After further heavy selling in Asia, London equities have made an unconvincing start to the day. Click here to see what The Trader Nicole Elliott thinks of the markets.
IC TIP UPDATES:
Perhaps Barclays (BARC) chief executive Jes Staley will continue where his predecessor left off. Today the bank announced it would cut cash equity research and trading, plus convertible bond trading, across its Asian business, amounting to more than 1,000 jobs. Buy.
Lloyds Banking Group (LLOY) has made its largest commercial property development loan since the financial crisis, putting £185m behind the creation of a retail village at London’s O2 Arena. The Financial Times reported its head of commercial real estate John Feeney saying such big-ticket projects would be “at the centre of our strategy”. Buy.
Analysts at Peel Hunt have said a “pre-emptive” downgrade to forecasts for bike retailer Halfords (HFD) will not be necessary after the group put in a resilient performance over the Christmas period. Weather conditions have been tricky, but like-for-like sales remained pretty much flat during the third quarter, although the autocentres division reported close to a 2 per cent increase. Buy.
Shares in Laird (LRD) rose 2 per cent after the technology company announced revenue growth of 12 per cent and expressed its confidence for another year of growth in 2016. A strong performance from the group’s wireless systems segment helped offset weaker trading in performance materials, which was hit by weakness in the telecoms and smartphone markets. Buy.
The house is clearly winning over at gambling company 32Red (TTR) as it expects to report cash profits ahead of expectations. This has been helped by the record net gaming revenue of £48.6m - a whopping 51 per cent higher than in 2014. The winning formula has been helped by its purchase of Roxy Palace, which has now been fully integrated into the Gibraltar-based company. The new year has started off with a bang too as revenues in the first nineteen days in January are up 27 per cent on the corresponding period in 2015 and up 54 per cent including the contribution from Roxy Palace. Buy.
The unaudited EPRA net asset value of warehouse-focused property trust Tritax Big Box (BBOX) has been marked at a 124.5p per share as of 31 December 2015, slightly below the current 126.8p share price. This means that last year, shareholders booked a total return of 24.1 per cent, based on 6p of reinvested dividends and a 15.7 per cent hike in NAV. We think Tritax is a good play on structural changes to retail, and maintain our buy rating.
The sales bonanza promised by Fox Marble (FOX) remains sluggish. Today, a trading update detailed a new long-term distribution agreement with Eboracum, orders from Banyan and “further partnership agreements” with India and the Middle East. But delays in sales to China and a steep fall in previously expected 2015 revenues underwhelmed the market, which sent the shares down 13 per cent. We have faith that the sales will start to come this year. We’re sticking to our guns: buy.
Shares in Servelec (SERV) climbed 3 per cent after the healthcare and energy software group reported a robust performance in 2015, as strong demand from health and social care customers offset tepid trading in oil & gas markets. Buy.
KEY STORIES:
South32 (S32) has cut net debt by about 70 per cent since the end of June to $115m, but the mining group’s earnings will doubtless pull-back from weaker output and plunging prices for most of its commodities. South32 cut its forecast output of Australian coal by 7 per cent for the year to June 2016 after running into geological challenges at two mines. However, the miner reaffirmed full-year output guidance for its other products.
There seem to be some lumps in the gravy over at Bisto maker Premier Foods (PFD) as its branded goods division suffered a 1 per cent drop in sales in the third quarter. Part of this has been blamed - interestingly - on a mild December although the better reason is its decision to reduce promotional activity on Ambrosia custard. The unseasonably warm weather at the end of last year didn’t dent mince pie consumption though with the group selling 185m of the sweet treats, a rise of 8 per cent on last year. This helped its non-branded division register positive sales and therefore, make the wider group’s revenues flat for the quarter. The shares have fallen 6 per cent in early trading.
Dollar strength took the fizz out of the reported numbers over at brewer SABMiller (SAB) in the third quarter. The world’s second largest brewer - which is set to be subsumed by its larger rival Anheuser-Busch InBev - saw an 8 per cent drop in net producer revenue (NPR), marginally better than the year-to-date drop of 9 per cent. But this was predominantly because of the greenback’s strength against the group’s key trading currencies. Remove FX fluctuations and group NPR grew by 7 per cent with Africa seeing the strongest growth in percentage terms (12 per cent).
Wealth manager St James’s Place (STJ) recorded a strong final quarter, with net inflows up 17 per cent at £1.6bn in the final three months of 2015 compared with the same period in 2014. Its advised pension sales continue to grow as people seek advice after large-scale regulatory changes to retirement.
Online shopping over the festive period helped Royal Mail (RMG) to deliver a 6 per cent rise in parcel deliveries in December. But revenue from parcels rose just 1 per cent in the nine months to just after Christmas, due to the group operating in a very competitive market. Despite this, and a 3 per cent drop in letters delivered, shares in the postal giant jumped 3 per cent.
Shares in Chemring (CHG) plummeted 11 per cent after the defence contractor revealed a 78 per cent fall in operating profit alongside details of a £81m rights issue. As noted in last year’s profit warning, most of the group’s problems stemmed from the US government terminating a big ammunition contract.
Shares in Countrywide (CWD) jumped 5 per cent after the estate agent indicated that profits for 2015 will be slightly ahead of expectations. This comes as a relief to investors who were bracing themselves for a weaker performance as a result of lower transactional volumes in the housing market. Countrywide pointed out that this side of the business remains difficult but the effects have been offset by strong growth on the letting side, which the company has identified as the next stage of its growth strategy and is investing on this side of the business.
Land Securities (LAND) reported an increase in footfall in its shopping centres in the third quarter to the end of December, while good progress has been achieved on development lettings. The group also continued with its disposal programme, selling £450m of assets and bringing the total so far in the financial year to £853m. On the other hand, acquisitions for the nine months were just £99m, while refurbishment and development expenditure totaled £292m. Accordingly, adjusted net debt has fallen from £4bn in September to £3.5bn in December, taking the loan-to-value ratio down from 26.5 per cent to 24.3 per cent.
Aim-listed Mortgage Advice Bureau (MAB) continued its strong start to life as a listed company, reporting 2015 revenue up a third on 2014. This was down to a strong mortgage market and a growing number of advisers under the MAB umbrella. This figure averaged at 720 last year, up a quarter on the previous period.
Shares in EMIS (EMIS) slumped 11 per cent after the connected-healthcare specialist cautioned - in an otherwise solid trading update - that revenue growth of 13 per cent in 2015 was held back by the timing of contracts within secondary care. That compares with sales growth of 30 per cent in 2014.
Shares in 4imprint (FOUR) rose 5 per cent after the international marketer of promotional products reported that underlying pre-tax profits would be “at least” in line with market expectations for the year to 02 January. Moreover, it estimates that underlying sales climbed a fifth in the period.
Wealth manager Charles Stanley (CAY) has lost 5 per cent of its market value today after announcing that bad markets had seen its funds under management fall by 2.3 per cent in the nine months to the end of December, to £21bn. Over the final quarter, its turnover fell by 8 per cent.
Investors sent shares in Pearson (PSON) up 13 per cent after the global education group outlined plans to simplify its business, slash costs and target growth markets. It now expects to realise £350m in annualised cost savings in the next two years and is targeting adjusted operating profits of at least £800m in 2018 - up from £720m in 2014.
Shares in Fusionex International (FXI) tumbled 9 per cent even as the ‘big data’ software group reported more than 30 per cent growth in sales and gross profits in the year to September 2015. It also grew the client base of its Flagship GIANT product from 12 to 36.
Shares in NCC (NCC) rose 2 per cent after the cyber security specialist posted a 26 per cent rise in adjusted operating profits to £15.7m in the six months to end-November 2015. Moreover, orders and renewals are up nearly a third at about £76m.
OTHER COMPANY NEWS:
Shares in communication services provider Communisis (CMS) rose 3 per cent after the group reported trading for FY15 was in line with current expectations, with adjusted operating profit up 12 per cent. However, in November management announced last year’s results would be below market expectations, as acquired shopper marketing agency Life took longer than expected to contribute its expected earnings.
Investors sent shares in Bango (BGO) down 12 per cent after the app store payments specialist reported a lower end user spend margin of 1.8 per cent. That reflected outsized demand for digital services in developed markets.
Shares in N Brown (BWNG) have rocketed more than 13 per cent following a far stronger-than-anticipated third quarter update. The retailer traded particularly well over the Black Friday promotional weekend, leaving profits on track to meet current market forecasts.
