SSE Plc

SSE Plc (SSE) is a Perth, United Kingdom-headquartered integrated energy utility company, with operations and investments across the UK and Ireland, including regulated electricity networks and renewable sources of energy.

Recent News
On 13^th November 2019, SSE announced its interim results ending 30^th September 2019.

Financial Highlights – H1 Financial Year 2020 (30^th September 2019, GBP, million)

(Source: Interim Report, Company Website)
 
In the first half of the financial year 2020, driven by a decline in revenue from Business Energy and Electricity Transmission for the period, the company’s revenue declined to GBP 3,052.2 million as against GBP 3,317.7 million in H1 FY2019. The company’s total gross profit stood at GBP 956.1 million in H1 FY2020 versus GBP 181.5 million in H1 FY2019. The company’s underlying operating profit (continuing operations) in H1 FY2020 was at GBP 377.2 million versus GBP 353.8 million in H1 FY2019. The company’s reported operating profit (continuing operations) in H1 FY2020 was at GBP 347.5 million versus a reported operating loss of GBP 184.6 million in H1 FY2019. The company’s adjusted PBT (profit before tax) stood at £228.5 million in H1 FY2020 as against GBP 218.7 million in H1 FY2019. The company’s reported PBT (profit before tax) was at GBP 128.9 million in H1 FY2020 versus an LBT (loss before tax) of GBP 284.6 million in H1 FY2019. The company’s statutory LAT (loss after tax) from continuing and discontinued operations was at GBP 387.5 million in H1 FY2020 versus a LAT of GBP 244.4 million in H1 FY2019. The company’s basic and diluted loss per share (continuing and discontinued operations) per share were at 42.1 pence versus a basic and diluted loss per share (continuing and discontinued operations) of 28.6 pence in H1 FY2019.

Share Price Performance

Daily Chart as at 14^th November 2019, before the market closed (Source: Thomson Reuters)

On November 14^th, 2019, SSE Plc shares were trading at GBX 1,320.00 at the time of writing before the market close (at 11:04 AM GMT), down by 0.15 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 1,335.00/GBX 997.80.

Valuation Methodology

*Peers: Pennon Group Plc, Drax Group Plc, Severn Trent Plc, National Grid Plc and United Utilities Group Plc.

Conclusion
On a reported basis, the company’s financial performance has declined in the first half of the financial year 2020. Both the top-line and the bottom-line performance have declined for the period. The company’s operations can be affected negatively due to ongoing uncertainties created over the Brexit, as it widens the political uncertainty. As the company operates in multiple geographies, its profits can be impacted negatively due to the foreign exchange rate fluctuations. Moreover, the company is trading near the 52-week high, raising doubts at its upside potential at current prices. A diversified and complementary generation of portfolio allows the company to safeguard itself from market volatility, create sustainable returns and secure monetary benefits from renewable schemes; and enables it achieving the overall earnings and maximise returns.

Based on the above rationale, we recommend investors to keep a "Watch" on the stock at the current price of GBX 1,324 (as on 14^th November 2019, before the market close at 8:45 AM GMT), with support from few catalysts needs to be evaluated at a later stage.

Coca Cola HBC AG

Coca Cola HBC AG (CCH) is a Switzerland based company engaged in the business of production and distribution of non-alcoholic beverages. The company is a bottler of Coca Cola Products. The company distributes Coca-Cola, Coca-Cola Zero, Coca-Cola Light, Fanta, and Sprite as well as water, energy drinks and juice.

Recent News
On 14th November 2019, Coca Cola HBC and Coca-Cola HBC Finance announced the issue of 10-year fixed-rate Euro denominated Notes. The notes are issued under the Medium-Term Note Programme for €5 billion Euro.

Trading Update
On 13th November 2019, Coca Cola HBC announced its Q3 trading update. Despite poor weather conditions, the group showed robust performance for the period. The company’s FX-neutral revenue surged by 3.4 per cent for the period, while the volumes were up by 1.1 per cent for the quarter.

Financial Highlights - H1 Financial Year 2019 (28^th June 2019, €, million)

(Source: Interim Report, Company Website)
 
In the first half of the Financial Year 2019, net revenue surged by 3.8 per cent (actual basis) to €3,352.4 million and by 3.4 per cent on a constant currency basis. The revenue was increased because of the favourable currency movements in the Nigerian Naira and Swiss Franc. The company reported volume growth of 2.2 per cent with improvement in all the segments led by Sparkling beverages. Comparable EBIT for H1 FY2019 surged by 4.7 per cent to €325.1 million and comparable EBIT margin improved marginally by 10 bps to 9.7 per cent, driven by decent volume and revenue growth and 30 bps cut in the operating expenses as a percentage of revenue. Comparable Net profit surged by 0.5 per cent to €222.8 million. In H1 FY2019, Comparable reported earnings per share stood at €0.612 and reported an increase of 1.5 per cent as compared with the corresponding period of the previous year. In the first half of 2019, free cash flow reduced by 37.5 per cent to €79.3 million against the same period in 2018, due to reduced cash from operating activities and with increased capital expenditure. The Board has approved a dividend per share of €0.54 cents in H1 FY2019.

Share Price Performance

Daily Chart as at 14^th November 2019, before the market closed (Source: Thomson Reuters)

On November 14^th, 2019, Coca Cola HBC AG shares were trading at GBX 2,566.00 at the time of writing before the market close (at 11:53 AM GMT), up by 2.52 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 2,950.00/GBX 2,094.19.

Valuation Methodology

*Peers: Fevertree Drinks Plc, Nichols Plc, Unilever Plc, A.G. Barr Plc and Tate & Lyle Plc.

Conclusion
In the H2 FY2019 period, revenue growth will expand as expected by the group against the H1 FY19 in all the three divisions and particularly in Emerging markets. The company expect this increase in revenue, due to the quicker volume growth in all the segments, while an increase in revenue per case on a CER basis is projected to remain at the pace of the H1 FY2019.

Considering the present favourable spot rates and the hedged positions, the company believe that the adverse effect from FX movements on the P&L in the FY2019 will be around €20 million. This is lower by €30 million from the prior spot-rate determined in guidance.

Input costs have proceeded in line with the company’s prospects. The company have contracts in place for most of the raw materials that they use and will assume low-single-digit growth in currency-neutral input cost per case for the FY2019.For the FY2019, the company will expect currency-neutral basis revenue progress to be in the range of 5 per cent to 6 per cent and to deliver one more year of margin growth.

On the basis of above rationale, we recommend investors to keep a “Watch” on the stock at the current price of GBX 2,572 (as on 14^th November 2019, before the market close at 11:40 AM GMT), while any correction with support from few catalysts needs to be evaluated at a later stage.

*All forecasted figures and Peer information have been taken from Thomson Reuters.Currency exchange rate taken for 1 EUR = 0.85565 GBP.

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