Equities made another positive start to the day today, brushing off yet more iffy economic data from the UK economy. Click here for The Trader Nicole Elliott's latest thoughts.
IC TIP UPDATES:
Shares in Ocado (OCDO) made a marginal come back this morning following news that the online grocer has extended its existing contract with supermarket chain Morrisons (MRW). The latter has called it a “re-negotiation” with key changes to the agreement including lifting restrictions on which stores goods are picked from to fulfill online orders, cancelling the profit share agreement and reducing the research and development (R&D) fee. As previously announced, Morrisons will take on capacity at Ocado’s new customer fulfilment centre which greatly reduces the upfront capital cost of costs from the original agreement. However, we still see the advance of Amazon (US:AMZ) - not to mention its own tie-up with Morrisons - as a long-term threat to Ocado’s growth. Sell.
Shares in Regus (RGU) had a wobble this morning, as the flexible workspace provider hinted at a possibly softening in demand across some markets. It also failed to give further clarity on currency exposure for the current financial year, which in turn pushed the shares down more than 3.5 per cent. There’s not a huge amount to complain about otherwise, with group revenues up more than 10 per cent and underlying pre-tax profits up 38 per cent at constant currency. More to follow - our recommendation is under review until then.
A disappointing update from biotech group Motif Bio (MTFB) reveals that current market conditions have forced it to delay its NASDAQ listing. The group’s share price had soared in the last few weeks following the initial announcement to list in the US, but has plummeted back 18 per cent this morning. Questions could now be raised concerning the group’s ability to fund its crucial final phase clinical trial for antibiotic iclaprim. Until we gain a greater understanding of Motif’s ability to raise cash, we place our recommendation under review.
Standard Life (SL.) grew assets under management by more than £20bn during the first half of the year to £328bn, thanks to strong inflows into its pensions and savings business as well as weaker sterling benefits. Standard Life Investments continued its solid run, growing revenue 11 per cent although net inflows of £1.7bn were lower than that achieved during the previous year. The shares are 16 per cent down on our buy tip but that’s in line with recent volatility hitting the sector. Buy.
Shares in Legal & General (LGEN) dropped 6 per cent despite the life insurer posting a 16 per cent increase in cash generation and pre-tax profit growth of a fifth. Its retirement business led the way, with operating profits up more than 40 per cent. However, its insurance business suffered a decline in operating profits as a result of lower expected releases from its back book. Our buy recommendation is under review.
With a good dose of pessimism already baked into Amec Foster Wheeler (AMFW) shares, the market was looking for any sign of hope in interim results. Though little evidence of this could be found in the challenged US oil and gas division, or a narrowing trading profit margin, an increase in revenues, turn to positive operating cash flow and the re-iteration of full-year guidance were enough to send the shares up 7 per cent. Despite the cut in the interim dividend, we stay long-term recovery buyers.
KEY STORIES:
Ahead of its interim results in late September, online fast fashion retailer Boohoo (BOO) has said sales momentum continues to be as strong across the first and second quarters. Demand for seasonal stock has been consistent and robust and, as such, the board expects results for the full financial year to be ahead of current expectations. Sales growth should fall between 28 per cent and 33 per cent compared to previous guidance of 25 to 30 per cent. Cash profit margins are also thought to be better than first predicted.
A reduction in the value of Aim-listed companies Xeros (XSG), hVIVO (HVO) and Avacta (AVCT) caused a reduction in the fair value of IP Group’s (IPO) portfolio during the first half of the year. The group provided £13m in funding to portfolio companies and projects, compared with £15m the prior year. Shares in the technology investment business subsequently fell 5 per cent.
Shares in Worldpay (WPG) climbed 5 per cent after the international payments group posted double-digit growth in both constant-currency sales and underlying cash profits in the first half of 2016. Management signed new customers, raised transaction volumes with existing clients and expanded its range of payment types, products and services.
