Confidence remains thin on the ground in London's dealing rooms with equities heading south in early trading today. Click here for The Trader Nicole Elliott's latest views.
IC TIP UPDATES:
The shares are not soaring high at tour operator Thomas Cook (TCG) this morning. The stock has fallen as much as 18 per cent in early trading on a marginal drop in sales and a 5 per cent fall in reported pre-tax profits. The group has pivoted well to deal with the blow to plunging booking for Turkey by shifting capacity to other areas including Spain’s Balearic and Canary Islands as well as to long-haul destinations such as Mexico. But bookings including Turkey are down 5 per cent on this time last year - it’s dominant position in the Turkish market proving a double-edged sword in the wake of reduced demand for the destination in the wake of last year’s terror atrocities. Its Belgian business also suffered after March’s Brussels airport bombing, prompting a “sharp decline” in demand for travel by the country’s population. Buy.
Revenues in the ten months to April grew 32 per cent at Ricardo (RCDO). The majority of this was generated by the acquisition of Lloyd's Register Rail, although 9 per cent organic growth shows that existing businesses have also been performing nicely. The shares rose 1 per cent as management maintained its guidance for the full-year. Buy.
Harry Potter publisher Bloomsbury Publishing (BMY) unveiled Bloomsbury 2020, a plan to pivot towards providing digital information and scholarly resources to academic libraries, law firms and other specialist organisations. Sales leapt 57 per cent in the children’s and educational division in the year to 29 February, as a new illustrated edition of Harry Potter and the Philosopher’s Stone more than doubled overall Harry Potter revenues. Buy.
The soft conditions of the UK tourist market from 2015 seem to have endured this year if Merlin Entertainment’s (MERL) update is anything to go by. The board said market conditions in London “remain challenging” in spite of favourable foreign exchange movements. It will be hoping for some good summer weather though given it has just expanded Legoland Deutscheland Holiday Village and has further offerings at Gardaland, Chessington World of Adventures and Warwick Castle on schedule to open over the coming weeks. The shares are down roughly 4 per cent in early trading. Buy.
Results from wholesaler Booker (BOK) show a 5 per cent rise in total sales and a 1.9 per cent in like-for-like sales. Adjusted operating profits rose 11 per cent and this has helped the group announce a 3.2p special dividend - it expects to make a similar payout in July 2017 too. We remain buyers.
A strong second half from Dairy Crest (DCG) helped it insulate the bottom line despite a 6 per cent drift in revenues and a squeezed dairy price. Pre-tax profits rose by nearly a quarter last year thanks to robust margins and strong underlying cash generation. The dividend rose 1.9 per cent to 16p a share accordingly. We retain our buy rating.
Where it’s polished the brass and dusted off the chairs sales at Mitchells and Butlers (MAB) sites have improved. Turnover at its 294 invested sites has risen 10 per cent but the uninvested side of the business offset this meaning group sales were down 1.5 per cent to nearly £1.1bn. The market seems okay with this though as it has sent the shares up more than 2.5 per cent. Fresh chief executive Phil Urban - who has been in place nearly 18 months - believes investment in the business is the best way to improve its fortunes as this can help it tap into the premium end of the market. Sell.
Private healthcare provider Spire (SPI) has this morning produced a sparse, but none-the-less reassuring trading update, stating that full year results are expected to be in-line with previous estimates and all construction projects remain on-time and within budget. The share price was up 1.5 per cent in early trading. Buy.
“Superbugs will kill every three seconds by 2050” is the rather bleak headline grabbing national papers this morning. But these findings from the Review on Anti-Microbial Resistance come as welcome news to Aim-traded Motif Bio (MTFB), a company in the process of developing a much needed new antibiotic. In a bid to encourage new antibiotic discovery the review recommends $2bn of funding should be made available to companies operating in this area. Shares in Motif Bio have leapt 7 per cent in early trading. Buy.
There are certainly some solid performances in the trading update for Cineworld (CINE) with revenues up 9.8 per cent. Admissions grew in both its UK and Republic of Ireland division as well as its rest of world business, which includes countries such as Israel and Romania. Retail revenues jumped 12 per cent thanks in part to the addition of Starbucks concessions in a growing number of sites. A cinema had to be closed in Hammersmith, London, in the period, but three new sites are planned for the UK and five others for overseas in time for the coming film slate which features Alice Through the Looking Glass and Independence Day 2. Buy.
Shares in Rolls-Royce (RR.) fell 3 per cent in morning trading after it emerged that the Serious Fraud Office widened its investigation into the engineer’s alleged bribery practices. The UK body is now also examining the engine maker’s former energy operations in Nigeria. Sell.
First half results from healthcare-services and drug-packaging company UDG Healthcare (UDG) demonstrated strong organic growth, with a particularly positive performance from the US business, and margin expansion in all three divisions. Currency headwinds did restrain revenue and profits growth but management have reiterated full year earnings growth of between 6 and 8 per cent. Buy.
KEY STORIES:
Pottery company Portmeirion (PMP) will tell its annual general meeting this morning that sales in its two largest markets - the US and UK - have performed better than during the same period last year. But total sales for the group for the four months to end-April were down 2 per cent due to ongoing pressures in South Korea, a major market for the group. Management had said at the full-year results how a competitor had entered the market with an aggressive pricing strategy but that it was expected its presence would be short-lived. Unexpected weakness in other Asian markets has also been noticed, but management believes this is temporary.
Record cash generation has helped push the dividend up 6 per cent at upmarket pub chain Young & Co’s (YNGA) which will cheer Stephen Goodyear in what will be his last results as chief executive. After 13 years in the top job, he’s moving to be a non-executive director on the board to make way for colleague Patrick Dardis - a switch that had been previously announced. The group invested £45m in its estate, including eight new managed houses and upgrades to existing premises and hotel developments. Like-for-like sales since period-end are up 5.3 per cent.
Posh tonic maker Fevertree (FEVR) continues to fizz away with sales in the first four months of the year seemingly going great guns. As such, the company says its results for the full year will be “materially ahead of market expectations”.
A “sharp reduction in consumer confidence in the immediate aftermath of terrorist atrocities” is probably the reason shares in online travel agent On The Beach (OTB) are suffering a bit this morning. Trading has been strong in the half-year period with revenues up more than a fifth to £35.5m helping push operating profits up more than half to £7.4m. But the company’s outlook has perhaps cooled the enthusiasm. Beyond the view about consumer confidence, it noted there had been a shift away from eastern Mediterranean destinations to western ones and that is expects late bookings to rise given some consumers are delaying booking their summer breaks.
The home refurbishment cycle is clearly still in rude health as replacement window and door company Safestyle (SFE) has seen orders rise by a quarter, ahead of last year and the expectations for this term. The reasons for the growth are, according to the group, its wider range of products, investment in its brand and the success of its revamped range of financing options which was introduced in June. This fact is likely to mean order growth in this second half is likely to moderate.
Shares in Investec (INVP) fell 2 per cent in morning trading after a heavy drop in the rand weighed on the South-Africa focused bank and asset manager’s full-year profits. Strip out unfavourable currency movements and there was plenty to cheer, as profits rose 14 per cent in the year to March.
Electrocomponents (ECM) reported a 64 per cent drop in pre-tax profit in the year to March, as the group booked £42m of restructuring charges. But the distributor did post a slight increase in revenue, maintained its dividend and noted that pricing and discounting discipline should result in a more profitable second half.
Shares in Royal Mail (RMG) declined by 4 per cent after the FTSE 100 group posted a £130m fall in pre-tax profits for the 12 months to March, though “adjusted operating profits before transformation costs” were in line with the 2015 figure and 5 per cent up on a constant currency basis.
Tight budgets in the banking sector meant sales dipped 2 per cent at Euromoney Institutional Investor (ERM), driving the professional information publisher’s adjusted operating profits down 7 per cent to £46.8m. Management plans to focus more on providing critical information to asset managers and intends to dispose of peripheral operations.
Even in the face of deflation in its core markets soft-drinks maker Britvic (BVIC) has reported a 7 per cent rise in operating profits on a constant currency basis to £69m. Chief executive Simon Litherland said the customer environment had been challenging and that in spite of this it had “outperformed the soft drinks category in each of our core markets, gaining market share as a result”. Importantly its recent acquisition in Brazil is growing ahead of last year and Fruit Shoot multi-pack is being launched into the USA, a key development for its international division.
OTHER COMPANY NEWS:
It appears to be much the same story over at Mothercare (MTC). The UK business did well last year, reporting like-for-like growth of 3.6 per cent, beating last year’s 2 per cent growth rate comfortably. But the international picture remains challenging, with like-for-like sales down 4.5 per cent overseas. More to follow.
