After yesterday's brief respite, the bears were back in force across equity markets this morning with London sliding sharply. Read The Trader Nicole Elliott's take here.
IC TIP UPDATES:
The share price of Royal Dutch Shell (RDSB) clicked into reverse after the group confirmed that fourth quarter profit to December 2015 was hit by the ongoing slump in oil prices, but the group moved to quell fears over its annual dividend. Fourth quarter profit adjusted for one-time items and inventory changes are expected to be in the $1.6bn to $1.9bn range, compared with $3bn a year ago. Shell indicated its 2015 dividend will be $1.88 per share, flat from the previous year, while its dividend in 2016 will be at least that amount. Shell said its expected capital investment for 2015 will be around 20 per cent lower year-on-year. Buy.
It might still be dragging in some punters but discount pub chain J D Wetherspoon (JDW) is starting to get a hangover from increased wages. The group registered a 2.8 per cent increase in like-for-like sales in the second half, with total sales up 6.1 per cent. But management expects the operating margin for the half to be roughly 6.3 per cent , which is 1.1 per cent lower than the same period last year. This is due to wage rises in October 2014 and August 2015 which might not augur well for the introduction of the national living wage later this year. Chairman Tim Martin said profits for the year would likely be “towards the lower end of analysts’ expectations”. The shares dropped as far as 12 per cent but have recovered some of this loss now. Sell.
A third quarter update from Pets at Home (PETS) has been helped by the exclusion of a bank holiday. Like-for-like sales rose 2.2 per cent but, crucially, the merchandise division rose 1.7 per cent as health and hygiene sales started to recover. Like-for-like sales in the services division jumped 8.5 per cent and bosses believe expectations for the current year remain on track. We see any recent share price weakness as a buying opportunity.
In a third quarter update, IC Tip of the Year NewRiver Retail (NRR) revealed that proceeds from the recent £150m fund raising have been invested in a number of shopping centres, while £31.9m has been gained from three disposals. Assets under management have now broken through the £1bn mark to £1,1bn, while the rent roll has risen from £85.3m in September last year to £94.4m. Capital recycling continued into the fourth quarter with a £9m disposal. NewRiver remains on course to move from the Alternative Investment Market to a full listing in July.
As Redx Pharma (REDX) is yet to license its oncology and anti-infectives pipeline, the drug discovery and development group’s maiden results were light on financial detail. Expenditure remains within budgets, while three drug candidates are now in formal pre-clinical development. Despite this progress, shares have fallen considerably since our tip, but we see many reasons to keep Redx on a speculative buy.
Rigid plastic packaging manufacturer RPC (RPC) secured a 97 per cent take-up for its recent rights issue. The funds will be used to finance the €650m (£473m) acquisition of France-based GCS, a plastic closures and dispensing systems specialist. Buy
Simon Thompson tip Stadium Group (SDM) confirmed that trading has picked up in the last few months, in a positive update that sent the group’s shares up 4 per cent. The electronic technology company also said Stontronics, the power supply units maker it purchased in August, is performing well.
Genel Energy’s (GENL) hit a new low today after the Kurdistan driller forecast lower revenues and production for this year. The company forecast revenues of $200-$275m for 2016, assuming Brent oil price at $45 per barrel. Genel also forecast this year's production at 60,000-70,000 barrels per day. The higher end of the range was 17.5 percent lower than the average for 2015. Under review.
Plexus Holdings (POS), owner of the proprietary POS-GRIP friction-grip method of wellhead engineering, has been awarded a contract with new customer Masirah Oil Limited, the Oman branch of REX International Holdings Limited. Buy.
KEY STORIES:
High street stationer WH Smith (SMWH) has reported a better-than-expected sales performance over the 20 weeks to 16 January 2016. Like-for-like sales on the high street were flat (the last positive performance on this front being pre-2000) compared to travel sales which rose 5 per cent on the same basis. As a result of strong Christmas trading, the group now expects full-year profits to be “slightly ahead” of current forecasts. The shares rose close to 7 per cent in early trading.
Anglo American (AAL) has agreed to sell its Callide thermal coal mine in Australia to Batchfire Resources Pty Ltd for an undisclosed amount. This is the second Australian coal mine Anglo has sold in as many months, and analysts anticipate more disposals of similar assets will follow.
Weak industrial markets and the depreciating Australian and Canadian dollars are taking their toll on Diploma (DPLM). The technical products producer’s sales rose 6 per cent in the three months to December, with the majority of revenue growth driven by acquisitions. Management also warned that newly-acquired businesses are lower margin and have, therefore, weighed on profits.
OTHER COMPANY NEWS:
Investors sent shares in SDL (SDL) up 3 per cent after it revealed steady trading in the second half of 2015. Moreover, the new chairman of the global content and language technologies group revealed the findings of a “thorough” operational review. Management plans to zero in on the key language services and technologies business and focus less on areas such as social intelligence and campaigns.
Shares in NAHL (NAH) slid 3 per cent after the National Accident Helpline operator reported reduced revenue in the second half of 2015. That reflected its focus on sourcing higher quality, lower volume claims for its panel of law firms, which served to lift gross profit margins.
