With the FTSE 100 index flat in morning trading, Nicole Elliott discusses the mixed picture given by yesterday's data releases on UK employment. The economy is still soaking up jobs, but productivity - the amount of output each job produces - remains in the doldrums. Read her thoughts here.
IC TIP UPDATES:
ITV (ITV) said first-half advertising would be up about 5 per cent - higher than analysts were expecting. Advertising was 12 per cent ahead in the first quarter, but is proving weaker in the second quarter due to the phasing of Easter, the disruption of the election and the absence of the World Cup. The stock remains a play on the UK economic recovery and should benefit from exclusive rights to the Rugby World Cup in the autumn. Buy.
Aggreko (AGK) revealed that first-quarter turnover was 4 per cent ahead of last year at constant currencies. But the temporary power provider reiterated that first-half profit would be lower than last year due to higher mobilisation costs, and "it remains unclear what the full year impact of a lower oil price will be across all our markets". Sell.
Restaurant Group posted an upbeat statement, citing like-for-like growth of 2 per cent for the period year-to-date. Total sales are tracking 8.5 per cent ahead of last year thanks to restaurant openings, which management expect to total 42-50 this year. The group, which owns outlets in cinemas, noted an "improving film release schedule" and "slightly easier comparatives in the last four months of the year". The shares dipped 5 per cent to 686p on the news, which we would view as a buying opportunity. Buy.
Marston's (MARS) pre-tax profits rose 2 per cent to £29.6m in the first half, but would have been up 15 per cent adjusting for disposals and an increase in pension costs. The group continues to sell off smaller beer-led pubs and plough the proceeds into development - 8 newbuild pubs were completed in the first half. Like-for-like sales were up 2 per cent in the managed estate. Buy.
Building products distributor SIG (SHI) saw flat like-for-like sales in the first four months of the year, prolonging the trend established in the final quarter of 2014. In the UK and Ireland, the first two months were strong, but business weakened in March and April due to a "softer commercial market". Sales are still falling in mainland Europe, but the trend is improving. Buy.
Hill & Smith (HILS) performed solidly in the first quarter, with 6 per cent organic growth in sales and the operating margin ahead. Buy.
Grainger (GRI) continues to benefit from a buoyant UK housing market as well as its skill at managing assets. The value of its residential stock rose 3.8 per cent in the first half, compared to 1.9 per cent growth in the Nationwide and Halifax indices combined. Underlying gross book value is up 3.7 per cent since the year-end. Buy.
British Land (BLND) posted very strong final numbers, with book value up 21 per cent to 829p. Developments continue to drive the results: the standing portfolio was marked up 11 per cent, but developments rose 26 per cent in value. Buy.
3i (III) shares jumped 3 per cent in morning trading after the investment group unveiled a total return of 20 per cent for the year to March. The result was buoyed by £831m in private equity realisations as well as earnings growth in the company's portfolio. Buy.
KEY COMPANY STORIES:
Paddy Power (PAP) posted very strong results for the period year-to-date despite unfavourable sports results. The bookmaker is benefitting from the weak euro, strong growth in Australia and online. Like-for-like growth in the UK retail business, which excludes online, also remains eye-catching, with sports betting net revenues up 15 per cent and machine gaming net revenues up 10 per cent.
Pharma-services group UDG Healthcare (UDG) upgraded its growth guidance for the year. It now expects constant-currency EPS growth of 7-9 per cent, up from 5-8 per cent. That follows 12 per cent growth in the first half. The numbers go some way to justifying a 64 per cent share-price increase over the past six months.
TalkTalk Telecom (TALK) reported full-year results, with top-line growth of 4.2 per cent, accelerating to 6 per cent in the final quarter. Management upgraded its growth target to 5 per cent for the next two years and restated a cash profit margin target of 25 per cent. The market cheered the shares up 4 per cent in morning trading.
Like-for-like sales rose 1.7 per cent in the first half for pub group Mitchells & Butlers (MAB). But margins sagged from 14.5 per cent to 13.7 per cent, reflecting last year's acquisition of pub chain Orchid as well as "volume-driven sales growth".
OTHER COMPANY NEWS:
Melrose Industries (MRO) posted a brief trading update. The industrial turnaround specialist's Elster business, which measures the flow of natural gas, water and electricity, is performing strongly, particulary the gas unit, which has little exposure to oil and gas exploration. The opposite is true of Brush, which makes electricity generators, including for the oil industry. Management also reiterated that they were "keen on finding the next acquisition".
Lookers (LOOK) continues to motor ahead, with gross profit from new cars up 4 per cent in the first quarter and gross profit from used cars up 10 per cent.
Keller (KLR) issued a fairly downbeat trading statement. The ground engineering specialist said there had been no big change in market trends, with "few signs of improvement in Europe" and conditions elsewhere stable. The shares sank 3 per cent in morning trading.
Funds under management rose 6.3 per cent to £26.1bn during the first quarter at wealth manager Rathbone Brothers (RAT). Net inflows totalled £398m, just under half of which was acquired. Fees for some private clients are due to rise to bring them in line with the tariff for new clients.
