London shares dipped in early trading on weakness in US technology stocks after disappointing results from Apple. Click here for The Trader Nicole Elliott's latest take on the markets.
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A slew of pressures seem to be buffeting transport company Stagecoach (SGC). Management listed no fewer than six reasons - including weakening consumer confidence and slowing growth in real earnings - why revenue growth in its train division was slowing. It said the outlook for the rail industry is “more challenging” than it was last year and the overall rate of industry revenue growth has “slowed in recent months”. The group’s European megabus.com business remains loss-making although this is partly due to the fact the company is still building the brand on the continent and investing heavily in it. This business is currently being reported within the regional bus division but will be split out in the full-year results to give a fuller picture. Revenues fell in North America and operating margins in its London bus business were also squeezed slightly. Sell.
Barclays’ (BARC) pre-tax profits fell by a quarter during the first quarter, reflecting increased losses in its non-core businesses of £815m. The banking group is in the process of reducing its risk-weighted non-core assets, cutting £3bn to £51bn during the period. However, income for corporate and international increased to 2 per cent to £3.5bn. Credit impairments increased 15 per cent, primarily due to exposure to the oil and gas sector. We retain our buy rating.
There wasn’t much plumping up in collagen product company Devro’s (DVO) trading update this morning. The sausage casing maker said trading was in line with expectations and that market conditions were similar to those of the second half of its previous financial year. Its US and China plants remain on track for completion with all government approvals now in place, and due to the projects, net debt has risen as expected. Buy.
European-focused asset manager Henderson (HGG) reported more subdued first quarter results, with net inflows into UK and other retail of just £44m and net outflows of £769m from institutional funds. However, net inflows of £317m into US mutuals, plus positive currency effects, meant overall assets under management increased £700m to £9.7bn. We place our buy recommendation under review.
Transplant devices group Lifeline Scientific (LSIC) has today reported a stellar year, with double digit revenue growth and a 139 per cent increase in operating profits. The balance sheet is also looking stronger thanks to $8.2m net cash generated from operations. The share price is up 8 per cent this morning to reach its 52 week high of 251p. Buy.
British Polythene Industries (BPI) was the bearer of good news this morning. First quarter trading exceeded management expectations as the polythene products specialist benefited from lower energy costs and favourable currency movements. And the deal to sell its Chinese subsidiary Amcor is now expected to produce a larger gain than initially anticipated. Encouraged investors responded by sending the shares up 7 per cent. Buy.
Packaging company DS Smith (SMDS) has issued a brief statement confirming that trading for the year to April saw good volume growth and improved return on sales. Driving this performance was a decent contribution from large pan-European customers and the rapidly growing e-commerce channel. Acquisitions were also said to be performing well. Buy.
Shares in Hayward Tyler (HAYT) rose 3 per cent in morning trading after the maker of pumps and motors reported a 47 per cent increase in order intake in the year to March. Peter Brotherhood, which was acquired last October, contributed £7.4m to this increase, while management also confirmed that the project to double capacity remains on track to be commissioned by the end of June. Buy.
Today brought two good pieces of news for oil services group Amec Foster Wheeler (AMFW), pushing the shares up by 3 per cent. First, it has found a new chief executive officer – Jonathan Lewis – a Houston-based Halliburton executive who will join the company in June. The group also said guidance for this year remained unchanged, and that several interested parties have stepped forward to bid for the GPG power unit. Buy.
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Well that’s that. South African retailer Steinhoff - which has been mixing up the M&A scene recently - will walk away empty handed despite disruptive bids for both Home Retail Group (HOME) and French electricals retailer Darty (DRTY) since the start of the year. Having already conceded defeat over Home Retail to J Sainsbury (SBRY) , this morning it said it can’t go any higher than 160p a share for Darty. Looks like Fnac has it then.
Picture booth company Photo-Me International (PHTM) is focusing in on a potential acquisition target it has said this morning. The group said supermarket chain Asda would soon make an announcement about its UK photo product division and that Photo-Me was in discussions to acquire the assets relating to that business. It says if it does buy the division, it would continue to operate it from Asda stores. It added though there was no certainty a deal would be reached. Nonetheless, shares are up more than 1 per cent this morning.
The pressures of the milk market have continued to weigh on specialist ingredients company Glanbia (GLB). The group’s global ingredients division - which accounts for just less than half the revenues of its wholly-owned businesses - suffered a 5.2 per cent fall in revenues in the first three months of its financial year due to price declines in the dairy market cancelling out volume growth. Management is still guiding improved operating profits for the year though in the division thanks to its high end whey ingredients sales. Elsewhere, its Dairy Ireland division, which accounts for more than a fifth of wholly-owned sales, witnessed a 6.2 per cent drop in revenues which was partly driven by price declines.
The two recent purchases of The Noisy Drinks Company and the Feel Good brand have both helped nudge up revenues at Vimto-maker Nichols (NICL). Management said it had launched several new flavours for Vimto as part of its ‘Remix’ strategy, which only included no added sugar options - a sensible move given this is not only in line with consumers’ growing desires to be healthy but also removes the need to reformulate the drinks in light of the forthcoming sugar levy on soft drinks to be implemented in 2018.
In the midst of a merger with Deutsche Borse, London Stock Exchange Group (LSE) announced total income from continuing operations was up 9 per cent during the first quarter. This was driven primarily by a strong revenue growth in information services, thanks to recently-acquired FTSE Russell. However, technology services revenue was down 18 per cent, largely due to timing of customer deliveries.
Life isn’t getting any easier for Fenner (FENR), although a 1 per cent fall in the share price indicates that this is no longer a surprise for investors. Underlying operating profit nearly halved to £15m as the engineer’s exposure to oil and gas and other commodity markets continued to cause problems. Management is confident that it’s restructuring drive will curb losses from here on in.
Trading at speciality chemicals company Croda (CRDA) continues to go from strength to strength. First quarter sales climbed 8 per cent to £307m as it benefited from the acquisition of Incotec, favourable currency movements and robust demand for its core personal care and life sciences products. This success also helped to drive the operating margin up by 60 basis points.
Shares in Elementis (ELM) slumped 2 per cent in morning trading after the chemical company’s AGM statement highlighted challenging markets. A big slump in oilfield sales was mainly to blame for total revenues falling 7 per cent. But there were some bright spots, including a 4 per cent rise in personal care sales.
One of the biggest risers this morning was Hargreaves Services (HSP), whose shares jumped 14 per cent on news that it would seek to realise £66m from the sale of its legacy assets, a figure in excess of the company’s current market capitalisation.
Full-year results for China-focused Green Dragon Gas (GDG) showed a 17 per cent net increase in proven and probable reserves to 173 billion cubic feet of gas, and revealed plans to increase gross production capacity by a third this year. Most significant was an eighteen-fold increase in operating cash to $12.4m, though the drilling programme meant the cash balance more than halved to $27m by the end of December.
OTHER COMPANY NEWS:
London focused estate agent Foxtons (FOXT) saw revenue up by 16.2 per cent in the first quarter, boosted by a 57.6 per cent rise in revenue from mortgage broking. However, in the wake of the 3 per cent stamp duty surcharge that came into force on 1 April, Foxtons warned that it has a reduced sales pipeline going into the second quarter, citing uncertainty ahead of the EU referendum as a reason for the fall in transaction volumes.
What do you get if you cross Teletubbies with Peppa Pig? Well, according to independent toy company Character (CCT) the answer is growing revenues and profits. The Surrey-based business said turnover had risen 12 per cent in the half-year to end-February compared with the same period the prior year which helped push adjusted operating profits up nearly 21 per cent. Encouragingly, management said international sales now account for 25 per cent of all transactions.
Exxon Mobil (XOM), the largest listed oil company in the world, has lost the AAA-credit rating first awarded to it by Standard & Poor’s in the 1930s. The Texas-headquartered group, which we recently flagged as the best-positioned super marjo to ride out the oil slump, had its credit rating downgraded due to “high reinvestment requirements, and large dividend payments”, as well as low commodity prices. The decision came as Goldman Sachs’ head of commodities research suggested oil prices may stay down long enough for Exxon and other oil majors to cut their dividends. Exxon shares are up 12 per cent so far this year.
