Equities were back in favour in London this morning as the FTSE100 rebounded sharply in early trading. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
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The deflationary battle has left a war wound on grocer J Sainsbury (SBRY) this morning after it reported a 1.1 per cent drop in like-for-like sales (excluding fuel sales) in spite of both like-for-like transaction and volume growth. Chief executive Mike Coupe said this showed “customers are consistently choosing Sainsbury's for the choice, quality, value and customer service we offer”. There’s hope also its acquisition of Argos owner Home Retail Group will help matters. A total of 200 new digital collection points are due to open by the end of the year and the company already has 15 Argos Digital stores open in Sainsbury's stores so customers can shop 90,000 products. In its second quarter to 27 August, Argos achieved total sales growth of 3 per cent and like-for-like sales growth of 2.3 per cent. Buy.
Following a promising trading update in July, a strong set of results from specialty pharma group Clinigen (CLIN) had been expected. But the market was no less impressed by revenue, profit and earnings all almost doubling in the financial year and bumped the shares up 8 per cent in early trading. An impressive swansong for chief executive Peter George who used these results to announce his departure. His former deputy Shaun Chilton will take the reins in November. Buy.
Clothier and Simon Thompson recommendation Moss Bros (MOSB) is suited and booted this morning with like for like retail sales (85 per cent of total revenue) up 5.3 per cent, including retail e-commerce sales up 7.7 per cent. Beyond this, like for like hire sales (15 per cent to total revenue) were up 2.8 per cent. Perhaps most encouragingly, retail gross margin was up 3.3 per cent due to improved pricing, the removal of a mid-season sale and more targeted promotional activity. All this meant pre-tax profit was up 30 per cent to £3.7m. The company continues to boast net cash and also raised its dividend.
Following media speculation, Phoenix (PHNX) has confirmed plans to purchase Deutsche Bank’s insurance business Abbey Life for £935m cash. The acquisition would add £10bn in assets under management and 750,000 policyholders to the group and is expected to generate around £0.5 billion of aggregate cashflows between 2016 and 2020 and approximately £1.1 billion in from 2021 onwards. It will also support a further 5 per cent increase in dividend per share for 2017. Buy.
The buses are spluttering but the trains don’t seem to be having too many problems over at transport operator Stagecoach (SGC). In the 16 weeks ended 20 August, its UK regional, London and North American division (which is bus-based), all saw like-for-like sales drop but UK rail and Virgin Rail Group bucked that trend to post positive like-for-likes. Management said its expectations for full year adjusted earnings per share had not changed from when it announced its 2016 financial year results in June. But it warned independent macroeconomic forecasts cover “a wide range of possible outcomes and therefore, there is a higher than usual degree of forecasting uncertainty”. Sell.
Mortgage Advice Bureau (MAB1) grew sales and pre-tax profits by a third during the first six months of the year. The average number of advisers was up a quarter to 851 by the period end. The mortgage broker benefited from a spike in mortgage applications prior to April but activity quietened around the referendum. Management says written business volumes have held up well since the referendum. We place our recommendation under review.
Tritax Big Box REIT (BBOX) plans to raise around £150m through a placing, open offer and offer for subscription of 113.6m shares at 132p a share. The offer price represents a discount of 7.1 per cent on the previous closing price, and the new shares will not be eligible for the second interim of 1.55p a share announced today. The net proceeds will be used to fund further investments. Buy.
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Royal Bank of Scotland (RBS) has reached a final settlement of $1.1bn with the National Credit Union Administration over alleged mis-selling of mortgage-backed securities in the US. However, lawsuits with the Department of Justice and and the Federal Housing Finance Agency are still outstanding.
Parcels group UK Mail (UKM) is to be acquired by Deutsche Post DHL, in an all-cash deal worth £243m. Shares in the company surged by 43 per cent this morning to the 440p target price, after the board of both companies agreed to the deal and UK Mail shareholders were told they will still receive the upcoming 5.5p interim dividend.
An element of stability in personal care company PZ Cussons’ (PZC) African business seems to have helped settle investors’ nerves. The stock is up more than 4 per cent in early trading and management’s description of trading in the important market of Nigeria (26 per cent of operating profits) as “robust” will no doubt have helped fuel this morning’s rise. In the UK, Imperial Leather, Original Source and Carex brands, helped its washing and bathing division grow market share but its beauty division suffered in the UK with sales of St Tropez down. This brand performed well in the US though.
It’s been a tough time for tour operators of late given the spate of terrorist incidents in 2016 but Tui (TUI) seems to be holding its own. The group said the UK, its Rui hotels business and cruises had performed well, helped by the launch this summer of two additional cruise ships and the opening of five additional hotels in its core brand. Winter trading is in line with expectations. Elsewhere, the group has secured the sale of Hotelbeds, which comes just more than a year after it put online hotel booking site LateRooms up for sale. It is also seeking a buyer for Travelopia, another specialist - but non-core - business.
Increased spending on new IT systems and an uptick in call-outs meant trading cash profits AA (AA.) were flat during the first half of the year. However, the motor services specialist managed to reverse the decline in membership of its roadside assistance service during the final three months of the period. Nevertheless this declined 0.6 per cent on the previous year. Insurance services margins also suffered as a result of increased competition and higher churn.
