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News & Tips: Cineworld, M&S & more

Equities continued their crab-like scuttle as Greece falls apart
July 7, 2015

Equities continued their crab-like scuttle as Greece's economy falls apart. Click here for The Trader Nicole Elliott's take.

IC TIP UPDATES:

The City is hiring. Shares in our buy tip Robert Walters (RWA) were up 4 per cent in early trading after the recruiter announced a 15 per cent constant currency increase in net fee income in the second quarter, to £60m. UK was the strongest growing segment, with gross profit up 19 per cent at £17m as the economic recovery prompted financial services companies to hire, while a continued recovery in Australia boosted Robert Walters’ Asia-Pacific business. Buy.

Good times for the flicks. Cineworld Group (CINE) grew admissions in all of its territories save for the Ukraine in the first half, and total pro forma revenue grew 11 per cent over the period. Trading was boosted by a decent film schedule and the opening of four new cinemas across the UK. Buy.

Our buy tip Gama Aviation (GMAA) – formerly known as Hangar 8 – saw its shares come off a little today after a first-half update reported trading in line with management expectations. Synergies from the combination of the two companies have been “at least” in line with forecasts, while the jet operator continued to expand with new bases in the US and a Hong Kong joint venture that will see its first managed aircraft in the region. Buy.

In a pre-close trading update, Churchill China (CHH) said business for the six months to 30 June was going well against a strong comparative. Hospitality sales growth has boosted the ceramic manufacturer. Buy.

Distributor Connect Group (CNCT) grew its turnover by 3 per cent in the 44 weeks to 7 July. New regional business helped improve the picture against a tough comparator, with last year’s numbers boosted by World Cup sticker sales. Like-for-like sales were down 3.5 per cent in the news and media division, though within medium-term forecasts. Buy.

Our sell tip Smiths Group (SMIN) is down 3 per cent today after announcing Andrew Reynolds Smith of GKN's (GKN) automotive division as its new chief executive. We reiterate our sell advice.

Interserve (IRV) has reported trading in line with expectations ahead of half-year results to be released in August. Decent performance in support services, equipment and international construction are offsetting more challenging conditions for UK construction. Buy.

Household and personal care product providers McBride (MCB) has reported group revenues for the year to 30 June up 0.3 per cent on a constant-currency basis. We reiterate our buy call.

KEY STORIES:

The Competition and Markets Authority has found that the UK’s big six energy providers have overcharged customers to the tune of £1.2bn a year. The watchdog is considering a price cap among a range of measures to improve pricing for consumers. Shares in Centrica (CNA), which owns British Gas, undershot a weak market following the results.

If Marks & Spencer (MKS) is indeed turning around the supertanker, it is at least a three-point turn. Analysts had an eye on its general merchandise like-for-like sales in its first-quarter trading statement – but after a brief dalliance with growth, this business contracted by 0.4 per cent in a challenging quarter. Management said the company remained on track, though, to boost its gross margin here over the financial year. The company’s food division fared more strongly, outperforming a difficult market with LFL sales up 0.3 per cent and total sales up 3.2 per cent.

Digital communications manufacturer Sepura (SEPU) had its March full-year results welcomed by the market after it announced revenues up 12 per cent to a record €131m (£93m). The company delivered 217,000 radios worldwide over the period, up 15 per cent from the previous year. It also has a record order backlog worth €41m, compared to €13m last year, boosted by a major Saudi Arabia public safety contract for 63,000 terminals.

The Department for Transport has informed Stagecoach (SGC) that it is ending the discussions with its subsidiary over the extension of its South West Trains franchise. “Despite extensive negotiations, a significant difference has remained between both parties regarding the financial evaluation of the proposals,” said the company in an announcement.

Twenty-something online clothes retailer Asos (ASC) reported a constant-currency group revenue up almost a quarter year-on-year at £397m in the four months to 30 June. UK consumers provided the bulk of this uplift, though the strength of the pound muted some of the gains in its overseas business. The company expects full-year sales at the upper end of its guided growth range of 15-20 per cent.

OTHER COMPANY NEWS:

Get a round in. Nick Bryan, chairman of Young & Co’s Brewery (YNGA), who will tell shareholders at today’s annual general meeting that managed house sales are up 5.6 per cent on a like-for-like basis in the first 13 weeks of the current financial year, with accommodation performing particularly well. Following eight acquisitions last year, the company has opened two new pubs in north London.

Ultra Electronics (ULE) has been awarded a £18m contract to provide reactor control and cooling systems for Royal Navy submarines.

3i Infrastructure (3iN) and asset manager AMP Capital have joined together to buy Denmark-based ESVAGT, which provides emergency vessels to the offshore oil and gas industry. 3i will be investing £109m for a 50 per cent interest.