Investors have bailed out after the Bank of Japan failed to feed their desire more further monetary easing. Click here to see what The Trader Nicole Elliot thinks of the markets.
IC TIP UPDATES:
Serco Group (SRP) announces that its wholly-owned subsidiary DMS Maritime Pty Ltd has now signed the contract for the design, build, operation and maintenance of the new icebreaker Research and Supply Vessel (RSV) for the Australian Antarctic Division (AAD) of the Department of the Environment. The total contract value to Serco, which excludes the build cost of the vessel, is approximately £160m. Buy.
Victrex’s (VCT) medical device materials business has agreed to settle charges that it violated antitrust laws by using long-term exclusive contracts to maintain its monopoly. This could mean the chemical company is restricted from being able to market and sell medical products on long-term exclusive contracts. The shares fell 8 per cent and our buy advice is under review.
Weir Group (WEIR) expects first half profits to be slightly ahead of market expectations, thanks to a combination of cost savings and a “resilient” performance from the minerals division. £160m of savings was generated in the past 18 months, while its recently unveiled £100m disposal programme is said to be on track. That reportedly compensated for significant declines in the oil and gas business and a 22 per cent fall in overall order intake on a like for like basis, although net debt did rise in the period. Sell.
Ahead of its annual general meeting today, Schroders (SDR) has reported a slight decline in pre-tax profits during the first quarter to £138m. Net inflows of £2.7bn were roughly half that received by the asset manager at the same time the previous year. Weaker retail demand partially offset institutional inflows of £4.5bn. We place our buy recommendation under review.
Shares in our recovery tip of the year Lloyds (LLOY) fell 4 per cent after the banking group revealed a 46 per cent fall in pre-tax profits during the first quarter of the year. This was largely due to the planned buyback of £790m of enhanced capital notes. However, this also meant the deposit pricing and mix and lower wholesale funding costs. We place our recommendation under review.
A strong operational update from Falcon Oil & Gas (FOG) was followed by a 4 per cent increase in the explorer’s share price. An in-depth shale evaluation program revealed good continuity over a large proportion of the key Beetaloo Basin assets, including three organic rich shale intervals within the Middle Velkerri formation. With the shares up by a third on our initial tip, our recommendation is under review.
The 21.5kt of copper cathode produced by KAZ Minerals (KAZ) in the three months of 2016 puts the miner on track to hit full-year guidance. However, a fall in copper grade helped to take 2 per cent off the shares in early trading. We keep our long-term buy recommendation.
KEY STORIES:
Berendsen (BRSN) said trading in the first quarter was in line with management's expectations, with revenues up 3.6 per cent at constant exchange rates and before acquisitions. The group’s top line is benefitting from advantageous currency translations, while underlying operating profits are ahead of the equivalent period last year.
In a Q1 update, temporary power provider Aggreko (AGK) followed up last month’s warning on challenging trading conditions, with confirmation that revenues have fallen 17 per cent, but guidance for the full year, of profit before tax “slightly lower than 2015”, remains unchanged.
The multi-faceted group Camellia (CAM) seems to be steadying up. The shares have fallen nearly 13 per cent in the past year as various macroeconomic pressures have weighed on different parts of the business. But management says it has taken steps to address issues in its engineering division as well as in its Kenyan tea business. Revenues and adjusted pre-tax profits are both up and strong cash generation was also registered. It won’t all be plain sailing this year though. Already a glut of tea in Kenya has pushed prices down, which impacts Camellia, and the low oil price also hurts its engineering division.
Speciality chemicals company Synthomer (SYNT) has confirmed that it’s trading in line with expectations after a steady first quarter. While volumes fell slightly in the period due to lower paper volumes, margins widened as it benefited from falling raw material prices.
Management at accident services provider Redde (REDD) has revealed it expects operating profits for the full-year to be ahead of the board’s original expectations, thanks to a strong third quarter of trading. Shares in the Aim-traded group rose 5 per cent on the news.
Desperate to shed assets and bring down its debt pile, Anglo American (AAL) has sold its Brazilian niobium and phosphates businesses to China Molybdenum, for $1.5bn in cash. The businesses, which generated $146m in cash profits last year, were deemed non-core in Anglo’s revamped strategy.
Petropavlovsk (POG) released its full year results today, but the bigger news was its acquisition of another gold company, Amur Zoloto, in an all-share transaction. In return for paying $144m for the company, contributors Lexor Group and Alliance Mining Group will receive 30.3 per cent of Petropavlovsk’s enlarged share capital, based on a knock-down price of 6.89p per share. Separately, the Peter Hambro-chaired miner has entered into a joint venture with GMD Gold to finance the construction of the company’s pressure oxidation hub project. This hub, towards which GMD is paying $120m for a 51 per cent stake, will allow Petropavlovsk to produce a further 200,000 to 300,000 ounces of gold a year when fully operational.
OTHER COMPANY NEWS:
It’s business as usual for housebuilder Taylor Wimpey (TW.), with the group reporting no influence on its forward order book from the approaching EU referendum. The total order book of 8,811 homes is up from 8,200 a year earlier, and is valued at £2.17bn against £1.86bn a year ago. Crucially, build cost inflation continues to slow, and is expected to stay below 4 per cent in the coming year. Land prices also remain benign.
LSL Property Services (LSL), which focuses on estate agency and surveying services, reported a predictably buoyant first quarter, following the rush to beat stamp duty charges imposed from 1 April. Trading in the second quarter is expected to slow ahead of the EU referendum, although, depending on the outcome, trading expectations for the rest of the year are expected to be in line with expectations.
