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News & tips: William Hill, easyJet, Britvic & more

A sell-off of airline shares dragged UK stock indices down in morning trading
July 21, 2016

The UK's major stock market indices drifted downward in morning trading, as a full-year profit warning from German airline Lufthansa sparked a sell-off of shares in easyJet (EZJ), International Consolidated Airlines (IAG) - owner of British Airways - and other airline groups. Lufthansa blamed the recent string of terrorist attacks in Europe for a significant drop in long-haul bookings.

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There mustn’t have been too much drowning of sorrows or celebrating post Brexit as pub group Fuller, Smith & Turner (FSTA) seems to be feeling some effects of what it calls a “challenging" environment. Like-for-like sales from its managed pubs and hotels rose 2.1 per cent in the 16 weeks to 16 July, but like-for-like profits were down in its tenanted division. What’s more, total beer and cider volumes in the Fuller’s Beer Company were down by 5 per cent. However, the latter metric likely points to the trend of consumers opting for more expensive drinks in smaller quantities than the average pint. A new pub has been snapped up in Canary Wharf and some renovations have taken place too. The group has also rolled out the first London site of recent acquisition The Stable - a trendy beer and cider chain whose genesis was down in the West Country. Buy.

The weather might have been scorching in the past few days, but a dreary June apparently dampened the public's appetite for soft drinks. Britvic (BVIC) reported a 5.3 per cent increase in revenue in the third quarter to 3 July, with volumes up 8.8 per cent. Organic volume increased 1.4 per cent whilst revenue declined 0.7 per cent. That said, the company remains on track to deliver full-year cash profits within the guidance range set at the beginning of the year of £180m to £190m. Buy.

Shares in Intel (US:INTC) slid 3 per cent in after-hours trading after weak demand for personal computers pushed second-quarter sales down 3 per cent in the chipmaker's client computing segment. More positively, revenues in the data centre, security and ‘internet of things’ divisions rose 5, 10 and 2 per cent respectively. Management also cut about 6,000 jobs, meaning it’s halfway towards achieving its target of a 12 per cent reduction in headcount by 2017. Buy.

Investors sent shares up 3 per cent in Euromoney Institutional Investor (ERM) after the financial information and events group posted a 1 per cent fall in underlying sales in the period from 1 April to 20 July - an improvement from the first-half decline of 6 per cent. Its progress reflected a less challenging comparative period for its events business, as well as early gains from restructuring. Sell.

It’s been an exciting time for shareholders in Premier Foods (PFD) recently after the tug of war between US group McCormick, which wanted to buy the group outright, and Japanese business Nissin Foods, which ended up securing a sizeable stake and trade agreement. Now we’re in a new financial year and the first quarter seems to have gone well. Total sales are up nearly 2 per cent with non-branded goods performing the strongest.On a divisional basis, sales grew by 1.9 per cent in grocery, thanks to the likes of Loyd Grosman sauces and Bisto gravy, while sales in sweet treats increased by 2 per cent thanks to innovations with the Ambrosia brand such as frozen custard ice cream.

It was a short innings at the top of bookie William Hill (WMH) for James Henderson, but the man who became boss of the company two years ago is leaving a business he has been with for more than 30 years. There’s no love lost though from shareholders, who have sent the stock up 3 per cent. This is in spite of the group’s performance in the online arena still struggling slightly. William Hill has also been notable in the past year or so for its lack of a deal, something which has been front and centre for most of its major rivals. Chief financial officer Philip Bowcock is taking the reins on an interim basis and an interim chief financial officer is being sought. Buy.

It’s tough being an airline at the moment. Not only have we had Brexit and the fall in sterling making holidays abroad more expensive, but there’s been a spate of terrorism attacks and our nearest neighbours in France don’t look like quitting their strike any time soon. So it is perhaps unsurprising that shares in budget carrier easyJet (EZJ) are down 5 per cent this morning. Total revenue per seat decreased by 8.3 per cent at constant currency, or by 7.7 per cent on a reported basis, to £54.54 per seat. Total revenue in the quarter decreased by 2.6 per cent to nearly £1.2bn, as increased seat capacity was offset by the impact of cancellations as a result of “significant external events”. Impressively, cost per seat excluding fuel was flat, an achievement given £20m of disruption cost during the quarter to 30 June.

A solid trading update from infection control group Tristel (TSTL) has proven the doubters wrong. Revenue and pre-tax profit for the year to 30 June are expected to be at least £17m and £3.1m respectively - ahead of market expectations. The group’s highly cash-generative business model also continues to deliver, helping to rake in £5.7m of net cash at the year end. This has prompted management to suggest the payment of a special dividend with any excess cash. Considering net cash is likely to stay around the £3m mark there is the opportunity for a big payout. Buy.

Constellation Healthcare (CHT) has also been trading well in the last six months, according to this morning’s update. Operating profits are expected to be in line with the board’s expectations and strong organic growth in the US medical billing market means the group is on track to deliver full-year revenues of $126.5m - over two-thirds up on last year. Buy.

Legal & General (LGEN) has had its AA- credit rating reaffirmed by Standard & Poor. The ratings agency also upgraded the insurer’s management and governance from 'satisfactory' to 'strong', citing factors including its focus on longevity reinsurance and favourable recent disposals. Buy.

Action Hotels (AHCG) has announced its intention to open its first hotel in Dubai. It will also be the group’s first Novotel hotel - the mid range offering from AccorHotels. The 220-room hotel will be a four-star offering in a prime location in the centre of Dubai Healthcare City - an area of land 50 per cent owned by Action Hotels. The share price has climbed 5 per cent in early trading. Buy.

Buy tip Close Brothers (CBG) grew its loan book by 7 per cent during the five months to the end of June to £6.4bn. Managed assets were up 500m to £7.8bn, while Winterflood also put in an improved performance around the referendum. Buy.

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White-goods retailer AO World (AO.) has said it's “mindful” of recent “economic uncerainty” following the UK’s decision to leave the European Union and its potential effect on consumer confidence, as well as the foreign-exchange impact for its suppliers. However, it has yet to change the full-year guidance it already issued to the market. During the first quarter, UK revenues grew 25 per cent, with revenues in Euros up 101 per cent. Margins are still a work in progress as the group balances marketing costs and set-up expenses relating to its new European outposts.

Things are looking sweet for ingredients group Tate & Lyle (TATE) - which, remember, has actually nothing to do with the eponymous sugar brand. A key performer for the company has been Splenda Sucralose, its sweetener product, which drove profits up “significantly higher” than the comparative quarter to 30 June. Outside of Splenda, specialty food profits are slightly ahead and bulk ingredients have fared well thanks to demand in the US. And to make things even better, given the company derives as little as 2 per cent of revenue in the UK, the drop in sterling versus the dollar should lead to earnings increasing strongly if the weakness persists.

It might be geared into the machinations of the supermarket price war, but meat-packing company Hilton Food Group (HFG) is not being overly affected. In the UK, volumes are higher than in 2015, when they were still building up during the bedding-in phase following the expansion of the production facility. In the Dutch market, the group has seen volume growth and its Irish business has also seen growth. In Sweden, volumes have been flat and turnover up, reflecting the availability and price of Swedish pork. Hilton will also supply customer ICA, the leading Swedish retailer, with pizza to its stores from end-2016. In Central Europe, where Hilton supplies customers in seven countries, the company has seen volume growth.

UK sales jumped nearly 5 per cent to £44.5m at soft drinks group Nichols (NICL) in its first-half results in spite of tougher trading conditions. The overall UK soft drinks market declined by 0.5 per cent according to industry data provider Nielsen, making the performance even more notable. Group operating profit rose by 10.8 per cent to £11.9m, reflecting a one percentage-point increase in margin. The outperformance of the UK market was driven by the strong growth of its Still Ready To Drink range, the launch of Vimto Remix into both the still and carbonate categories, and most notably the incremental sales from the acquisition of The Noisy Drinks Co. International sales were in line with expectations at £12m, but the second half is likely to see better numbers as much of its trade in the Middle East comes in the latter half of the year.

The ongoing saga that is the deal dubbed ‘mega-brew’ - that of Anheuser-Busch InBev (ABI) snapping up SABMiller (SAB) - its next biggest rival - has jumped another hurdle. The US Justice Department has given its blessing, prompting the groups to say the acquisition should be completed in the second half. The thing that likely helped it across the line stateside is the fact AB InBev had previously agreed, among other conditions, to divest SABMiller's US interest in MillerCoors to Molson Coors.

The currency impacts and dour outlook are probably the things putting a halt to any rise in the shares at household and personal goods group Unilever (ULVR). Adjusted revenues rose nearly 5 per cent but when currency movements are factored in, they actually dropped 2.6 per cent to €26.3bn. Currency movements also left operating profits flat. Underlying profit growth remained soft in developed markets - falling 1 per cent - but in emerging markets it leapt 5 per cent in the first half.

De La Rue (DLAR) confirmed trading so far this year is in line with the board’s expectations, despite the impact of Brexit on the business in the short term. Management said the order book remains strong. Due to currency volatility, its policy is to hedge all confirmed currency sales and purchases.

Shares in St Ives (SIV) leapt 11 per cent after one of the strategic marketing group’s agencies, Realise, landed a 7-year contract with the English Football League. Broker N+1 Singer thinks it could be worth over £1m a year.

CMC Markets (CMCX) grew active client numbers by 13 per cent during its first quarter of trading. However, the overall value of client trades declined slightly during the run-up to the referendum. Management does not foresee any change to expectations.

Charles Stanley (CAY) enjoyed a 2 per cent uplift in its funds under management to £20.9bn during the first quarter of its year to the end of June. Discretionary and execution-only funds were up 4.3 per cent and 2.9 per cent respectively. However, like-for-like sales were down 7 per cent as a result of a reduction in trailing commission and commission on bargains.

SSE (SSE) saw a slight decline in retail gas and electricity consumption during the three months to the end of June, while retail customer accounts also declined by 16,000 to 400,000. However, management confirmed that it was targeting a return to growth and adjusted EPS of 120p a share for the 2017 financial year ending June 30.

OTHER COMPANY NEWS:

Howden Joinery’s (HWDN) investors ran for the exit in the immediate aftermath of the Brexit referendum, but the kitchens specialist sounded a cautiously upbeat note in half-year results this morning. Revenue from the group’s UK depots increased by 9.1 per cent in the 24 weeks to 11 June, while the gross profit margin edged up 120 basis points to 64.5 per cent on the back of price increases and the lagged impact of adverse currency movements.

In a pre-close update, online retailer MySale (MYSL) has said a good second half means it expects full-year revenues and underlying cash profits to be ahead of current market expectations. Gross profits are also up by more than a fifth thanks to a 300 basis point improvement in margins, and the group finished the year with nearly £20m in cash on the balance sheet. The shares rose around 2 per cent in early trading.