowing us to still consider strategic, value-accretive investments as and once they arise,’ he added.