Equities in London were unmoved by news from the US that the Federal Reserve is still expecting rate rises 'fairly soon'. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
BAE Systems (BA.) posted a 13 per cent rise in full-year earnings on the back of increased US military spending and ongoing instability in the Middle East, most notably in Syria and Yemen. The FTSE 100 defence contractor saw its revenue increase to £17.8bn, up from £16.8bn in 2015, while order intake increased significantly to £22.4bn, up from £14.9bn a year earlier. Buy.
Centrica (CNA) dropped 3 per cent with the release of its final results for 2016. The group made good headway on delivering cost efficiencies, with £384m in the first of its five-year programme targeting £750m by 2020. However, accounts were down across its consumer and business sectors in both the UK and US, its two biggest sectors and two biggest geographies. Buy.
Barclays (BARC) more than doubled its pre-tax profits to £3.2bn during 2016. This was largely due to much lower litigation and conduct costs and reduced operating costs. The core business generated a 6 per cent uplift in income, but this was offset by the continued run-off of its non-core businesses. More to follow.
AO World (AO.) chief - and company founder - John Roberts is stepping aside from his role just over two years since the group’s float. He will be succeeded by Steve Caunce, currently chief operating officer. But Mr Roberts isn’t leaving the group altogether; he will move into the role of executive director and founder, taking responsibility for “innovation and inspiring AO's people”. We remain sellers.
32Red (TTR) has soared by more than 16 per cent this morning following news it is recommending a cash offer from Swedish group Kindred worth 196p a share. That’s a 16.3 per cent premium to the last closing price of 32Red shares on 22 February 2017 - the last business day before the news broke. This morning’s share price surge has, however, taken the stock above this level to around 200p in early trading. Await documents.
Shares in gambling software and finance group Playtech (PTEC) are flat this morning despite a solid set of annual results. Revenues rose by a fifth at constant currency (12 per cent on a reported basis) with adjusted cash profits up by nearly a third on the same basis. The group still has stonking level of net cash - around €545m - and has raised its dividend by around 15 per cent. There’s no special dividend today, and there are mounting concerns about the level of regulation left to come in relation to its financials division, but we remain bullish for now. Buy.
National Express (NEX) moved 2 per cent higher this morning followed an expectation-beating set of results. The rail and bus operator reported pre-tax profits of £175m - well ahead of consensus forecasts of £166m - with growth derived mainly from the group’s expanding overseas business, particularly in North America, Spain and Morocco. Management is optimistic about the year to come too, saying the group should continue to enjoy better levels of free cash flow, the benefits from a string of acquisitions and lower fuel costs. Buy.
Mondi (MNDI) delivered flat adjusted revenues and a 3 per cent uptick in underlying operating profits for 2016 as sales volume growth was countered by lower selling prices. Overall, there was a 70 basis point improvement in the group operating margin to 14.7 per cent, tempered by a 20 basis point increase in the return on capital employed to 20.3 per cent. Buy
Revenue and profit growth is something we’ve grown accustomed to at Tristel (TSTL), but that didn’t stop investors sending the share price up 11 per cent following an excellent set of interim numbers. Revenue and adjusted operating profit rose 22 per cent and 16 per cent respectively, while overseas revenues rose 29 per cent at constant currencies. Buy
Rathbone Brothers (RAT) grew its total funds under management by 17 per cent during 2016. As a result fee income was up 15 per cent to £185m. Fee and advisory income now represents almost 80 per cent of revenue as more clients adopt its fee-only tariff. However, head office relocation and acquisition costs meant pre-tax profits declined 15 per cent. More to follow.
Alberto Lavandeira is getting bullish about Spanish copper. The chief executive of Atalaya Mining (ATYM) this morning announced his company has exercised an option to acquire 10 per cent in a copper project near Santiago de Compostela, which like the now fully operational Riotinto mine, is a former mine complete with an old plant. We remain buyers.
In other copper news, full-year earnings figures for KAZ Minerals (KAZ) came in well above analyst estimates. The timing of the ramp-up at Aktogay and Bozshakol also correlated with an improvement in prices, even if reported revenues were slightly behind expectations. With the company continuing to benefit from low start-up costs and falling gearing, we keep our buy call.
KEY STORIES:
British American Tobacco (BATS) results have been significantly helped by the current foreign exchange climate, lifting both revenues and profits substantially higher at current rates. There are other positives too: cigarette market share rose by 50 basis points, with group cigarette volumes up 0.2 per cent to 665bn. But transactional impacts relating to foreign exchange did actually hurt operating margins. Excluding this and other adverse impacts from acquisitions, margins would have expanded by around 160 basis points. Other items of note include the group’s vaping business, now the largest of its kind outside of the US, with a successful new product launch of this variety in Japan.
Ingredients maker Treatt (TET) enjoyed a 22 per cent rise in its share price this morning after a very strong trading update. Performance for the six months until the end of March 2017 are now expected to show “substantial” year-on-year progress, with revenues up more than a fifth.
The re-shaping of Glencore’s (GLEN) asset portfolio made 2016 a lucrative year for the commodity firm’s small army of legal and financial advisers, but it was also a profitable one for shareholders. After posting a $5bn loss in 2015, Glencore booked a $1.4bn net income attributable to holders of its equity. To get there, the company smashed its debts and worked hard to bring down costs as far as possible, further supported by a good contribution from the marketing division.
In a filing with the SEC, ExxonMobil (US:XOM) reported a 19 per cent drop in its oil and gas reserves, after writing off 3.5bn barrels of heavy bitumen at its Kearl oil sands project in Canada. According to the Financial Times, the fall is the “largest drop to be reported by one of the big international oil companies for at least a decade”.
OTHER COMPANY NEWS:
Shares in pest control and workwear company Rentokil Initial (RTO) were flat following its preliminary results this morning. Ongoing operating profit grew 11.5 per cent for the year, while revenue was up 12.6 per cent. The company continued its acquisitive strategy, making 41 acquisitions in 2016.
At the top line animal genetics group Genus (GNS) continues to deliver strong growth, despite a dismal market for pork and beef producers. But big spending in research and development has dented profits in these half year results. This morning the group has also announced the acquisition of the genetics assets of Hermitage, one of the longest established pig breeding companies in Europe.
Howden Joinery‘s (HWDN) shares were up slightly following its preliminary results. The group recommended a final dividend of 7.4p, raising the full year amount to 10.7p from 9.9p in 2015. It also proposed an £80m share repurchase programme.
