The UK economy largely shrugged off the impact of the EU referendum, growing 0.5 per cent in the third quarter of the year. Investors weren't cheered - the UK's main stock indices drifted downward in morning trading. In her morning update, The Trader Nicole Elliott highlights European banks' non-performing loans and a regulatory push to reduce British banks' exposure to certain foreign banks.
IC TIP UPDATES:
Shares in Bloomsbury Publishing (BMY) climbed 2 per cent after the Harry Potter publisher grew turnover by 19 per cent in the six months to 30 August, reflecting higher print and digital sales. Revenues surged more than 60 per cent in the children’s trade business as consumers snapped up new editions of the Harry Potter books.
Annual results from high street chain Debenhams (DEB) have come out in line with market expectations this morning. There’s been little update in terms of forward strategy as incoming chief executive Sergio Bucher is due to update the market on his strategic views by the spring. Critically, analysts have pointed out that the company is fully hedged at $1.50 for the year ahead, meaning margins should remain flat. For the year ended 3 September, revenues grew 0.7 per cent on a like-for-like basis, with adjusted profit before tax up 0.5 per cent to £114m. Our recommendation is under review.
Hurricane Energy (HUR) has completed testing at its horizontal sidetrack well at its Lancaster prospect, which revealed a natural flow rate of 6,520 barrels of oil a day and more than double that using an electrical submersible pump. The well will now be suspended ahead of the publication of a competent persons report in the first half of 2017. We remain buyers.
It’s rare for a mature natural resources company to increase quarter-on-quarter production by 43 per cent, but KAZ Minerals (KAZ) - which has had few problems expanding the output from its Bozshakol and Aktogay mines - is an exception. Shares in the copper miner nudged forward 3 per cent this morning, after it reassured the market it would hit full-year guidance. Buy.
Shares in Amec Foster Wheeler (AFW) tumbled by a fifth this morning, after the oil services group announced it would be disposing an additional three assets for £100m, as part of its wide-ranging debt reduction programme. Despite the wide sell-off, the company reassured investors that performance this year and next remains in line with expectations, sterling’s depreciation continues to be a boon, and an uptick in activity from the environment and infrastructure division is offsetting declines in oil and gas. Our long-term recovery call is under review.
Ahead of the publication of its feasibility study at the beginning of 2017, prospective lithium miner Bacanora Minerals (BCN) today announced results for the 12-month period to June, which provided little detail beyond a net cash balance of C$28.7m (£17.5m). Buy.
The cider’s flowing in terms of volume at Bulmers manufacturer C&C (CCR), but price cuts mean revenue and operating profit both dipped in the six months to 31 August. The fact the group reports its results in euros has also not helped as sterling’s profound recent weakness against the single currency means profits in pounds don’t translate as well. Cash generation remained strong and net debt did fall but the group will be targeting €15m of cost savings to focus its production in fewer sites. Buy.
Barclays (BARC) incurred a further £1bn in provisions for the third quarter of the year, which dragged on pre-tax profits for the core UK operations. Non-core disposals meant on a group level they declined 10 per cent to £2.9bn. We stick with our buy recommendation.
KEY STORIES:
Shares in BT (BT.A) slid 3 per cent after the telecoms giant grew underlying sales by 1.1 per cent in the second quarter to 30 September, pushing adjusted cash profits up 0.9 per cent. Rivals’ calls to open up the group’s Openreach division failed to detract from its performance.
A positive outlook for Fidessa (FDSA) pushed its shares up 7 per cent in morning trading. The financial software group’s bosses expect minimal impact from the Brexit vote.They also predict a boost from the weak sterling as Fidessa earns the majority of its revenues outside of Europe.
A third-quarter update from global motor retailer and distributor Inchcape (INCH) sent shares there down 3 per cent this morning. That’s because the outlook for 2017 is slightly more cautious than the market expected. Otherwise, third-quarter like-for-like sales rose 4.3 per cent in constant currency, while foreign-exchange tailwinds have helped total sales grow 15.3 per cent at actual currency.
Shares in oil and gas services provider Hunting (HTG) are down this morning after the FTSE 250 constituent said it would place new shares equivalent to 9.8 per cent of the company’s issued capital. The funds will be used to pay down debt and “increase financial flexibility”, though the revenue declines seen in the first half of the year have apparently stabilised and underlying losses have reduced by 23 per cent.
Shares in Berendsen (BRSN) plummeted 16 per cent after the cleanwear and workwear provider revealed operational instability in the UK flat linen business during the third quarter meant higher-than-expected operating costs. Despite this, revenue increased 13 per cent during the period.
Asset manager Henderson (HGG) increased assets under management by 6 per cent during the third quarter to £101bn. This was thanks to positive currency movements and market returns. Institutional net inflows were £0.4bn, however continued negative sentiment towards European equities resulted in retail net outflows of £1bn.
OTHER COMPANY NEWS:
Infrastructure and support services firm Stobart (STOB) used its interim results to August to announce an agreement to operate CityJet flights to up to 18 new destinations from April 2017, boosting footfall at London Southend Airport. A pre-tax profit of £10.8m during the reported period was largely due to the canny disposal of the investment property at Speke, which had been acquired just last year, in May.
