Equities in London are flat after a testing day yesterday. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Sales and margins are up at fashion chain Ted Baker (TED) so why did the shares fall in early trading? The culprit might be £4.5m worth of exceptional costs, mostly relating to extra warehousing costs while Ted tries to migrate to a larger distribution centre in the Midlands to supply its European business. That meant statutory pre-tax profits grew just 4 per cent despite a 16 per cent acceleration at the top line. That said, we hardly believe Ted’s quality credentials should be damaged by this one-off charge, so we remain buyers.
Project management and technical consultancy WYG (WYG) has warned in its latest trading update that profits will be weaker than expected due to project delays in the group’s higher margin service lines. The shares are down 19 per cent and our buy recommendation is under review.
Window and door manufacturer Safestyle (SFE) unveiled respectable growth for 2016, increasing the volume of frames installed by 3.2 per cent to 288,460. It continued to grow market share and over the next year will look to improve conversion rates. Management said a small improvement in conversion could have a substantive impact on performance. It is also nearing completion of its factory expansion, with the new facility expected to be fully operational by the summer. Buy.
Rockhopper Exploration (RKH) has entered international arbitration proceedings against Italy, in relation to the Ombrina Mare project. Last year, the Republic chose not to award a product concession covering the field, which Rockhopper believes entitles it to damages and compensation. Our long-term buy call is under review.
Foxy Bingo owner GVC Holdings (GVC) declared a second special dividend for 2016, bringing the total declared during the year to 30 euro cents a share. The online sports betting and gaming specialist, which acquired Bwin for £1.1bln in September 2015 following a bidding war with industry rivals, delivered underlying cash profits of €206m, up 26 per cent on the previous year, while revenues were 8 per cent in advance of those in 2015. Buy
Arbuthnot (ARBB) grew its pre-tax profits to £0.2m during 2016, compared with a loss of £2.6m the previous year as it scaled up its commercial bank and also made acquisitions to grow its private banking business. Return on equity shot up to 88 per cent, while the total dividend was increased to 356p a share, including 325p in special dividends. With the bank rich in capital, we think there is further growth to come. Buy.
Anticipating a tightening in credit demand meant Secure Trust Bank (STB) has ceased to write new unsecured personal loans, following the sale of Everyday Loans last year. On the other hand real estate lending grew more than a fifth to £451m during 2016, with the loan book skewed to less capital intensive investment finance. Motor finance balances also grew sharply and management sees this as a good growth opportunity. Buy.
KEY STORIES:
The other large retail story of the day comes from high street bellwether Next (NXT). Sure, full-price sales are still in doldrums and pre-tax profits of £790m did fall short of some analysts’ expectations, but it seems Next’s ‘mea culpa’ attitude has served it well if an early 5 per cent rise in the share price is any indication. It has also managed currency-related inflation well, and intends to re-focus on its core, ‘best-selling’ products to recapture customer loyalty. However, this won’t be put right until the Autumn, most likely, so investors will still be required to show a degree of patience this year.
Shares in Merlin Entertainments (MERL) are off this morning following yesterday’s terror attacks in Westminster, London. Analysts at Peel Hunt have issued a warning that they expect tourism numbers in London to fall as a result, and have lowered the target price for Merlin stock immediately. There’s no adjustment been made to near term forecasts as yet.
Following its acquisition Suffolk Life last year, Sipp administrator Curtis Banks (CBP) ended last year managing almost 73,000 Sipps, compared with 39,000 in 2015. This more than doubled its assets under administration to almost £19bn and pushed revenue up dramatically to £29.7m.
OTHER COMPANY NEWS:
Eddie Stobart Logistics, the truck haulage outfit which split off from Stobart Group (STOB) in 2014, has announced its intention to raise £130m through a float on Aim. The listing, which the company believes should give it a valuation above £550m, could hand a windfall to Stobart Group, which retained a 49 per cent stake in the firm.
Strikes at the Escondida copper mine set a record for BHP Billiton (BLT) yesterday, as a new round of talks marked the longest industrial action the commodity giant has experienced in Chile. Production has now been suspended for six weeks.
