The FTSE 100 edged higher in early trading, and Tesco reported its first sales growth in seven years. Here's The Trader's morning take.
IC TIP UPDATES:
It’s been a record start to the year for recruiter PageGroup (PAGE), with gross profit climbing 9.1 per cent in constant currency to £170.3m. The UK remained flat on the same quarter last year, meaning growth was driven mainly by its EMEA and Americas divisions. Temporary contracts grew faster than permanent with 10.7 per cent against 8.5 per cent. Investors welcomed the news, sending the shares up 7 per cent in early trading. Buy.
Just two days after its joint venture was awarded a contract with the Ministry of Defence, Carillion (CLLN) has been named preferred bidder for a student residences project with the University of Manchester. The contract is worth an estimated £75m and will entail the winner designing and building phase one of its Fallowfield student residences project. The shares stayed flat on the announcement. We remain buyers.
Timing is expected to have a favourable impact on National Grid's (NG) UK and US business in its headline full-year results, published next month. The group released an update announcing “over-recoveries” due to out-turn electricity and gas volumes being different to expected levels. The upshot of all this is earnings per share will be around 5p higher than previously estimated. For reference, Sharepad gives a forecast normalised continuous EPS of 71.5p for 2017. Timing has no impact on longer term performance. We stay at buy.
Shares in Norcros (NXR) jumped nearly 14 per cent after the bathroom accessories supplier revealed that revenue for the year to 31 March 2017 is likely to be up around 15 per cent. Recent acquisitions are now starting to make a significant contribution, while the South African operation saw turnover jump by nearly a quarter, although currency movements brought this back to a still respectable 8.4 per cent on a constant currency basis. Buy.
Ranger Direct Lending (RDL) is “urgently seeking additional information” from Princeton Alternative Income Fund, which runs a fund in which Ranger has a majority stake, after Princeton announced plans to take a $11.7m reserve against its Argon Credit loan portfolio. Despite assurances, made in December, that the collapse of Argon Credit was unlikely to hit Ranger’s net asset value, Ranger Direct now expects to book a 4 per cent write down. Our buy recommendation is under review.
Pan African Resources (PAF) has completed a fast-track 14p-a-share placing to partly fund the recently sanctioned Elikhulu project in South Africa. The $51m (£41m) fundraising, which was made at a 2p discount to yesterday’s closing price, was made alongside a new seven-year $72m debt facility from the Rand Merchant Bank, and will accelerate construction of the low-cost Elikhulu gold mine. Buy.
KEY STORIES:
It’s a big day for retail news, and top of the list is annual results from supermarket chain Tesco (TSCO). It’s chief executive Dave Lewis is on a mission to convince the market this morning that the business is still firmly in recovery. He’s surely hoping that operating profits up 30 per cent and the first tangible like-for-like sales growth since 2010 will do the trick. The shares have lost last year’s momentum lately as the group’s potential takeover of wholesaler Booker (BOK) rumbles on, and executives try to find common ground with authorities over its 2014 accounting scandal. More to follow.
Other results today include high street stalwart WH Smith (SMWH). The shares fell during early trading despite news of flat half-year profits on the high street and a solid 11 per cent rise in trading profits from the travel outlets. That might reflect a reaction to the group’s top-line performance, which was much more aligned with wider industry footfall trends: like-for-like sales fell 3 per cent on the high street, but grew 5 per cent across the travel division. It proves WH Smith’s mettle as a keen costcutter that pre-tax profits still grew 4 per cent overall.
Sports Direct (SPD) has quite the PR mess to clean up this year following the controversy surrounding the group’s treatment of its employees. But a new workers’ representative - today confirmed to be 30-year-old Barnstaple store manager Alex Balacki - could be a positive first step in righting some wrongs. Mr Balacki was elected by Sports Direct staff from a choice of three candidates who were previously selected by an internal assessment process. The workers' representative is now due to attend all scheduled meetings of the Board over the next 12 months, the first of which is due to take place later this spring. A new representative will be elected each year.
A third-quarter update from homewares retailer Dunelm (DNLM) has helped lift the shares a little this morning, although the group has some way to go to make up the de-rating the share price has suffered over the last 12 months. A 2.2 per cent decline in like-for-like sales hasn’t spooked too many investors this morning, as the group explains the later timing of Easter will shift approximately 1.5 per cent of underlying sales growth into the final quarter this year. Although eagle-eyed shareholders will also spot that around 1.7 per cent of like-for-like sales growth had already shifted into the third quarter from the second. But other welcome news comes in the form of a 75 basis point improvement in gross margins and a 21 per cent rise in home delivery sales.
Engineering consultancy WS Atkins (ATK) released a pre-close trading update this morning, and it’s trading in line with expectations. The group performed well in the UK and North America and was “encouraged” by stabilisation in the oil and gas market. We stay at hold.
Housebuilder Countryside Properties (CSP) provided further evidence of the buoyant housing sector, pushing completions up by a third in the six months to 31 March 2017. Average selling prices on private sales were down 13 per cent at £440,000, but this was not because of falling prices. It simply reflected a change in the mix, with Countryside building fewer expensive houses. Underlying sales price growth was 6 per cent.
Shares in RWS Holdings (RWS) were up 4.7 per cent in early trading following the release of the group’s half-year trading statement. The group expects to achieve record revenues of £76m or higher for the first half of 2017, up from £56.9m for the same period in 2016. This is due to strong growth in its patent translation and search business. Hold for the full announcement, due out on 20 June.
