Equities in London recovered early losses as the election of Donald Trump as US president began to sink in. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
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Interim results from British grocer J Sainsbury (SBRY) are the first set to involve its recent acquisition of what remained of Home Retail Group at the start of the year - namely the Argos chain. However, the deal only completed on 2 September, so the inclusion is minor. Like-for-like sales fell by 1 per cent, although general merchandising sales rose by 5 per cent, with clothing sales 1 per cent ahead. For the 13-weeks to the 27 August, Argos' like-for-like sales rose 2.3 per cent with total second quarter sales 3 per cent ahead. Chief executive Mike Coupe also said the impact of the recent devaluation of sterling on retail prices was “uncertain”. Our recommendation is under review, more to follow.
It’s no surprise to see a disappointing set of results from luxury fashion house Burberry (BRBY) after a trading update in late October revealed significant weakness in the group’s wholesale division. Retail sales actually grew 2 per cent on an underlying basis during the first half (or 11 per cent when you take into account the weak pound) but wholesale revenues crashed 14 per cent on the same basis. Licensing revenues also tumbled 54 per cent. That left group sales down 4 per cent (or up 5 per cent at constant currencies). Our recommendation is under review.
Arrow Global (ARW) grew its core debt collections by more than a third during the first nine months of the year, boosting revenue by a quarter to £164m. The distressed debt purchaser bought debt portfolios with a face value of £1.17bn for a price of £155m. However, pre-tax profits declined 43 per cent to £12m as a result of non-recurring items of £18m primarily from refinancing its £220 million fixed rate note. Buy.
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A good day to bury bad news, perhaps? This morning Rio Tinto (RIO) said it has contacted regulators in the UK and the US following an internal investigation contractual payments made to a consultant on the miner’s Simandou project in Guinea. Rio first discovered “email correspondence from 2011 relating to contractual payments totalling $10.5m” made to the consultant at the end of August, and has since suspended the executive responsible for Simandou at the time, energy and minerals chief Alan Davies. Legal and regulatory group executive Debra Valentine, who joined Rio as its legal head in 2008, has also stepped down ahead of her retirement. The 2 per cent rise in the company’s share price today was broadly in line with the mining sector.
It’s been a tough 2016 for plenty of the airlines and even though eastern European focused Wizz Air (WIZZ) has been robust operationally, its shares are down 14 per cent year to date. The dial hasn’t moved much this morning although Donald Trump’s US presidential election win could be clouding the picture here - especially given Wizz’s pre-tax profit rose 38 per cent to €263m (£235m). Ticket revenue crept up 4 per cent to €567m but perhaps most interesting was the large rise in ancillary revenue, up a fifth to €354m. And importantly margins, on an earnings before interest, tax, depreciation, amortisation and restructuring rose 5.3 percentage points to 41.9 per cent, suggesting it is managing its costs well in what is an increasingly competitive fares environment.
Things at Exeter-headquartered airline Flybe (FLYB) seem more positive though with the shares up in early trading. The company saw its chief executive Saad Hammad leave late last month having only joined in 2013. The group has declared its turnaround complete, with revenue up 13 per cent to £383m but a pretty steep 16 per cent drop in pre-tax profit to £7m came in spite of a 13.5 per cent increase in capacity. Costs, excluding fuel, fell 1.2 per cent but even with fuel (down 5.8 per cent) a 6.9 per cent decrease in passenger revenue per seat to £50.80 undid the good work. It has bought some of the aircraft it previously leased, which should reduce ownership costs but did push it into net debt.
A third quarter update from motor retail group Lookers (LOOK) has reported total gross profit from new cars increasing by 11 per cent, or flat on a like-for-like basis. Gross profit from used cars also rose, and margins also improved, resulting in an increase in gross profit there of 22 per cent or 8 per cent on a like-for-like basis.The aftersales business grew gross profit by 24 per cent, or 8 per on an underlying basis, while gross margins were maintained at a similar level to last year.
SSE (SSE) reported a significant uplift in pre-tax profits during the first half of the year primarily thanks to its wholesale business, which swung to a £267m profit from a £129m loss last year. However, this was due to a positive performance from mark-to-market commodity derivatives during the period. Retail profits declined by almost half to £61m due to lower customer account numbers. Its networks business - which includes gas and electricity distribution and electricity transmission.
Shares in YouGov (YOU) slid 5 per cent after the data analysis group wrongly predicted the outcome of the US election. It forecast Hillary Clinton would win 317 of the 538 electoral college votes, while Donald Trump would win 221. In fact, Trump cleared the required 270 votes while Clinton, according to RealClearPolitics, secured only 218.
Underlying billings at Sophos (SOPH) rose 16 per cent in the six months to 30 September, driving the cyber security giant's adjusted cash profits up 12 per cent to $50.9m (£40.9m). Management highlighted an increase in new customer billings of a fifth, a 19 per cent rise in subscription billings, and a renewal rate above 100 per cent.
