London equities are on good form in early trading on Tuesday. Click here to see what The Trader Nicole Elliott thinks of the markets.
IC TIP UPDATES:
Shares in gambling company GVC (GVC) have taken another step up this morning as management says average group pro forma revenues per day in Q2 are currently 11 per cent higher than the corresponding period last year and 15 per cent better on a constant currency basis. Chief executive Kenny Alexander said the “strategy to reinvigorate growth at bwin.party is delivering positive early results” while the deal announced yesterday to host Betfred’s online business on the GVC platform would help the group “deliver significant value to our shareholders”. The planned move to the main market is progressing. Buy.
Bicycle retailer Halfords (HFD) has spent £18m of its borrowing facilities on acquiring online competitors Tredz and Wheelies Direct. Together those businesses generated £32m in revenue last year and cash profits worth £2.4m. From a customer’s perspective, both those companies will continue to trade independently. Buy.
Another retailer out with news today is giftwrap king Card Factory (CARD). The group racked up first quarter sales growth of 6.5 per cent having opened 20 new stores. That didn’t quite catch last year’s growth rate of 7.5 per cent, and like-for-like sales also suffered at the hands of lower footfall on the British high street. The shares fell 4 per cent in early trading, and our recommendation is under review.
In a pre-close trading statement, Micro Focus International (MCRO) guided towards full-year underlying revenues, cash profits and net debt ahead of expectations. That bodes well for the software giant to resume its famous cash returns. Buy.
KEY STORIES:
Film-and-TV distributor Entertainment One (ETO) grew underlying pre-tax profits by a fifth to £129m in the year to 31 March. The strong growth reflected brisk trading in the television business, offset by weakness in film. Management is restructuring the film division and expects to generate £10m in annual cost savings within three years.
It’s been a stuffed year for pork producer Cranswick (CWK) as it had to integrate its purchase of chicken producer Benson Park. The move diversified the group and it went even further post year-end after snapping up Crown Chicken. Like-for-like sales, which exclude Benson Park, were very robust though as they rose 4.7 per cent to £1.07bn. This helped push adjusted pre-tax profits up 14 per cent to £65.7m. It did have to account for a £4.6m non-cash impairment in its sandwich business though after a key client served notice. Thankfully, management secured a new substantial contract which it said leaves the outlook for that division “more secure and stable”.
The ‘get someone else to do it’ trend is clearly still strong after Screwfix, which is owned by DIY group Kingfisher (KGF), posted like-for-like sales growth of 16 per cent to £301m in the first quarter. But Brits are obviously not completely disinclined to have a go themselves as its B&Q stores hit turnover of £950m, a 3.6 per cent like-for-like rise. It’s across the Channel where they would rather be doing something else by the looks of it though as sales in France, where the company has the Castorama and Brico Dépôt brands, saw sales rise a meagre 0.2 per cent to nearly £1.05bn.The group’s One Kingfisher plan - which among other things aims to have a unified range across its stores, is progressing well.
One day after announcing the well-received disposal of its underperforming cash processing business, De La Rue (DLAR) reported that underlying operating profit rose 2 per cent to £70.4m in the year to 26 March. The bank note printer responded to a difficult trading period by slashing a tenth of its workforce and cutting capacity by a quarter. The shares rose 2 per cent.
Management at Old Mutual (OML) have confirmed that it has been approached by third parties over the sale of its US asset management business. The Financial Times previously reported that the board has “endorsed” the transaction, which would be a cash and share deal. Management said it will update the market in due course, regarding the break up of its operations.
The subdued economic environment continues to pose little threat to Scapa (SCPA). In the year to 31 March the tape and adhesive supplier delivered a 5 per cent jump in sales and 15 per cent rise in adjusted operating profit. While the healthcare unit continues to flourish, the group’s industrial arm benefited once again from efficiency gains and asset optimisation.
Recently-floated challenger bank CYBG (CYBG) announced a 2 basis point increase in its net interest margin to 2.25 per cent during the first half of the year. Management also expects underlying costs to be reduced to £730m for the full year, compared with the £762m expected previously.
The last financial year was an exceptionally tough one for UK Mail (UKM), but the logistics group seems to have checked its run of profit warnings in preliminary results. This was underlined in full-year adjusted EPS of 15.4p, which squeaked ahead of consensus forecasts despite adjusted operating profit in the higher-margin parcels division dropping a third to £15.9m. Prudently, the group cut the final dividend to 10.9p, down from 14.5p in 2015.
OTHER COMPANY NEWS:
Investors sent shares in accesso (ACSO) down 4 per cent even after the leisure technology group revealed strong trading and further contract wins in the four months to 30 April. That may reflect a management reshuffle, which will see chief Tom Burnet become executive chairman.
Shares in Aveva (AVV) slid 3 per cent after the engineering data and design systems specialist revealed a 2 per cent dip in underlying sales for the year to 31 March. That reflected tepid trading in key energy markets. The upshot was an 18 per cent decline in adjusted pre-tax profits to £51.2m.
Tungsten (TUNG) expects sales for the financial year ending 30 April to be in line with management expectations at £26m, with cash losses less than £15m, excluding one-off items. Management aims to turn the electronic invoicing specialist cash flow positive by the end of FY17.
