Strengthening sterling has taken some of the steam out of the equity rally as traders await further central bank pronouncements. Click here for The Trader Nicole Elliott's latest thoughts.
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PageGroup (PAGE) has reported a slowdown in the run-up to last month’s referendum on leaving the European Union. The UK recruiter second quarter update showed UK gross profit fell by 2.3 per cent in the three months to June 30, but overall gross profits gross were up 3.7 per cent on a constant currency basis to £157m. Predictably the group’s temporary placement business is showing greater resilience than permanent PageGroup highlighted good performances in Continental Europe and Latin America (ex-Brazil), which combined now account for around 45 per cent of the group’s activities. However, challenging market conditions persist in several of its larger markets, including Greater China, the UK and Brazil. Buy.
The flow of good news from Shire (SHP) is still going strong - this morning the pharma giant has announced that its dry eye treatment Xiidra has been approved by the US food and drug administration (FDA) meaning launch is set for the third quarter of 2016. This will be the group’s first drug in ophthalmics, a field in which chief executive Flemming Ornskov aims to become a global leader. The share price is up 3 per cent and we maintain our buy recommendation.
NewRiver Retail (NRR) delivered an upbeat trading statement, highlighting the fact that business in the wake of the referendum remains strong. Specialising in convenience stores and extracting maximum value from its existing portfolio, NewRiver pushed average rents up from £12.14 per sqft to £12.66, while the first quarter dividend has been increased by 11 per cent. Buy.
Galliford Try (GFRD) pushed housing completions up from 2,769 to 3,078 in the year to June, and business going forward looks strong, with forward sales up 27 per cent at £380m. On the construction side, trading remains strong, with 82 per cent of the 2017 order book already secured. Buy.
The chief operating officer at stevia producer and distributor PureCircle (PURE) has resigned. Jordi Ferre is said to be leaving to pursue a “non-conflicting business opportunity” and will remain in situ until 30 September to allow management to find a replacement. The shares have fallen 4 per cent in early trading. Buy.
A pre-close trading update from veterinary group Dechra (DPH) indicates an excellent year of growth. Revenues are reportedly up over a fifth, underpinned by strong organic performance and helped along by acquisitions made in 2015. Notably the group’s US business has been really motoring, with sales here up 37 per cent at constant currencies - particularly good news considering current market conditions. Brokers Numis and Investec have been impressed and have upgraded earnings forecasts for this year and next. The market has also responded well, sending the share price up 4 per cent in early trading. Buy.
A 14 per cent share price decline greeted full year results from Begbies Traynor (BEG), despite an increase in adjusted pre-tax profits from £3.6m to £4.5m. The preliminary numbers, which included the first full 12 month contribution from Eddisons, the property business acquired towards the end of 2014, also saw stronger than expected management of working capital, which management used to bring down net debt. We repeat last week’s buy call.
A strong performance in June, positive trading conditions, margin improvement and good operating cash flows were enough for Somero Enterprises (SOM) to forecast it will beat market expectations in for the year ending 31 December 2016. The shares raised four per cent on the trading update, which singled out “particularly strong activity” in North America. Buy.
Amec Foster Wheeler (AMFW) stock ticked up 4 per cent on the award of two long-term major services contracts as part of Repsol Sinopec Resources operations in the North Sea. The contracts, which are both for an initial three-year term with up to two one year extensions, are the latest in a stream of new or repeat business for the oil services firm. Buy.
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The immediate impact of the pound’s fall against the euro will push some prices up by 6 per cent at floor covering distributor Headlam Group (HEAD). Management said it imports residential floorcoverings from Belgium and Holland, a process which has become more expensive since sterling’s plummet against the single currency following the vote to leave the EU. But the company will increase selling prices by roughly the same amount, it said in its half-year trading update for the six months ended 30 June. In terms of trading, all is on track for the full year. Sales for the first half were up 4.8 per cent compared with the same period last year. In the UK, like-for-like turnover rose 3.4 per cent compared to the same period last year with residential up 4.7 per cent and commercial 0.4 per cent.
It’s fair the say the market has noticed fast-fashion e-tailer Asos (ASC) couldn’t look more different to a luxury design house if it tried. It’s selling clothes fast, at volume, over mobile apps and not in China. More than that - it’s working. UK-based sales rose a staggering 28 per cent during the third quarter - compare that to just a 1.2 per cent improvement across the British retail market as a whole in June. International retail sales now represent more than half of group revenues, although retail gross margins did fall 180 basis points following company-wide price cuts. No matter - the shares still rose close to 5 per cent in early trading.
OTHER COMPANY NEWS:
Market newcomer Hotel Chocolat (HOTC) has defied the odds to report a 12 per cent increase in revenues for the year ending 26 June, which is slightly better than analysts’ forecasts. Online sales grew particularly strongly, up around 20 per cent. A project to increase manufacturing capabilities with a new facility in Cambridge remain on track and in budget according to the company’s bosses.
