The FTSE 100 rebounded slightly this morning ahead of the Bank of England's rate call later today. Here's the latest on the markets from The Trader's desk.
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Shares in high street chain Next (NXT) have rallied this morning following the release of a half-year trading statement. The group reported a 0.7 per cent rise in full price sales during the second quarter - something it’s been struggling to do of late - although full price sales for the year to date are still down 1.2 per cent as a whole. A lot of the second quarter improvement is down to the group’s directory business, which grew sales by 11.4 per cent in the latter period. Retail sales, by comparison, fell 7.4 per cent suggesting Next is still struggling to drive customers into stores. Breaking the performance down month by month, June marked a real turnaround for Next, implying that warmer weather also lent a helping hand. Buy.
It is surely profit taking which sent UDG’s (UDG) share price down three per cent off the back of a third quarter trading update as, once again, there is little to fault in the pharmaceutical outsourcing group’s performance. Revenue and pre-tax profit growth have been solid across all three divisions and recent acquisitions have given management the confidence to up their earnings guidance for the year to September 2017. Buy.
It’s obviously a work in progress at troubled UK defence contractor Cobham (COB), but there were some encouraging sings at the half-year mark. Revenues increased through the period, although this was down to positive currency translation effects. The group generated an operating profit of £34.7m, compared to a £12m loss at the same time last year. However, order intake was down significantly from Q216. The group completed a £500m rights issue in May, the second in a year. So, cash management, as much as trading performance will tend to occupy the minds of analysts going forward. Sell.
Aviva (AV.) delivered an 11 per cent increase in operating profits during the first six months of the year, while cash generation was up more than half to £1.17bn. This was driven by the UK and Ireland life business, although Aviva Investors also generated good growth of 45 per cent in operating profits. This led management to increase the interim dividend 13 per cent to 8.4p a share. Buy.
Amerisur Resources (AMER) is down this morning, after the Colombia-based oil producer placed its average daily production target under review. Between 10 and 28 July, producing wells at the Platanillo field were shuttered amid protests associated with a governmental crop substitution programme. All issues are reportedly resolved, and daily costs during the period were capped at $3,000 a day, though the shares have unsurprisingly reacted negatively, and are off 6 per cent. Our buy call is under review.
Centamin (CEY) has previously told the market it will cap cash on its balance sheet at $250m, and return the rest to shareholders. At the end of June, cash and liquid investments crept up to $334m, from $291m in March, which Investec suggested might point to an outsize full-year return. Still, a 2.5c interim dividend is some compensation. Buy.
Shares in Serco (SRP) are up 2.6 per cent in early trading following the release of the group’s interim results. Revenue from continuing operations was up slightly to £1.5bn, while the order intake more than doubled to £2.4bn, helped in large part by the group winning its largest ever contract, the £1.5bn deal for Grafton prison in Australia. Reported operating profit, more than halved to £21.7m for the year. Buy.
Toby Bradbury, chief executive of Shanta Gold (SHG), is to retire from the company, as the Aim gold miner changes confines its focus to cost control and shareholder returns. He will be replaced by chief financial officer Eriz Zurrin, who will have to contend with heightened political risk, and royalty take, associated with operating in Tanzania since mining rules were re-drafted this year. Our buy call is under review.
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Just a matter of weeks after its surprise profit warning, sofa king DFS (DFS) has announced plans to buy retail chain Sofology for £25m. Sofology owns 37 stores in the UK, and also operates via its own website. Synergies worth around £4m have already been identified and the deal is expected to be earnings accretive from the first year. Meanwhile, DFS has also managed to refinance its debt to a new lower-cost five-year £230m revolving credit facility in order to help fund the acquisition.
There are a lot of moving parts over at Non-Standard Finance (NSF) this morning. First the group has released a set of interim results, which analysts argue show that growth is being delivered in the right way. However, despite a 10 per cent improvement in first-half operating profits rose to £8.5m, rising costs for new agents and branches in Everyday Loans and Loans at Home are weighing on overall growth. The group has also announced the acquisition of George Banco, the number two player in the guaranteed loans sector for £53.5m in cash. Although the deal is expected to be earnings enhancing, NSF has chosen to refinance its debt, although this will lead to a material increase in costs, with the new £175m term loan having a headline cost of LIBOR +725 basis points (before fees).
London Stock Exchange Group (LSE) reported an 18 per cent uplift in revenue during the first six months of the year. Its information services division put in a particularly strong performance, with revenue up almost a quarter. Total income for the majority-owned post-trade services business LHC rose 31 per cent.
Paper and packaging group Mondi (MNDI) reported a fall in interim profits due to a "significantly lower" forestry fair value gain in South Africa and increased mill closures for maintenance. Pre-tax profits fell 4 per cent to €462m. However, the paper and packaging company said the market outlook remains "broadly positive", with strong demand across its Packaging Paper and Corrugated Packaging businesses.
Randgold Resources (RRS) is a big beast, but half-year numbers for the gold miner point to a nimble operating performance of late. Profit bounced 53 per cent to $188m, thanks to a 16 per cent climb in production, and a 13 per cent drop in cash costs. Average gold prices remained flat year-on-year, though sales were up by a fifth.
Ferrexpo (FXPO) has been one of the best shares to own at almost any point in the last year. Half-year figures for 2017 show why. Despite a planned drop in pellet sales of 5.065mt at higher cost, favourable foreign exchange movements and good prices have led to a 179 per cent increase in earnings per share.
Homeware group Portmeirion (PMP) is starting to feel the benefits of its acquisition of candle maker Wax Lyrical. Group revenue in the first six months of the year was up 16 per cent compared to the previous year to £76.7m, but strip out the contribution from Wax Lyrical and turnover at a constant exchange rate fell 2 per cent due to the phasing of orders, but management expects the second half of the year to make up for the first. The acquisition made the UK Portmeirion’s largest geographical market during 2017, followed by the US and South Korea. Shares were up 3 per cent in early trading.
OTHER COMPANY NEWS:
Spirent (SPT) reported flat revenues for the first half at $213.6m (compared to $213.5m a year earlier), with improved cost management leading to a higher operating margin. The best performing region for the group overall was Asia. However, “changes in customer priorities” led to delays in Ethernet testing, while the group expects its lifecycle service assurance division to see second-half weighted revenues. Shares dropped by around 5 per cent in early trading.
Market analytics specialist Ebiquity (EBQ) grew its top-line by 5 per cent in the first half, achieving high single-digit growth in its Media Value Measurement practice. Market intelligence practice sales also grew. The group’s US-based multi-channel analytics divisions “fell behind expectations”, attributed to clients’ organisational changes.
Shares in small-cap Gattaca (GATC), which specialises in engineering and technology recruitment, fell 11 per cent in early trading after a full-year trading update. Net fee income for the group was slightly higher in the second half than the first (at £39.9m versus £38.7m) and more heavily weighted to the engineering division. Overall net fee income for the group fell by 4 per cent, attributed to “ongoing Brexit negotiations, IR35 tax changes and the UK General Election” eroding confidence.
Petrol forecourt retailer Applegreen (APGN) has agreed to acquire seven sites from the Carsley Group, consisting of six service areas and one petrol filling station in the UK mainly located on the A1. The deal will cost £21m, while chief executive Bob Etchingham said the assets being acquired provided a set of “large and strategically important sites” that can “accelerate Applegreen's growth in [this] key marketplace”.
