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News & Tips: AO World, Carr's, Booker & more

Equities are flat as traders greet Brexit trigger with a shrug
March 30, 2017

Equities are doing little this morning as London investors brush off the Brexit trigger. For the Trader Nicole Elliott's latest thoughts, click here.

IC TIP UPDATES:

AO World (AO.) share dipped further this morning on news of a placing to raise £50m. This will ensure the company is “well positioned for the future” and can continue in its pursuit to expand into Europe. As part of the announcement, the group confirmed it is on track to report a 17 per cent increase in annual revenues, while overall losses for the year should not exceed £2.4m. We see this morning’s fundraising as proof of AO World’s ‘spend big to grow big’ strategy which we’ve long suspected might cost shareholders in the long run. Sell.

Shares have plummeted in Carr’s Group (CARR) this morning following a profit warning. As a result of a previously announced delay to a UK manufacturing contract, together with a slower than anticipated recovery in US cattle prices, the board admits the group’s performance will be “significantly below” existing expectations this year. Quite how bad the situation is will be detailed further in the interim results on 12 April. Our recommendation is under review.

Morses Club (MCL) has launched its online installment loan product Dot Dot Loans, following its acquisition of Shelby Finance last year. The business is its first online installment lending product but is not expected to have a material impact on profits this year. Buy.

As full-year results show, Anglo Pacific Group (APF) benefited from two key trends in 2016. First, a significant increase in saleable tonnes from the mining royalty company’s Kestrel stream, together with better coking coal prices led to a 127 per cent jump in income to £19.7m. Those earnings were then juiced by the devaluation of the pound post-EU referendum, which meant basic earnings per share came in at 15.6p, against a loss of 14p in 2015. We stay buyers.

Given its end-market problems, interim results for Plexus Holdings (POS) were predictably dire. Though the wellhead technology specialist ended 2016 with £10.1m in net cash, that salvo was more than offset by poor sales, a post-tax loss of £2.5m and a fall in research and development spend. Our buy call is under review.

Though it remains a very cheaply-valued stock, logistics group Wincanton (WIN) continues to win high-profile contracts. This morning the company announced a new deal to manage drinks group Britvic’s national transport operations, which will involve 100,000 deliveries a year. Buy.

KEY STORIES:

Tesco (TSCO) and wholesale business Booker (BOK) have barely left the headlines this week, and it looks like Booker’s going to have the last word with a fourth quarter statement this morning. Total sales rose 0.5 per cent during the period, with like-for-like sales up 0.7 per cent. Excluding tobacco - which has long been a drag on Booker’s top line growth - sales rose 4.5 per cent on a total basis and 4.7 per cent on a like-for-like basis. The group also had a tidy £160m in net cash left by the financial year-end.

The management re-shuffle continues over at high street bookie William Hill (WMH). The latest appointment comes in the form of new financial chief Ruth Prior, who is currently serving as chief operations officer at payments processor Worldpay. She will join the William Hill board later in the year.

Shares in SSE (SSE) were down slightly this morning on release of the energy group’s latest trading statement. All three of its segments were profitable during 2016/17, but its networks business is expected to be down on last year and retail is due to be lower. Dividend cover is also expected to fall in 2017/18 to the bottom end of its 1.2-1.4 times expected range.

Shares in Hilton Food Group (HFG) were up 3 per cent on release of its latest results. The group saw 7.4 per cent growth in volume to over 275,000 tonnes, driven largely by strong performance in the UK and Ireland. It has also signed an agreement with Woolworths to build and operate a new production facility in Queensland, Australia from 2020.

OTHER COMPANY NEWS:

Shares in DFS Furniture (DFS) were relatively stable this morning despite good half-year results and confirmation of a special dividend. The group first hinted at the special pay-out late last year, but said it was conditional on the group’s position by the end of the six month period. Along with ordinary returns, shareholders can expect to receive 13.2p per share. Otherwise, interim revenues rose 6.8 per cent, whilst good mitigation of rising costs meant pre-tax profits still grew in excess of 3 per cent to £16.7m.