Despite cautionary noises from the Fed overnight, equities have slipped back again. Click here to find out what The Trader Nicole Elliott thinks of the markets.
IC TIP UPDATES:
In a short and sharp update from London-based brewer Fuller, Smith & Turner (FSTA) it seems trading over Christmas has helped the third quarter numbers. Like for like sales in its managed pubs and hotels rose 5.3 per cent in the 43 weeks to 23 January while its tenanted division saw turnover rise 3 per cent. Total beer and cider volumes actually fell 1 per cent but a growing trend in the pub market is consumers’ desire for less but more expensive tipples. Buy.
Third quarter revenue rose “significantly” at RPC (RPC) as the plastic packaging specialist enjoyed good organic growth and strong contributions from acquisitions. The group also benefited from favourable polymer prices. Buy.
Seems we made the right call on shoe king Jimmy Choo (CHOO) by offloading the shares at 146p. A trading statement today revealed a 7 per cent increase in total sales but only a 1 per cent uplift in underlying retail sales. The group also cited recent terrorist activity for a drop off in European tourism. Most of the growth comes from the shoe category and from Asia and Japan although the trading environment remains “challenging” and “competitive” overall. The shares barely nudged up 1 per cent in early trading. Sell.
Construction group Kier (KIE) remains on target to meet management expectations, with the residential and property divisions performing well, demand for housing pushing income from the residential business ahead by 30 per cent. The construction division is also winning new business, while the services side has already secured all of the division’s targeted revenue for 2016. The shares are down from our buy tip (1,399p 16 April 2015) but have recovered strongly despite the current market malaise, and we are sticking with our earlier advice. Buy.
KEY STORIES:
Obstacles on the road to improving its fortunes are coming from all sides for FirstGroup (FGP). The stock is down 5 per cent in early trading after management guided operating profit for the year would be “lowered” in light of trading in the third quarter. Not only did the flooding in the north of England hit trading but demand for rail services also weakened in the wake of the Paris terror attacks. Its First Student division, the US schools transport arm of the company, suffered from fewer operating days and higher costs due to “acute driver shortages” in some areas.
Lonmin (LMI), the South Africa-focused platinum miner, cut more than 5,000 jobs in the last quarter and pared-back production of lower margin metal, according to a Q1 update. Platinum prices have been weak on the back of US dollar strength and persistently high inventories. Refined Platinum production of 171,441 ounces was 23 per cent up on the prior year period. Hold.
Lower input costs for pork and chicken producer Cranswick (CWK) are being passed onto customers by the group but this has not had a negative impact on sales. Management said revenues in the three months to 31 December rose 5 per cent compared to the comparable 2014 period thanks in part to strong volume growth of 11 per cent. Encouragingly export sales also grew with volumes shipped to the Far East up 28 per cent on Q3 14.
Anglo American (AAL) reported mixed fourth-quarter output, with diamond production down in response to weaker diamond prices during the quarter. However, iron ore output, the group’s second-largest earnings contributor last year, rose 8.4 per cent on year to 14.2 million metric tons as the ramp up of its Brazilian Minas Rio project more than offset a decline in output from the majority-owned South African unit Kumba Iron Ore Ltd. Hold.
Copper producer KAZ Minerals (KAZ) revealed that full-year copper cathode production fell 3 per cent, as maintenance work at one of its smelters hobbled output. KAZ produced 81,100 tonnes of copper cathode in the 12 months to Dec. 31, compared to 83,500 tonnes a year earlier.
The market seems to be treating Phil Urban, the recently-installed chief executive of pub chain Mitchells & Butlers (MAB), to a drink as the shares are up 2 per cent in spite of total sales dropping by 0.8 per cent. The reason might be that operating margins are up and the conversion of Orchid establishments, the chain it bought last year, are still going apace with 10 completed in its first quarter.
Currencies might have wreaked a bit of havoc with the reported numbers over at global beverage company Diageo (DGE) but the group is upbeat about its prospects. In the US it has seen positive momentum with brands such as Smirnoff and Captain Morgan while innovations with Ciroc should come through in the second half. Asia was a bright spot with underlying operating profits up 18 per cent in spite of net sales only rising 2 per cent while beer growth in Africa was also robust as net sales rose 15 per cent. This was, however, offset by a significant decline in Orijin, a herb and fruit beer, on the continent.
Business is ticking along for investment group 3i (III), which realised £403m from its private equity holdings between October and December, compared with £245m in the same period last year. Crucially, its investments are close to keeping up at £364m, compared with £275m last year. Earnings growth at investee companies of 18 per cent is also ahead of last year, while its infrastructure and debt management businesses continue to grow.
The US Food and Drug Administration (FDA) has awarded pharma giant AstraZeneca (AZN) “breakthrough status” for its new prostate cancer drug Lynparza. That’s a step in the right direction if Pascal Soriot wants to prove how innovative the company can be, and that he was right to walk away from a mega-merge with US rival Pfizer (US:PFE).
The effects of terrorist attacks obviously impact demand for transport but they also impacs related businesses. SSP Group (SSPG), which runs food and drink chains at transport hubs, saw revenues rise by 6.2% on a constant currency basis, thanks to a 4.3 per cent rise in like for like sales and the remainder coming from contract wins. Management noted “geopolitical activity” had impacted the business in the short term and trading in Egypt - albeit a very small part of the business in terms of sales - “remains challenging” due to the fall in passenger numbers.
Shares in ITE (ITE) climbed 5 per cent even though the event group revealed a 13 per cent slide in like-for-like sales for the first quarter to end-December. Comparable trading volumes and revenues are also tracking a tenth below last year’s levels, reflecting the downturn in oil-producing economies such as Russia, Kazakhstan and Azerbaijan. But record attendance and volume at the group’s Chinacoat event in Shanghai and the acquisitions of Breakbulk and Africa Oil Week offset some of the damage.
Shares in LSL Property Services (LSL) jumped over 11 per cent after the estate agent delivered an upbeat trading statement revealing that full-year profits for 2015 are likely to be slightly ahead of the previous year. Crucially, the estate agency side of the business managed to increase income by 5 per cent, while lettings income grew by 12 per cent. The share price move reflected an element of relief because estate agents have been under pressure from increased competition and a decline in transactional volumes.
OTHER COMPANY NEWS:
After more than halving in value in the past week, shares in Fusionex (FXI) rallied 6 per cent after non-executive director Robin Taylor - who sits on the boards of EMIS, FDM and Phoenix IT - spent about £15,800 to acquire around 12,800 shares in the company.
Fund administrator Sanne Group (SNN) continues its steady progress since listing last year. In the year to December it secured new business worth £13m in annualised fees, and saw growth across all its core business lines.
Stellar Diamonds (STEL) said good progress continues to be made towards the approval of the mining licence for its 1.45m carat Tongo Dyke-1 project in Sierra Leone. na.
The 15 per cent point of consumption (POC) tax is weighing on all gambling companies but Netplay TV (NPT) says it has managed to mitigate “a significant proportion” of the impact. The acquisition of digital marketing business Otherside seems to have helped in this regard as it has helped the company diversify its revenue streams and better target advertising to customers. Key TV contract extensions with ITV and Channel Five until 2019 are also positive for the group.
Strat Aero (AERO), the AIM quoted company specialising in Unmanned Aerial Vehicles, has signed two agreements that mark its entrance into the “rapidly growing” Chinese UAV market.
Passenger volumes and revenues might be up at airline Flybe (FLYB) but it has highlighted an issue which is likely to impact the whole airline industry. Management said its third quarter was affected by “industry wide capacity growth acceleration”. This is the case to such an extent that the group has said it will reduce its Q4 capacity growth rate by 10 percentage points. On the plus side, cost per seat fell 2.2 per cent, excluding fuel.
