This morning saw the release of some weak economic indicators. An HSBC measure of Chinese manufacturing plunged to a one-year low, while purchasing-manager surveys in France and Germany both pulled back from their previous highs. Nicole Elliott reports.
IC TIP UPDATES:
WPP (WPP) posted 5 per cent growth in net sales at constant currencies, split equally between organic growth and acquisitions. The UK business and emerging markets are performing particularly well. Management reiterated a target of 3 per cent organic growth and improved margins. Nothing to change our view that this is a very high-quality business. Buy.
Hammerson (HMSO) announced the sale of the Drakehouse retail park in Sheffield for £61.7m – ahead of the December book value. The property is fully let to tenants including Homebase, Currys, Wickes and B&M. But chief executive David Atkins said he wanted to “reallocate capital”, including to the retail landlord’s major London development projects at Brent Cross and Croydon. Buy.
Computacenter (CCC) is suffering from the weak euro, with first-quarter sales down 2 per cent. In constant-currency terms that equated to growth of 3 per cent, with a particularly buoyant quarter in the UK offset by weakness in France, where the IT services provider is exiting unprofitable business lines. We retain our buy stance.
Senior (SNR) issued a cautious trading statement, citing a “number of near-term challenges”. The engineer’s shares were down 6 per cent in morning trading. Progress in industrialising new aerospace programmes was “slower than anticipated”, while lower aluminium prices reduced the income received from machined metal waste. Management maintained their profit guidance, but said pre-tax earnings would be “more second-half weighted than historically”. We are reviewing our recommendation.
Shares in Pace (PIC) rose 33 per cent after management announced agreement on the terms of a merger with US rival Arris Group. The deal will see Pace shareholders receive 132.5p in cash and 0.1455 Arris shares for each Pace share – a total value of 426.5p based on the closing price of Arris shares on 21st April. Pace shares are now trading at 440p, suggesting some chance of a counter-offer. Cautious shareholders may want to take profits on our tip of the year.
Gambling payments specialist SafeCharge (SCH) launched a pre-paid ‘Mastercard’ that allows UK online poker players to withdraw funds direct from their bank account. Buy.
Simon Thompson recommendation Trakm8 (TRAK), which specialises in vehicle tracking, saw its shares leap 21 after it published a very positive pre-close statement. Group revenues almost doubled for the year to 31 March, with annualised recurring revenues up 60 per cent to £7.3m. Profits for the new financial year to March 2016 should be “comfortably ahead of previous management expectations”.
KEY STORIES
Taylor Wimpey (TW.) is benefitting from house price inflation, which is running at 14 per cent year-to-date for its private order book. Management saw “increasingly competitive mortgages and secure employment prospects underpinning homebuyers’ confidence”. But the company is not expanding volumes noticeably: it is currently operating from 302 outlets, the same number as a year ago. At 8,200 homes, the total order book was also marginally down on last year.
William Hill (WMH) suffered its worst ever trading week in January, which dragged first-quarter net revenues down 4 per cent for its bricks-and-mortar sport-betting division. The booming online business went some way towards compensating, and group net revenue finished the quarter up 1 per cent. But operating profit was down 19 per cent as a result of the point of consumption tax, which added £20m to the cost of the online business. The shares fell 3 per cent in morning trading.
Defence group Meggitt (MGGT) saw organic revenues grow 4 per cent in the first quarter, with equipment orders stronger than aftermarket sales. Interestingly, military spending was stronger than expected, but the improvement was offset by a worsening energy market.
Digital advertising specialist Matomy Media (MTMY) saw its shares dive 19 per cent following a profits warning. Management now expect first-half cash profits of about $10m, down from $12.6m last year. The Israeli company attributed the decline in its financial performance to new internal regulations imposed by big media trading platforms.
