Equities took another slide southwards in early trading today. Click here for The Trader Nicole Elliott's latest thoughts.
IC TIP UPDATES:
It’s not an exhilarating ride from theme park operator Merlin Entertainments (MERL) this morning with a steady-as-she-goes trading update. The group says it expects profits to be in line with expectations given underlying trading at Midway Attractions has remained consistent with that reported at the 29 September update. In its resorts, a strong Halloween period, helped by favourable weather, means trading has been solid here too. Legoland has also been performing well but conditions have been tough in Florida due to tough trading conditions. It said its 2020 milestones were on track though, thanks to the opening of Legoland Dubai on 31 October and Madame Tussauds Istanbul on 28 November. Buy.
Transport group Go-Ahead (GOG) might be having a headache with its Govia joint venture and the strike-hit Southern rail franchise it runs, but it has announced an accounting change set to boost reported profits. It is adopting a new methodology for accounting with regards to rail pensions, aligning itself, it says, with growing industry practice. Go-Ahead said the long term contractual responsibility for the rail pension schemes rests with the Department for Transport. “Accordingly, the group's balance sheet only recognises the share of surplus or deficit expected to be realised over the life of each franchise. The current assessment is that there is no surplus or deficit to be recognised and so no asset or liability is provided for.” This means group cash profit for the year to 2 July was £112.6m rather than the £88.8m that was reported. Buy.
If you grabbed a coffee at the station this morning there’s a high chance it was from one of the Upper Crust, Ritazza or Starbucks concessions run by SSP Group (SSPG), which is atop the FTSE this morning on the back of strong results. Underlying operating profit is up 18 per cent to £121.4m on a constant currency basis and the jump is even higher when positive foreign exchange movements are factored in. The move by management to take cost out of the business also seems to be working with underlying operating margins up 70 basis points on a constant currency basis to 6.1 per cent. Buy.
Shares in Topps Tiles (TPT) enjoyed a 3 per cent bounce this morning after full-year results met analysts’ expectations. Adjusted pre-tax profits grew 7.8 per cent cent on like-for-like sales growth of 4.2 per cent. Net debt is down, whilst the dividend has leapt nearly 17 per cent to 3.5p for the year. Current year like-for-like sales growth has slowed, but chief executive Matthew Williams is confident a weaker market will provide more market share opportunities in the long-term. We remain buyers.
Park Group (PKG) reported a 6 per cent increase in customer billings during the six months to September, reducing its seasonal pre-tax loss to £0.8m from £1.4m the previous year. The first-half is traditionally loss-making since the savings scheme provider dispatches and invoices the bulk of its customer orders between October and December. Cash balances reached a record high, although low interest rates means the group makes fewer returns on these holdings. Buy.
Shares in KCOM (KCOM) slid 3 per cent in early trading after the telecoms group - now focused on the enterprise market, Hull and East Yorkshire - posted a 7 per cent decline in underlying revenues in the six months to 30 September, which drove underlying operating profits down 28 per cent to £18.9m. Under review.
Tharisa (THS) today published its first set of full-year results as a listed London company, and they weren’t bad. The platinum and chrome miner posted a 200 per cent increase in headline EPS, announced a maiden dividend and a 129 per cent surge in pre-tax profit to $22m; all despite weak prices and lower revenues. Buy.
There was a positive market reaction to equipment rental specialist VP’s (VP.) interim results today, which showed a 9 per cent increase in profits before tax and amortisation to £18.7m, despite a 28 per cent leap in fleet investments and a lower average return on capital employed. Our recommendation is under review.
Acal (ACL) a supplier of customised electronics, grew underlying first half earnings despite a difficult market environment. Underlying profit before in the six months to the end of September rose 7 per cent to £7.3m from £6.8m in the corresponding period of last year. The group continues to boost margins through ‘self-help’ measures and by increased production of in-house components. Buy
Hogg Robinson (HRG), a specialist in travel, payment and expenses management services, said it made a pre-tax profit of £14.0m in the half to September 30, up 21 per cent from a year before. Revenue grew to £164m from £156m, up 5.0 per cent and boosted by a weak pound. Margins and cost savings were both heading in the right direction, but the post-Brexit environment has increased uncertainties. Our sell call is under review.
KEY STORIES:
Shares in cafe owner Patisserie Holdings (CAKE) have jumped nearly 7 per cent in early trading thanks to a pleasing set of annual results. Revenues for the year ended September grew 13 per cent, whilst reported pre-tax profits soared by nearly a fifth. How much of this growth has been ‘bought in’ is still a matter of debate: the group opened 21 new stores last year, including an inaugural site in Northern Ireland.
Investors sent shares in ITE (ITE) down 4 per cent after the exhibitions group’s sales dipped in the year to 30 September, sending headline pre-tax profits down 23 per cent to £36.5m. A challenging market backdrop pushed revenues down in the key regions of Russia and Central Asia.
It’s a veritable feast over at pork and chicken producer Cranswick (CWK) with adjusted pre-tax profit up nearly a quarter to £37.9m. The Crown Chicken acquisition it made in April has had an important impact on the numbers but its longstanding pork business continues to deliver the goods and an upgrade to its Norfolk processing facility has taken it a step closer to being able to satisfy US food regulators so it can export goods across the Atlantic. Management spent £24.5m in capital expenditure making sure the business remains well-invested. Encouragingly, exports grew 23 per cent, with volume growth in the Far East the strongest.
Shares in GB Group (GBG) climbed 5 per cent in morning trading after the identity intelligence group grew organic revenues by 9 per cent in the six months to 30 September, driving adjusted operating profits up 15 per cent to £5.2m - ahead of market expectations. Headline sales rose 24 per cent in the identity proofing business, and 8 per cent in the identity solutions division.
Shares in Pantheon Resources (PANR) cratered by almost a quarter this morning. The Texan oil explorer made a peculiar announcement regarding drill testing at its VOBM#3 well, explaining that though less than 60 per cent of the fracture stimulation fluid has been recovered, the variability in the data so far suggests that the well may be located near the edge of a reservoir.
Iluka appears to have backed off from its bid for Sierra Rutile (SRX), after informing its Aim-listed peer that there are geotechnical risks at two of Sierra’s dams. Consequently, Iluka has stepped back from its July offer, citing a “material adverse change” under the terms of the merger implementation agreement. Following the statement, the shares fell 16 per cent to 30p.
Shares in BT (BT.A) treaded water in early trading as the telecom giant’s investors digested the news that regulator Ofcom will be pursuing a legal division of BT’s Openreach business from the rest of the company.
OTHER COMPANY NEWS:
Online retail group MySale (MYSL) has said it expects underlying cash cash profits slightly above the top end of the current range of analysts' projections of $8.2m to $8.5m this year. Although revenue growth rates are similar to the second half of last year, gross profits are said to be “substantially enhanced”.
Having only joined the market in May, it’s the first set of interim results for Motorpoint (MOTR) as a public company. Despite an 11.5 per cent increase in revenues, operating profits before exceptional items are down 32 per cent. Boss Mark Carpenter has blamed uncertainty around the referendum for what he calls a “disappointing performance”. Despite ongoing concerns about consumer confidence, Mr Carpenter has assured investors that margins appear to be recovering, and he anticipates a stronger second half.
