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Written by: Susannah Streeter | Hargreaves Lansdown
Christmas Crackers
- Ashtead up 72%
- Meggitt up 57%
- Glencore up 56%
- Royal Mail up 55%
- Croda International up 52%
Christmas Turkeys
- Flutter Entertainment down 27%
- Ocado down 26%
- London Stock Exchange Group down 25%
- PolyMetal International down 24%
- Fresnillo down 22%
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
There has been a cracker of a performance this year from companies which have shared on the spoils of reopening after the pandemic. As demand bounced back for commodities and industrial components, chemicals and services, companies like Ashtead, Glencore and Meggitt and Croda International have been pushed to the top of the FTSE 100 leader board this year. Royal Mail has delivered a box of delights in 2021 as it capitalised on the shift to e-commerce by ramping up parcels deliveries and modernising its infrastructure. But investors would have found the performance of some of the pandemic winners hard to swallow this year as some have turned into turkeys in 2021. E-grocer Ocado has delivered a disappointing performance, following a string of setbacks. Bets made on Flutter Entertainment would also have disappointed given its share slide and high hopes of a great travel rebound also evaporated, which has led to British Airways owner, IAG putting in a dismal showing in the share rankings for 2021.
Among the Christmas Crackers:
Ashtead
Ashtead has roared back into recovery in 2021 after its business renting out construction equipment was severely dented in 2020. As major building sites whirred back into action, particularly in the US, revenue has come flooding back in, lifting shares by 68%. Increased demand from emergency services and key industries like utilities and telecoms has helped buoy results and long term contracts with the Department of Health in the UK has helped its resilience. The group has recently diversified into areas other than construction, which was a large driver behind the impressive revenue growth. However, the uncertainty surrounding Joe Biden’s huge stimulus programme after opposition from a key Democrat has hurt the share price in recent days, as the super-high spending planned on infrastructure could be slashed.
Glencore
Glencore’s recovery has powered ahead over 2021 which was reflected in its first half profit of £1.3 billion compared with the shock £2.6 billion loss last year. As governments set targets for the phasing out of the combustion engine and the adoption of EVs the demand for copper lithium and cobalt needed for battery manufacturing is forecast to soar and that’s helped Glencore’s valuation. The commodities giant has already committed to net zero carbon emissions by 2050, and ramping up copper and cobalt production while reducing its coal business is a big part of the strategy with management seeing a big opportunity on the cusp of the e-vehicle revolution. Copper prices fell to a four year low last March but have climbed back in 2021, helping push up the share price. However it's also still a key player in global coal markets where there still is demand in China, but Glencore is coming under activist pressure to hive off the coal division as this sector is looking less attractive to investors due to serious environmental concerns,
Royal Mail Group
Royal Mail’s recovery has been signed, sealed and delivered this year. It reported a 7.1% year on year increase in first half revenues, with underlying profits surging to £404 million from £37 million a year ago. It’s not just benefitting from the ongoing windfall of higher parcel demand due to the accelerated shift to online shopping. It’s also ramped up facilities to cope with the extra demand, and is driving higher volumes with lower costs offering a big boost to margins. Crucially it’s made huge strides on automation, with aims to hit 70% of parcels being sorted automatically in the not too distant future. This Christmas may have proved challenging due to staff absences, and inflation could offset planned cost savings but if Royal Mail can weather the headwinds, its future still looks bright.
Among the Christmas Turkeys:
Flutter Entertainment
Flutter Entertainment, one of the big winners of 2020, as lockdown boredom boosted betting, has descended in a flurry of disappointment. Concerns about tougher rules around gambling in the UK appear to have weighed on the stock, alongside some disappointing guidance for the third quarter down to some unfavourable sports results in October. But the company is still expanding, posting revenue growth of 12% for the third quarter and its performance in the US is particularly strong. That bodes well for a recovery in 2022 in the share price. However if strict affordability checks to protect problem gamblers are brought in across the board, they could considerably disrupt earnings given that the UK market represents a sizeable chunk of income.
Ocado
The journey out of lockdown made conditions a lot tougher for Ocado, and although the long term increase in online ordering is here to stay, competition with bricks and mortar stores was tougher with the basket size of orders smaller compared to 2020. Ocado also had to deal with a firestorm of problems this year, not least the blaze at its warehouse in Erith which was a major setback for deliveries in the summer. Add into the mix worries about labour shortages, cost inflation and the high level of capital spending Ocado needs to keep shelling out to boost capacity. Its partnership with Marks and Spencer did get off to a good start, and the e-grocer is predicting its best ever Christmas with concerns about Omicron at front of many shopper’s minds,but with inflation predicted to keep rising, Ocado may still face a bumpy New Year.
Fresnillo
Fresnillo, the world’s largest silver miner and Mexico’s largest gold producer has really struggled to regain its lustre given the decline in the metals over the year. The company has also been beset by production problems in Mexico earlier in the year with workers struck down by Covid. Regulatory delays in Mexico have also knocked sentiment with the CEO calling the current government’s policies unfavourable for the sector. The prospects of higher inflation see yet another resurgence in demand for gold which could lift the miner, but the metal took another dip this week as Joe Biden’s infrastructure stimulus programme hit the buffers, which could help limit soaring prices.
IAG
British Airways owner IAG has been a popular stock to buy on the HL platform this year amid hopes of its recovery, with the travel industry showing signs of limping back to health. But investors have had to buckle up for repeated bouts of turbulence with new restrictions being imposed on the airline industry with the spread of the Omicron variant. It’s feared new testing requirements, which could lead to passengers becoming stranded on their travels, will cause severe repercussions in terms of booking rates over the coming weeks and potentially months, particularly given the warning from the World Health Organisation that people should curtail Christmas travel plans. However, if enough boosters are rolled out and hospital admissions don’t dramatically rise, prospects look much brighter for the crucial spring summer season.
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