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News & Tips: Lloyds, Travis Perkins, Aggreko & more

Equities have tipped into reverse
April 27, 2017

Shares in London crunched into reverse as tax plans from the US received a lukewarm response. Click here for The Trader Nicole Elliott's latest thoughts on the markets.

IC TIP UPDATES:

Lloyds’ (LLOY) shares were up 4 per cent in early trading after the bank reported £1.3bn in pre-tax profit during the first three months of the year, double the same time the previous year. Net interest income was up 1 per cent, thanks to a lower cost of funding more than offsetting reduced asset pricing. This pushed the net interest margin up six basis points to 2.8 per cent too. Capital generation is also expected to be at the upper-end of the 170 to 200 basis point range for the year. However, management did cite weaker retail and commercial banking income, which was offset by stronger consumer finance sales. Buy.

Travis Perkins (TPK) started 2017 in line with expectations, growing like-for-like sales 2.7 per cent over the first quarter. The stand out performer was the contracts division, which saw like-for-likes up 12.1 per cent. Chief executive John Carter said the group’s performance was down to “careful pricing activity to recover input cost inflation”. We stay at buy.

The 5 per cent bounce in N Brown (BWNG) shares this morning is down to a few things: slightly better than expected results, a stemming in the decline across its traditional brands and the announcement of a new partnership with Tesco. Following the shares less than enthusiastic performance of late, the yield also stands at around 6 per cent. But further profit declines are still expected for FY2018, while some analysts suspect any cost savings already hinted at will need to be reinvested to drive future growth. Our recommendation is under review.

The 2017 outlook for sell-tip Aggreko (AGK) remains unchanged with the release of the first quarter results. Profit before tax and pre-exceptionals is expected to be lower than 2016 given the impact Argentina is having on the wider business. Excluding the impact of repricing in the country, revenues grew 7 per cent and excluding off-hires, they were up 25 per cent. Shares were up slightly on the announcement, but we remain at sell.

Weak sterling took a toll on the half year results for The Character Group (CCT), where revenue fell by 5.7 per cent to £61.5m and pre-tax profits were down by a quarter to £6.5m. The owner of Pepper Pig and Scooby Doo makes most of its purchases in US dollars but has begun to look for ways to make the group more efficient to mitigate this risk in the future. Shares were down 5 per cent in early trading. Our recommendation is under review.

Morses Club (MCL) reported net loan book growth of 8 per cent during its first year as a listed company. During the 12 months to 25 February pre-tax profits were up by the same amount to £11.2m, while the cost-to-income ratio also declined to 56.9 per cent. Management announced a maiden dividend of 4.3p a share. Buy.

Schroders (SDR) grew its assets under management across all its business areas during the first quarter of the year. Institutional assets were up 4 per cent to £235bn, while intermediary business also recovered, with £7bn additional assets compared with the same time the previous year. Buy.

KEY STORIES:

Additional operating costs and currency movements are due to impact profitability at Howden Joinery (HWDN) over 2017, but the the group’s sales initiatives look to be paying off nonetheless. Revenue was up 2.4 per cent on a same depot basis in the first quarter of the year, with plans to open 30 depots in 2017 on track. This will bring the total to 650.

Shares in Berendsen (BRSN) were up more than 3 per cent in early trading following release of the group’s first quarter results. Trading was in line with expectations, with underlying, pre-acquisition revenues up 3 per cent in constant currency. Chief financial officer Kevin Quinn, is planning to retire and will step down once a successor has been appointed.

Agriculture is set to be the key focus for Camellia (CAM) after it completes the sale of its private bank Duncan Lawrie. The agriculture division, which includes tea, macadamia nuts and avocados, was the strongest contributor to the group’s profits in the full year results to 31 December 2016, but management warned that climate change and a low oil price could harm the business over the coming year. Shares fell nearly 1 per cent in early trading.

Shares in Redde (REDD) were up 3 per cent in early morning trading after management said increased trading volumes during the first half of the year continued into the third quarter.