Russia Invades Ukraine, Sanctions, Energy Crisis, Inflation and COVID – Markets Surprisingly Stable!

In the December edition of Industry Watch, the focus was on COVID, and the emergence of a new variant that was a major blow to the anticipated return to relative normality.

Fears of a virulent resurgence did not come to pass, but whilst that return to relative normality is now happening in many parts of the world, a new threat has emerged in the form of Russia’s invasion of Ukraine.

The impact on Ukraine itself is catastrophic, and threatens to escalate and/or spill over into neighbouring countries. In economic terms, the invasion has exacerbated existing shortages, not least of fuel, in turn altering the geo-political landscape as countries rush to reduce their dependence on Russian gas and oil.

The immediate outcome for most countries is higher than COVID-predicted inflation and slower than previously predicted growth.

Throughout this year we will track the performance of the main markets by comparing their value with that at the start of the year. So far this year only three markets, the FT100 (+1%), the Dow Jones (+5%) and the S&P/TSX (+4.5%) are showing growth, with most others down by between 5% and 13%.

In comparison, in the year March 2021-March 2022, nine out of the 14 markets grew by between 4.72% and 17.42%. In Europe and the USA only the DAX was negative (-1.18%) as were all Asian markets but substantially so, (the Hang Seng lost 24.2% in value and the FTSE Xinhua lost 16.65%).

Of our quoted industry companies, roughly half gained and half fell in value compared with their markets. Eight out of the ten companies reported full year results – two achieved substantial growth in value but two suffered significant declines, and underperformed their markets for the second quarter in a row, along with two others.

Substrates and banknotes

De La Rue issued a trading update on 24 January indicating that commodity and energy costs, and challenges in the supply chain, primarily due to the pandemic, had become more pronounced since its half year statement. This, together with increased employee absences due the Omicron and Delta COVID variants resulting in reduced output, led the company to decrease its operating profit forecast for the full year to the £36-40 million range, compared with market expectations of £45-47 million.

The company’s share price fell by around 27% on the announcement. It quickly regained around 7% in value but on 8 March bottomed at -35%.

At the end of the period the company’s share price was 23.5% down, it underperformed its market by 24.5% and in the full year by 50%.

Crane Co announced record profits, especially for its Payment and Merchandising Technologies division. Company revenue for the year at $3.18 billion was 15% higher than in the previous year, while operating profit at $502 million was 109% higher than in 2020, with the operating margin increasing from 8.7% to 15.8%, a record for the company.

Banknotes, banknote paper and security features are included in the Payment and Merchandising Technologies sector, along with Crane Payment Innovations. Sales in this sector were 21.7% higher at $1.34 billion and operating profit 205% higher at $307.5 million.

The share price increased by around 10% on the announcement, taking its market value to $6.28 billion. In the period the company outperformed Crane's market by 15% and in the full year by 11.2%.

Orell Füssli announced on 10 March lower revenue but improved profitability for 2021. Sales fell by 3.8% to CHF 210.4 million but operating profit (EBIT) increased by 6.9% to CHF 15.4 million compared with 2020.

In the period the company’s share price gained 0.5%, enabling it to outperform its market by 4.1% but in the full year it underperformed by 31%.

Spectra Systems Corp reported its full year results for 2021 on 21 March, with sales up by 13% and EBITDA by 8%.

Despite the positive results, in the period Spectra’s share price fell by 7.5% and it underperformed its market by 1.5%, and in the full year by 22.1%.

CIT – Brinks and Loomis declare improved results

Brinks Co announced revenues of $4.2 billion for 2021, up 14% on 2020, and a 23.6% increase in operating profit to $471 million. Both were records for the company.

The company’s share price increased in the period by 2.9% to $66.6 and it outperformed its market by 7.5%, but in the full year it underperformed by 26%.

Loomis reported revenue for 2021 of SEK 19.7 billion, which exceeded the previous year by 4.8%. Operating profit (EBITA) of SEK 1.96 billion increased by 10.5%.

The company outperformed its market in the three-month period by 17% but in the full year it underperformed by 9%, down from underperforming by 21% at the end of the previous period.

Prosegur’s results for 2021, released on 28 February, indicated a fall in revenue of 1% to €3.46 billion and a decrease in EBITA of 13.6% to €223 million. Net profit for the year was the same as the previous year at €59 million.

In the period Prosegur’s share price fell by 0.7% and it underperformed its market by 6.7%. In the full year It underperformed by 9%.

ATM and service providers – NCR only company increasing in value

Diebold Nixdorf’s results for 2021 indicated that revenue for 2021 remained virtually static at $3.9 billion. EBITDA fell by 1.5% to $126.2 million, the operating margin falling from 11.9% to 11.6%. Operating profit (EBIT), however, increased by 47.1% to $137.1 million in 2021. The company still recorded a net loss of $78.8 million, substantially less than in 2020 (-£269.1 million).

Despite this improvement, in the period its share price fell by 14.6% and it underperformed its market by 15%; in the year it underperformed by 53.5%.

NCR’s revenue for 2021 increased by 15% to $7.15 billion and EBITDA increased by 38.8% to $1.24 billion, increasing the operating margin by 3% to 17.4%. Full year net income of $97 million from continuing operations attributable to NCR increased from a net loss of $7 million in 2020.

In the period the company’s share price increased by 2.4%, it outperformed its market by 4.9% and in the full year by 2.2%.

Glory reports its full year end in the next three-month period, but from December 2020 to March 2021 its share price was stable, falling by just 0.46%. It matched its market’s change in the period, but in the full year it outperformed its market by 6.5%.

A more detailed account of the 2021 financial results for Brinks, Loomis, Crane Co, NCR, and Diebold Nixdorf is available in the February Issue of Currency News™. The 2021 results for Orell Füssli, Spectra Systems and Prosegur are in this issue, page 4.

Company Performances – March 2022Main Global Markets

Growth in market value year to date and year-on-year.