UK investors awoke to an interesting crop of technology results from IBM, Netflix, Yahoo and others, while the FTSE 100 continued to show resilience despite significant uncertainty. Read The Trader Nicole Elliott's morning update here.
IC TIP UPDATES:
A short and sweet trading update from cheese-and-spreads maker Dairy Crest (DCG) shows the combined performance of its key brands, which include Cathedral City cheese and Clover butter, are in line with last year. Management said the outlook for the rest of the year is unchanged. Chief executive Mark Allen also said the company was “building the customer base” for its demineralised whey and GOS products - both of which are ingredients in infant formula milk. Buy.
The shares in transport hub food-concession company SSP Group (SSPG) haven’t quite regained their pre-referendum result level but its third-quarter trading update has helped it along the way. Total group revenues for the three months to June 30 were up 4.8 per cent on a constant-currency basis, comprised of like-for-likes up 3 per cent and net contract gains of 1.8 per cent. If the weakness of sterling since the leave vote is taken into account, then sales actually jumped 9 per cent thanks to the company’s international exposure. If the pound’s weakness continues, it could push annual revenues up another 3 per cent. In terms of trading, Europe continues to be mixed for the company, with the fallout from terrorism and industrial action in France being felt. The US appears more robust but Egypt continues to weigh on the ‘rest of world’ division. Buy.
The strong recent upward momentum in Rio Tinto (RIO) shares was checked this morning by a second-quarter trading update, which revealed lower than expected production in a number of key commodities. Save for diamonds, the miner did not make downgrades to full-year production estimates, though iron ore shipments and copper output will have to recover some ground to make up targets. Our recommendation is under review.
Russian steel giant Evraz (EVR) blamed planned repairs to one of its blast furnaces in West Siberia for a 9.9 per cent second-quarter fall in consolidated crude steel output, but North American production was worse. That was largely due to falling demand and lower use of plants at Regina, Canada and Pueblo in Colorado. Sell.
A 15 per cent year-on-year increase in recovered carats is nothing to be sniffed at, but investors in Gem Diamonds (GEM) will be disappointed by today’s half-year trading update. That’s because the average sale price of $1,899 per carat was 16 per cent down on the first six months of 2015, reflective of slightly weaker market conditions and fewer big gem discoveries. Analysts are expecting that trend to reverse in the second half of this year. Buy.
In spite of some softness in the UK cattle feed market and flooding of its food manufacturing sites, the diverse Carr’s Group (CARR) still expects to hit full-year forecasts. Management said although feedblock sales volumes in the UK were down year to date, the drop was roughly 1 per cent compared to the national fall of 4.4 per cent, meaning the business at least gained market share. Growth and market share gain were both recorded in terms of feedblock sales in the US though. As for the flooding of its factory, the group said it was still confident its insurance claim would be upheld meaning little or no financial impact. In engineering, the robustness of the nuclear sector is helping to counteract the weakness in the oil and gas industry. Buy.
A six-month trading update from Alliance Pharma (APH) indicates the extent to which recently acquired products are benefiting the business. Revenue is expected to more than double in the first half driven, largely due to the 27 new products acquired from Sinclair Pharma (SPH) at the end of 2015, while older products are also still performing well. The share price was up 4 per cent in early trading and we still see this as a buying opportunity.
KEY STORIES:
There certainly don't seem to be any gaps in the windows or doors over at Safestyle (SFE), as management said it is still in line to meet its enhanced expectations outlined in May. The company said its order intake in the six months ended 30 June was up 19.7 per cent on the prior year, which is expected to deliver sales revenue of £83.5m in the first half of its financial year, an increase of 12.8 per cent (H1 2015: £74m). Industry statistics compiled by FENSA show the company has increased its market share year on year to 10 per cent from 9.5 per cent. Cash flow was strong and meant net cash rose nearly 60 per cent to £23.6m.
A growing number of institutional investors are clearly willing to roll the China dice if the statement this morning from DJI Holdings (DJI) is anything to go by. The provider of technology for online bookings, mobile payments and lottery sales in China has raised £11.5m through a share placing thanks to interest from “a number of major institutional investors”. The move follows the £29m conditional placing announced on July 1. “Owing to institutional demand, the board has decided to accept this additional funding of approximately £11.5m from blue chip long term investors,” the group said. The additional money is likely to lead to the company being able to secure additional business, which it said it was confident of announcing in the coming weeks.
OTHER COMPANY NEWS:
Royal Mail (RMG) saw “no material change in overall trends” in trading in the three months to 26 June this year, a traditionally quieter trading period for the business. Group revenue crept up 1 per cent, with a good performance in Europe offsetting a 1 per cent top line decline in the UK.
