Investors awoke to the news that Theresa May has appointed Boris Johnson as foreign secretary, replaced Treasurer George Osborne with Philip Hammond and made several other key appointments within hours of becoming prime minister. The FTSE 100 climbed on predictions that the Bank of England's Monetary Policy Committee will halve interest rates today, potentially weakening the sterling further. Read The Trader Nicole Elliott's morning update here.
News of a 21 per cent surge in sales at high-street fashion chain SuperGroup (SGP) has sent the shares up more than 6 per cent in early trading. Pre-tax profits also grew by a significant 16 per cent and gross margins mustered a 60 basis point improvement. All in all, there’s a special dividend worth 20p to reward shareholders. We remain buyers.
The copper grade potential of the Rio Tinto mine in Spain has been known for centuries, but its current operator, Atalaya Mining (ATYM) has managed to upgrade its reserves and resources estimate by an impressive amount. Total open pit mineral reserves now stand at 153 million tonnes at an average grade of 0.45 per cent Cu – a 12 per cent increase – while measured and indicated resources are 193 million tonnes at a 0.2 per cent cut-off. As fans of Rio’s low cost profile and excellent infrastructure, we keep the shares on a buy.
Demand for office space from small companies helped to push the total rent roll up by 4.9 per cent to £82m for Workspace (WKP) in the three months to June, with rents from recently refurbished and redeveloped schemes up by nearly a quarter. The effects of the referendum remain uncertain, but with its focus on small businesses, Workspace remains confident that demand will be maintained. Five refurbishment projects are currently underway, with a further two expected to start shortly. Net debt fell from £276m at the end of March to £214m, giving a loan-to-value ratio of just 12 per cent. Buy.
East London focused housebuilder Telford Homes (TEF) reported total forward sales of over £640m, and over half the revenue expected for the next three years has already been secured. No major sales launches are expected until the Autumn, but the company highlighted the fact that there remains a chronic shortage of housing in and around London. Buy.
Office and industrial premises landlord McKay Securities (MCKS) remained in an upbeat mood, stressing that the chronic supply/demand imbalance continues to underpin the market in the South East. Crucially, rent reversion remains significant, whereby new lettings are securing much higher rents than projected by initial valuations. Contracted rent rose to £21.7m, which would total £31.4m if marked to market. Buy.
Shares in Micro Focus International (MCRO) soared 8 per cent after the enterprise software titan revealed full-year results at the top end of management’s expectations. Although underlying sales dipped 2 per cent, adjusted cash profits jumped 9 per cent to $533m (£402m). Its gains reflected strong growth in its subscription software business, SUSE, as well as cost savings from restructuring the business last year. Buy.
Hill & Smith (HILS) has bought Technocover, a supplier of services and products to the utilities market, for £10m. The target was previously a subsidiary of Ensor Holdings. The acquisition will be funded from the company's existing banking facilities, and is expected to boost earnings in the first full year of trading.
KEY STORIES:
A solid trading update from specialist healthcare group BTG (BTG) was dampened by news that problems concerning physician reimbursement of varicose veins treatment Varithena is still ongoing. That said, new products in the interventional medicine division are performing well and management alluded to the fact that the top line will benefit from the current sterling weakness.
More than 3m sun-seeking passengers helped Jet2.com owner Dart Group (DTG) push revenues in its dominant travel and leisure division up 15 per cent to more than £1.2bn. The growth was helped by a leap in package holiday customers - up a fifth - who represented 40 per cent of customers compared to 33 per cent in the year to March 2015. Its Fowler & Welch distribution and logistics business also performed extremely well - albeit from a low base. Revenue of £144m was down from the prior year’s £152m because a drop in fuel costs has been passed on to customers. But pre-tax profits rose by nearly two-thirds to £5.4m. A total dividend of 4p a share is now being recommended.
A first quarter update from bicycle retailer Halfords (HFD) suggests a soggy summer deters even the most willing of cyclists. Cycle sales fell 4 per cent on a like-for-like basis over the 13 weeks to 1 July, although sales rose across every other division on the same basis. Regardless, at the top level underlying retail sales dipped 1.2 per cent. Adjusting for the timing of the Easter break, the damage was less severe with retail sales down 0.2 per cent.
Late last night, convenience chain McColl’s (MCLS) announced a significant acquisition. The group plans to buy 298 stores from the Co-operative Group for £117m. Bosses there are calling the deal “transformational”, and have asked investors for an additional £13m in order to help fund the transaction. The purchase, however, is still subject to shareholder approval and the regulatory green light from the Competition and Markets Authority.
Gulf Keystone Petroleum (GKP) will live to fight another day, but equity holders are set to be almost wiped out in a $500m debt swap. In an announcement billed as a ‘balance sheet restructuring’, shareholders will be diluted to 5 per cent of their holding in exchange for a reduction in short-term debt from $600m to $100m. Equity investors will nevertheless retain the right to participate in a $25m open offer for 10 per cent of Gulf Keystone’s shares. Following the deal, chairman Andrew Simon announced he will step down and be replaced with non-executive director Keith Lough.
Shares in Moneysupermarket.com (MONY) climbed 9 per cent after the online price-comparison group revealed it was on track to grow first-half sales by a tenth, driving adjusted operating profits up 6 per cent to about £54m. That reflected double-digit growth in both the core MoneySupermarket.com division and MoneySavingExpert.com, offset by a 19 per cent fall at TravelSuperMarket.com.
OTHER COMPANY NEWS:
International sales at mum-and-baby chain Mothercare (MTC) benefited significantly from the timing of Ramadan according to the company’s bosses, although management warns it continues to see a high level of volatility across its foreign businesses. A rainy start to the British summer hampered domestic sales, although the home business still mustered a 1.2 per cent underlying improvement.
