After a wobble over the past couple of days, shares in London are back on form. Click here for The Trader Nicole Elliott's latest thoughts.
IC TIP UPDATES:
Real Estate Credit Investments (RECI) reported a 4 per cent rise in pre-tax profits during the 12 months to March 2017, due to a significant reduction in foreign exchange losses on its assets. However, after several property loans were repaid at or above the balance sheet value at the time of exit, the fair value of the drawn loan portfolio decreased slightly to £109m. Interest income for the loan portfolio was also down slightly to £12.5m and more than halved on its bond portfolio to £2.6m. We place our recommendation under review.
Bloomsbury Publishing (BMY) has another knight of the realm on the board. Sir Richard Lambert - a former editor of the Financial Times and head of the UK’s Confederation for British Industry - has been appointed as non-executive Chairman following the retirement of Sir Anthony Salz. On announcing the appointment, chief executive Nigel Newton made reference to the increasing role digitalisation has to play in publishing. Increased digital investment alongside higher marketing costs have hurt profit growth in the last year. But the shares still look good for income. Buy
Positive data from BTG’s (BTG) clinical study for a novel varicose veins treatment seems to have been somewhat overlooked by the market. Shares were flat on the news that the drug has proved more effective than any of its competitors. The result is expected to drive demand, particularly in the US, but BTG’s shares still trade at a substantial discount to peers in the interventional medicine market. Buy
KEY STORIES:
Tesco (TSCO) reported its sixth consecutive quarter of positive growth as like-for-like sales grew by 1 per cent in the first quarter, driven mainly by a 2.3 per cent boost from the UK. The UK’s largest supermarket chain said it has been working with its suppliers to limit the impact of inflationary pressures on customers and limiting passing on rising costs, which appears to be paying off with strong volume growth of 1.6 per cent in fresh foods, which the company called “significant market outperformance”. Its international business struggles as like-for-like sales fell 3 per cent mainly due to discounting bulk products in Thailand. Shares fell nearly 1 per cent in early trading.
Auto engine maker Rolls-Royce (RR.) heads into the Paris Air Show with trading in line with expectations. A pre-close trading update for the first half of 2017 said there had been so surprises on revenue, cash flow and profit over the period. Full-year revenues will see a £400m boost from sterling weakness, if current exchange rates maintain through to the end of the year. But “near term cash flow performance remains challenging” due to internal investment.
Diversified miner BHP Billiton (BLT) will have a new chairman from the beginning of September. Ken MacKenzie, who joined the board in September 2016 as a non-executive director, will succeed Jac Nasser. Mr MacKenzie had previously served 10 years as chief executive officer, and 23 years in total, at Australian global packaging company Amcor. His intray will include an ongoing battle with activist investor Elliott Management about the company’s legal structure and operational span.
Shares in SThree (STHR) were up 3.8 per cent in early trading following the release of a the group’s half year trading update. The picture was mixed, but not entirely unexpected, with strong gross profit growth in the USA and Europe, while the UK and Ireland continued to struggle. The group also shifted slightly towards contract or temporary work, with permanent shrinking three percentage points to 30 per cent of the overall split.
