Shares in London began the day on the front foot with decent gains. Click here for the latest thoughts of The Trader Nicole Elliott.
IC TIP UPDATES:
Luxury retailer Burberry (BRBY) has today commenced a share buyback programme up to the value of £150m. The purchase of shares will take place during the period commencing on 20 July 2017 and ending no later than 31 October 2017. The stock rose slightly in early trading. Buy.
Interim numbers at Moneysupermarket.com (MONY) are not too bad. Revenues, profits and earnings have all ticked up by mid-single digits while cash is flowing in. But the outlook is bad which is why shares dropped 11 per cent in early trading. The market for price comparison websites is becoming increasingly challenging, particularly in the energy market which means management think trading in the second half of the year will be at the lower end of previous expectations. We place our buy recommendation under review.
Demand for sportswear seems to be flying: revenues at Sports Direct (SPD) leapt 12 per cent in the year ended April 2017. The group’s problems - like most retailers - are in the margins which have been hammered by the falling value of the sterling against the dollar. Profits have therefore taken a dive. But Mike Ashley and his team seem to be feeling positive, the outlook for the 2018 financial year is in fact so good that shares have leapt more than 7 per cent in early trading. Are the bad times for this retailer giant finally at an end? We place our recommendation under review.
Shares in easyJet (EZJ) fell nearly six per cent in early trading after the budget airline warned in its third quarter trading statement that capacity is expected to continue to put pressure on yields. The number of passengers carried by the airline increased 10.8 per cent over the period to 22.3m while capacity was up 9.5 per cent to 24m. Total revenue per available seat increased 2.2 per cent at constant currency and total revenue was up 16 per cent to £1.4bn in the quarter. The airline also received approval for an Air Operator Certificate and operating licence from authorities in Austria so that it can continue to fly in Europe no matter the outcome of Brexit negotiations. Buy.
Shares in Inspired Energy (INSE) have ticked up slightly following the introduction of an incentive plan. The group has issued 14.9m shares to an employee benefit trust, to vest in three tranches over a three year period governed by adjusted EPS performance. Buy.
IQE (IQE) pointed to increased VCSEL wafer demand for mass-market consumer applications as part of a trading update. IQE, a supplier of wafer products to the semiconductor industry, expects to deliver revenues of c. £70m for the first half, reflecting increased sales in each of its three primary markets. The Board has now approved a capacity expansion plan to meet higher levels of demand for the second half of next year than previously anticipated. Buy.
Sales at Premier Foods (PFD) fell 3.1 per cent during the first quarter after a good performance form the sweet treats division was offset by lower branded sales. Management said that warm weather in June and promotions that were less effective than hoped were largely behind the fall. International sales fared better with sales up 20 per cent, but group sales for the first half of the year are expected to be flat. Shares rose by nearly one per cent in early trading. We’re sticking with sell.
KEY STORIES:
Double digit sales in Vimto gave UK revenue a 6.7 per cent boost at Nichols (NICL) to £47.5m during the first half of the company’s financial year, while a god period in the Middle East and Africa contributed to a 33.5 per cent increase in international revenue. Last month the beverage company recently acquired DJ Drink Solutions Limited, making it Nichol’s largest out of home dispensed soft drinks distributor. Shares were relatively flat in early trading.
As with all of the big six energy suppliers, SSE (SSE) has been in an unenviable position this year with repeated threats of a price cap on standard variable tariffs. The company lost energy customers during the three months to the end of June, with 7.77m accounts compared to 8m at the end of March. Alongside this, energy consumption was down due to average temperatures being 0.9C warmer between March-June 2017 than the same period in 2016. However, the group is continuing to make progress at building its capacity for wind generation, with six onshore wind farms scheduled for completion in 2017.
For anyone familiar with the hyper-acquisitive nature of outsourcer Bunzl (BNZL), won’t be suprised by this morning’s announcement that it has its sights on two new deals. The group has made a binding offer for Hedis, a group of cleaning and hygiene companies in France, as well as Comptoir de Bretagne and Générale Collectivités, which distribute catering equipment and tableware. It has also acquired Pixel Inspiration, a UK-based marketing services business which specialises in digital signage.
Unilever (ULVR) looks to be in good shape after the attempted takeover by Kraft Heinz. Turnover was up 5.5 per cent during the first half with underlying sales growth of 3 per cent, or 3.4 per cent once the spread business is stripped out despite a “challenging” market. The consumer goods giant delivered a 180 basis point improvement to the underlying operating margin as cost savings have come through more quickly than expected. Shares were up nearly one per cent in early trading. Hold.
OTHER COMPANY NEWS:
Big Yellow’s (BYG) first quarter trading update showed occupancy rates at its storage centres up to 82 per cent, which helped to drive like-for-like revenue up by 5 per cent. A 56,000 sq ft store is due to open in Guildford in March 2018, and plans have been submitted for a new store in central Manchester. Hold
Shares in mum and baby retailer Mothercare (MTC) fell more than 5 per cent in early trading after continued weakness in Middle Eastern markets weighed on the group’s international growth. Overseas sales fell more than 8 per cent during the first quarter, reflecting the low oil price and mounting economic concerns in that market. At home, total sales fell 1.8 per cent, although that reflected ongoing store closures. On a like-for-like basis, domestic sales grew 1.9 per cent - a faster growth rate than that seen this time last year.
