Cautious words from Fed chair Janet Yellen yesterday have not smoothed the frayed nerves of investors with equities taking another plunge this morning. Click here for The Trader Nicole Elliott's latest views.
IC TIP UPDATES:
It could have been worse. Unlike peers Glencore and Anglo American, Rio Tinto (RIO) stopped short of dropping shareholder returns altogether, though the move to a more “flexible” dividend policy wiped 6 per cent off the company’s shares in early trading. In an effort to shore up its balance sheet amid the commodities slump, the miner will cut a further $1bn from operating costs this year and next, which combined with cancelled capital expenditure plans amount to cuts of $10bn in 2016-17. With the dividend largely protected this year, we remain income buyers.
It might have sold the same amount of winter holidays as last year at higher prices but the fact it is 2 per cent behind in terms of sales for its summer programme are likely the reason Thomas Cook (TCG) shares are diving this morning. The stock is down more than 4 per cent even though revenues rose 1 per cent to £1.4bn and underlying operating losses reduced by 11 per cent to £49m. Management said there had been “clear signs of recovery” after consumer confidence was hit in the aftermath of terrorist events in Paris and Turkey. Another encouraging sign was increased sales of its own brand, higher margin holidays and hotels as opposed to just flights. We remain buyers.
Sales of its artificial-ingredient free Clover and Cathedral City cheese are going well but higher losses than had been anticipated in its dairies business before the sale of the division means Dairy Crest (DCG) are marginally down this morning. The group sold the dairy division to Müller UK & Ireland Group in December but said the impact the extra losses had on the sale proceeds and its £6m acquisition of the remaining 50 per cent of Promovita it didn’t own means net debt will be higher. The Promovita business develops and produces demineralised whey powder and galacto-oligosaccharide, ingredients in baby formula, an area which Dairy Crest is looking to enter. Speculative buy.
Workspace (WKP), which provides flexible office space in London for small and medium sized companies, has sold five light industrial buildings for £64m. Crucially, the assets were sold at a 12 per cent premium to the September 2015 valuation, representing a net initial yield of 5.4 per cent. It also means that the loan-to-value ratio on the portfolio comes down to a low 17.4 per cent, with cash undrawn facilities of £131m. Buy
Pennon (PNN) has announced that its return on regulated equity for the full year is expected to be on track for 11.5 per cent. As expected landfill volumes for its waste management business Viridor have continued to decline in the second-half, but the group is anticipated to feel the effects of having its five energy recovery facilities online for a whole year. Buy.
Residential landlord Grainger (GRI) delivered a strong performance in the four months to January, with rents on new lettings up by 7.8 per cent and 3.6 per cent on renewals. Including refurbishments, new lets rose by 10 per cent. Around £39m was generated from the sale of vacant properties, and plans to concentrate on the UK private rental sector mean that the sale of its remaining 1,100 residential units in Germany is currently underway. Buy
Shares in Henderson (HGG) fell 6 per cent despite the asset manager reporting record net inflows for the year of £8.5bn. However, chief executive Andrew Formica did say trading in the first few weeks of 2016 as a result of market volatility. We place our recommendation under review.
KEY STORIES:
DCC (DCC), a newly promoted FTSE 100 constituent, reported a strong third quarter but warned that its technology division is facing challenging trading conditions. Overall, however, the support services group said that operating profit in the third quarter to the end of December was “very significantly ahead” of the previous year.
In a further effort to reduce its debts, Glencore (GLEN) has entered into a complex streaming agreement to supply the Franco-Nevada Corporation with gold and silver, based on copper production at Glencore’s Antapaccay mine in Peru. The commodities giant, which will receive an up front payment of $500m for the deal, also said it expects to lower production of copper, zinc, lead and coal this year.
The guidance might be “on track” but Tate & Lyle’s update (TATE) hasn’t left a sweet taste in investors’ mouths. The specialty food and bulk ingredients business said its food systems business witnessed increased volumes but margins declines due to the “sharp increase in certain ingredient costs”. Its well-known sweetener Splenda also flew off the shelves faster but competitive pricing within the grocery market weighed on pricing here. Management expects adjusted pre-tax profits on a constant currency basis to be “broadly in line” with the £193m from the previous year but reported rates are expected to be “modestly below this figure”. The shares are down more than 6 per cent.
After a torrid start to the year shares in Enterprise Inns (ETI) are showing a bit of fighting spirit this morning. A trading update shows the group’s strategic overhaul is starting to have an impact. Like-for-like net income in the leased and tenanted estate grew by 1.6 per cent in the 19 weeks to 6 February thanks to strong rental income and growing income from beer sales.
It’s new strategy, announced in May, has seen growth in its managed house operations - whereby it directly manages the running of the pub. It expects to have 100 of these by September as well as 300 commercial properties under its ownership - another strand of its overhaul plan.
Adjusted operating profits leapt a tenth to £366m at Informa (INF) as the business intelligence, events and academic publishing giant put its ‘growth acceleration plan’ into action. The news sent shares up 4 per cent in morning trading. Organic sales and adjusted operating profits leapt double-digits in the events business. But they fell in the business intelligence division, the group’s historic bugbear.
Shares in Ashmore (ASHM) fell 6 per cent after the specialist emerging market asset manager reported assets under management were down by almost $10bn during the first half of the year. The group experienced net outflows of $5.7bn and a negative investment performance of $3.8bn.
Centrica (CNA) has announced a 5.1 per cent cut to average annual gas bills for British Gas customers from the end of March. This is the third time the company has cut its gas bills since the start of 2015.
OTHER COMPANY NEWS:
Hibernia REIT (HBRN) continues to make strong headway in Dublin, where demand for quality office space easily outstrips supply. In the five months since the start of October last year.Full ownership has been secured on Hardwicke House and Montague House, while around half of the One Dock Central site has been leased .
Corporate and fund administration provider Sanne Group (SNN) has entered into an agreement to acquire Chartered Corporate Services, a Dublin-based corporate services business. The business provides company secretarial, payroll, liquidation and VAT reporting services.
