Equities have continued to tick northwards as oil breaks through the $50 barrier. Click here for The Trader Nicole Elliott's latest views on the markets.
IC TIP UPDATES:
Debenhams (DEB) has announced the appointment of Amazon executive Sergio Bucher as its new chief executive. He replaces Michael Sharp, who is set to depart next month. Mr Bucher, who begins in the role in October, has previous experience at Puma, Nike and Zara-owner Inditex. We retain our buy recommendation.
Henry Boot (BHY) delivered an upbeat trading statement covering the first three months of this year, with land development, property investment and construction all performing well. Some transactional uncertainty ahead of the EU referendum has been noted but is not expected to continue after the June vote. Land sales for over 450 units have been secured on two sites, while planning consent has been secured on five sites for over 3,400 units. Further land purchases have taken the land bank up to 150 sites covering 11,200 acres. Buy.
United Utilities (UU.) reported a slight dip in revenue last year in line with the regulator’s lower allowed returns. However, the water group gained £2.5m in net real rewards by achieving its outcome delivery incentives. The group also increased its dividend by 2 per cent. Buy.
Pan African Resources (PAF) was one of the biggest risers this morning, after it agreed to acquire more shares in Shanduka Gold, a trust whose sole asset is a 23.8 per cent stake in the South African gold miner. In February, Pan African said it would purchase the 16.9 per cent interest in Shanduka owned by Standard Bank of South Africa, though this has now been extended to a 33.6 per cent interest owned by fellow investor Jadeite. PAF will stump up some of the cash, though the majority will be bought by new institutional investors at 14.25p a share, which constitutes a 5 per cent premium to the 30-day volume weighted average. Our profitable buy call is under review.
KEY STORIES:
Shares in Daily Mail & General Trust (DMGT) slid 9 per cent after the Daily Mail publisher posted a 12 per cent decline in underlying operating profits for the six months to 31 March. That partly reflected flagging demand for newspapers, which drove print advertising sales down 13 per cent.
Cybersecurity group Sophos (SOPH) posted a 32 per cent rise in comparable, adjusted cash profits in the year to 31 March, as brisk trading meant billings rose across all regions and product types.
If you’re looking for 50 Cent to help you out, things must be rough. Shares in Hostelworld (HSW) fell by a quarter after the group warned that geopolitical instability, particularly in Europe, had hit trading. Bookings into its supporting brands have been materially reduced as the company changes its product offering and improves its revenue streams, but its core Hostelworld brand* - where 50 Cent is fronting a new advertising campaign ‘In Da Hostel with 50 Cent’ - continue to demonstrate strong growth. Overall, group bookings are marginally down on last year.
Challenging defence markets were to blame for a 2 per cent dip in underlying operating profit at QinetiQ (QQ.) in the year to 31 March. Boss Steve Wadley described the defence contractor’s performance as “solid”. But analysts sweated over the impact new regulations will have on the group’s single source contracts.
Stobart Group (STOB) has booked an £11.8m profit, following the sale of an investment property at Speke in Liverpool for a cash consideration of £37m. The disposal of the site, which generated an annual rental profit of £0.7m, is all the more impressive given it was only acquired by Stobart last year. The group said it would consider returning the surplus cash to shareholders, sending the shares 2 per cent higher to 123p.
A 5 per cent improvement in adjusted pre-tax profits at Tate & Lyle (TATE) was well-received by the market, which was further encouraged by the business’ continued development of its speciality food ingredients division. Though sales were only marginally up in the 12 months to March 2016, revenues from products launched in the last seven years motored ahead, while net debt pared back considerably.
OTHER COMPANY NEWS:
Brickmaker Ibstock (IBST) reported brisk sales in the first four months of this year, thanks mainly to continued growth in the house building sector. However, this has been offset to some extent by destocking in the builders merchant supply chain, which primarily serves the repair, maintenance improvement (RMI) market. Good weather in the US has also helped to underpin the group’s clay business.
Upmarket clothes retailer Joules (JOUL) began trading today after its Aim admission with its shares rising almost 19 per cent in early trading. The float raised around £77m, much of which goes to founder Tom Joule and private equity backers.
*26 May 2016: The original version of this article stated that bookings at the Hostelworld brand had been materially reduced, which was incorrect. This has been updated.
