Shares in London rose in morning trading, but only marginally as the markets struggle for direction. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
A strong trading update from high street chain Hotel Chocolat (HOTC) has prompted further upgrades from City analysts this morning. For the year ended 2 July bosses say revenues have grown 12 per cent on a like-for-like basis to £104m, slightly ahead of market expectations. The number of new stores has also reached 12, with eight of those now featuring an in-store cafe. Trading since the year-end is also said to be in line with expectations. Brokerage Liberum - who had previously forecast for a second half loss of around £300,000 - are now expecting the period to be profitable. Buy.
Investors have come to expect a lot from infection control specialist Tristel (TSTL), whose dominance in the hospital wipes and foams space has helped boost its share price by 104 per cent in the last year. This morning the good news keeps coming with a trading update that suggests both revenue and profit in the year to June 2017 are going to come in ahead of expectations. The group has made strong progress in conquering overseas markets, with half of overall revenue now coming from outside of the UK. This helped boost sales by 17 per cent to over £20m and pre-tax profits 21 per cent to £4m. With launch in the US creeping closer and closer, we think the strong share price momentum is not yet at an end. Buy
Town Centre Securities (TOWN) completed three large transactions in the second half of the financial year to June 2017, including the Ibis Styles Merrion Hotel in Leeds and the Premier Inn at Whitehall Road. The Merrion house development is on track to complete early next year and is expected to generate around £900,000 of rental income. Occupancy rates overall were boosted from 96 per cent to 99 per cent. Buy
TT Electronics (TTG) a provider of engineered electronics, has entered into a conditional agreement for the sale of its Transportation Sensing and Control division to AVX Corporation, through its subsidiary AVX Limited, for a cash consideration of £118.8m. Buy
RPC (RPC) announced that it does not anticipate making any significant acquisitions, or incurring further acquisition-related exceptional costs, for the current financial year over and above those it has already announced. The packaging group also intends to commence a share buyback programme of up to £100m. Buy.
Shares in Morgan Sindall (MGNS) jumped 7 per cent after the construction and fit-out specialist delivered an upbeat trading statement for the six months to June. Trading was especially strong in fit-out, and there was a noticeable margin improvement on the construction side. As a consequence, interim profits are expected to be up by around 45 per cent from a year earlier at £23.5m. Buy
German residential real estate specialist Phoenix Spree Deutschland (PSDL) revealed that a combination of higher rental income and continued yield compression boosted net asset value by 22.6 per cent in the six months to June. The share price has more than doubled in the last two years, and demand for rented accommodation, especially in Berlin remains undiminished. Buy.
Shares in defence contractor QinetiQ (QQ.) slumped after it said that that new orders were slower-than-expected in the first quarter. The group revealed that revenue was broadly flat in its EMEA services division but some customer contract award decisions were deferred or delayed. QinetiQ left its full year forecasts unchanged but sounded a cautious note on the outlook. Buy.
After it was announced earlier this week that Carolyn McCall would leave her position as chief executive to go to iTV, easyJet (EZJ) has announced that Moya Greene will join the budget airline as non-executive director today, rather than 1 September, and that current non-executive director Keith Hamill will stay on for a further period to help the company search for a new chief executive. Shares fell about 1 per cent in early trading. Buy.
Aviva (AV.) plans to sell Friends Provident International - which offers life assurance, pensions, and investment products in Asia, the Middle East, Europe - to a subsidiary of International Financial Group for £340m. Management concluded the business was not central to the life assurer’s strategy, booking a £130m loss on the sale. However, it will provide a £100m boost to its solvency capital levels and will be beneficial to the dividend, management said. Buy.
Wizz Air (WIZZ) recorded a record profit of €58.1m in the first quarter, a 50.4 per cent increase on the same time the previous year. Total revenue increased by 28.6 per cent to €469.3m while ticket revenue and the number of passengers carried were up by a quarter. But chief executive Jozsef Varadi warned that airlines tend to compete away the benefit of low fuel prices with extra capacity, and so he is cautious on the yield environment for the second half of the year. However, Mr Varadi still expects full year net profit to be towards the upper end of guidance of between €250m and €270m. The airline also hired a new chief financial officer and chief technical officer, both internal promotions, as well as a new executive vice president and deputy chief executive from Air New Zealand. Shares fell nearly 1 per cent in early trading. Buy.
BHP Billiton (BLT) this morning provided an operational update for the year to June. Iron ore and thermal coal production both increased year-on-year, while output fell at the group’s onshore US oil and gas and copper operations at Escondida. The latter, which was hit by industrial action in the second half of BHP’s year, will contribute to a $740m post-tax impairment when financial figures are revealed on 22 August. We rate the shares a buy.
At the beginning of March, Shanta Gold (SHG) was quick to inform the market that it would not be impacted by the Tanzanian government’s ban on gold concentrate. That ruling, directed primarily at Acacia Mining (ACA), has since mutated into legislative changes that involve increased royalty and clearing charges. As a result, Shanta has been forced to launch a review of its operations and cost base, particularly disappointing in light of this morning’s strong second quarter update. Our buy call is under review.
KEY STORIES:
Tracsis (TRCS) announced that it has won a multi-million pound contract to provide software planning solutions to an unnamed major UK rail company. Shares in Tracsis climbed 13 per cent in early trading. The contract will last four years, but will not affect reporting for the current financial year to end of July 2017.
Reckitt Benckiser (RB.) will sell its food business, which includes French’s mustard and Frank’s RedHot sauce, to McCormick & Company for $4.2bn (£3.2bn). The move, along with its acquisition of Mead Johnson Nutrition earlier this year, is part of Reckitt Benckiser’s ambitions to become a global leader in consumer health and hygiene. The company will use the proceeds from the sale to pay down some of its debt after the sale is expected to complete in the third quarter of this year. Shares were up 1.5 per cent.
Water utility Severn Trent (SVT) posted an in-line update for trading between April and mid-July. The integration of Dee Valley is also on track, and the company is working on its business plan for the 2020 to 2025 regulatory period. The plan is due to be submitted next September.
Shares in biomass company Drax (DRX) fell after its half-year results revealed a string of one-offs had helped deliver a loss before tax of £83m, compared to a £184m profit in the past comparable period. This included losses related to foreign currency hedging, plus acquisition and refinancing costs.
OTHER COMPANY NEWS:
In late May, we raised concerns about the cash position at Horizon Discovery (HZD) which had fallen by £19m to just £6m in one year. This morning our concerns have proved prescient as the company has announced it is returning to the market for an £80m cash injection to help fund its proposed acquisition of gene modulating company Dharmacon, which is currently owned by GE. Shares jumped by nearly a tenth in early trading on the news that the profitable company will be earnings accretive.
