Shares in London look set for a ninth straight session of gains. Click here for The Trader Nicole Elliott's latest views on the global markets.
IC TIP UPDATES:
And so it begins. Christmas trading statements are flowing thick and fast and we’ll start with the first quarter update from Topps Tiles (TPT). The shares have barely moved, reflecting a minimal 0.3 per cent improvement in like-for-like sales there. Chief executive Matthew Williams said the group had experienced “softer trading conditions” during the opening period but he remains confident the company can continue to outperform the overall tile market. We remain invested in the re-rating potential here. Buy.
It’s a brief note from online takeaway service provider Just Eat (JE.). The group has told the market that order growth grew by 42 per cent last year, or 36 per cent on a like-for-like service. UK-based orders rose by a comparable 31 per cent. That might sound impressive, but like-for-like order growth was up around 50 per cent two years ago. Regardless, chief executive David Buttress says the company is in a good position to deliver full year results in line with existing guidance. Take advantage of the weakness. Buy.
Phoenix Group (PHNX) has announced it achieved £486m in cash generation during 2016, surpassing its target of between £350m and £450m set at the time of its 2016 results in March. The closed life insurance book consolidator generated £117m from the integration of the Axa Wealth pensions and protection businesses that were acquired in November. Management expects to generate at least £250m from the integration of the businesses within six months of completing the deal. Buy.
Pawnbroker H&T (HAT) received a bump in its share price after management announced it full-year pre-tax profits for 2016 are likely to be marginally ahead of expectations. A surge in the gold price since the referendum and strong growth in personal loans - up 124 per cent - and its pledge book were the driving forces. Buy.
Whether or not Donald Trump ultimately proves to be a boon for US infrastructure, trading is already looking very strong Florida-headquartered concrete levelling equipment specialist Somero Enterprises (SOM). This morning, shares in the Aim-listed company jumped 8 per cent after a trading update suggested full-year net cash, cash profits and revenues would all be ahead of expectations. The chief contributors to growth in the latter half of 2016 were the European division, and China, while domestic growth was described as “satisfactory”. Our successful buy call is under review.
Antibody specialists Abcam (ABC) continues to live up to its lofty valuation. A half year trading update reveals revenue at constant currencies up by a tenth, with particularly strong growth from the group’s primary antibody subsidiary and in China. Overall this top line growth is double that of the underlying market. With more benefits to come from recent acquisitions and research and development investment, we continue to rate these shares a buy.
The share price of Science in Sport (SIS) is on a new year's growth streak, up another 5 per cent today as management announced the brand has been selected as the official nutrition supplier to British Cycling. The four year deal will see the company support British cycling in the run up to and during the Tokyo 2020 Olympic Games. Buy.
There’s a little bit of winter gloom for farming-focused business Carr’s (CARR) with management expecting both volumes and margins to be under pressure in its agricultural division. While sales of feed blocks, which farmers use to feed cattle during the winter, are up in the UK they are flat in the US as falling cattle prices begin to take hold. In its engineering division a “significant contract delay” which will impact production activity this financial year. Work on the contract is now scheduled to start at the end of the financial year and the group it was trying to limit the impact on the engineering division’s finances. Buy.
Brownfield regeneration specialist Harworth (HWG) has revealed that profits for 2016 are now expected to be higher than earlier estimates. Valuation gains and the proceeds from disposals are likely to be significantly higher than expectations. Sales included 43.7 acres to Lidl for £22.5m and land for 284 plots to Taylor Wimpey, Harron Homes and Arch, the Northumberland economic development company. Options and planning promotional agreements have also been signed on a total of nearly 1,500 potential residential plots, taking the long-term landbank up to over 17,000 plots. Buy
There’s a sugar rush in shares of PureCircle (PURE) this morning after the US Customs and Border Protection (CBP) released shipments it had been holding. The company, which makes sugar substitute stevia, said its shipments had been wrongly held after the CBP linked the shipments to slave labour. The group has always vociferously denied any use of forced labour and now seems to have been fully exonerated. PureCircle said it was still working with CBP to get the Withhold Release Order, which allows the agency to detain its shipments, lifted. Buy.
Trinity Mirror (TNI) has confirmed it is undergoing “early stage” talks regarding buying a minority stake in Northern & Shell, publishers of The Daily Express. Although no offer has been made at this stage and there is no guarantee of a deal, shares in Trinity Mirror ticked up 1 per cent in early trading. Buy
KEY STORIES:
The first of the supermarkets to show their hand is Morrisons (MRW) - and it’s no wonder. The market was keen to see if the group could match its Christmas performance from 2015/2016, and the answer is yes. In the nine weeks to 1 January 2017, like-for-like sales excluding fuel were rose 2.9 per cent, the strongest performance for seven years. Total sales were also up 2 per cent despite the continuing impact of store closures. According to the group’s bosses, this growth was achieved by improving the product range, becoming more competitive, and serving customers better. It’s true: Morrisons has closed underperforming stores and cut more than 700 jobs at head office in a bid to improve business. It now expects underlying pre-tax profit for FY2016/17 to be ahead of consensus forecasts, in a range from £330m to £340m.
Vimto-maker Nichols (NICL) seems to be bubbly this morning after announcing group revenue for 2016 would be up 7.3 per cent to £117.3m. The rate of growth is more than double that of the prior year and has been helped by a solid performance at home and overseas. UK turnover is up 6.9 per cent to £90.7m while international sales were up 8.8 per cent - again double the rate of growth from the prior financial year - to £26.6m. A full results report will be announced on 2 March and management says the group’s performance is in line with expectations.
Online fast-fashion e-tailer boohoo.com (BOO) has had a busy Christmas as it prepares its bid to take over US rival Nasty Gal which has filed for bankruptcy. This followed the purchase last month of a controlling stake in UK fashion website, PrettyLittleThing. Over the four months ended 31 December 2016, revenues soared by 55 per cent, but gross margins are down 260 basis points, mainly due to heavy price cuts and promotions. That’s because the company needs to remain competitive; it seems to be working as active customer numbers rose by nearly a third over the same period.
Finally, all eyes will be on Majestic Wine (WINE) this year to see if the group can recover from last year’s marketing disaster in the US. As is to be expected, Christmas is a key trading period for the group, and like-for-like sales rose 7.5 per cent over the 10 weeks ended 2 January 2017 - comfortably beating last year’s growth rate of 7.3 per cent. That said, the gross margin percentage was around 1 per cent lower as the group spent money on attracting new customers amidst a competitive and promotional market. Chief executive Rowan Gormley said that, at the moment, there was no predicted change in long-term margin expectations.
