Shares in London started the day with another good showing despite lacklustre growth figures from the UK economy. Click here for The Trader Nicole Elliott's latest views.
IC TIP UPDATES:
Shares in Compass (CPG) were up nearly 3 per cent in early trading after the foodservice group reported organic growth of 3.9 per cent during the third quarter. North America was the biggest contributor to this growth despite struggles in the oil and gas business. Ongoing efforts to the business more efficient appear to be working as the group margin has improved by 20 basis points so far this financial year. The company also revealed that the £1bn special dividend it paid at the half-year mark was paid for through a bond issuance, pushing net debt to 1.7 times cash profits. Management stated that the group is on track to meet full year expectations. Buy.
There were good numbers today from Antofagasta (ANTO). The Chilean copper miner said second quarter net cash costs had fallen to $1.20 per pound, and should be no more than $1.30 for the year; guidance was also maintained at 685-720kt of copper. Ahead of interim results, our profitable buy call is under review.
We were fairly pessimistic that Faroe Petroleum (FPM) would generate many catalysts for the shares this year, but today provided another rebuttal to that outlook. Having completed its sidetrack well at the Brasse discovery, Faroe increased its recoverable resource volume range from 43-80 million barrels of oil equivalent (mmboe) to 56-92mmboe. The North Sea explorer and producer has reaffirmed plans to progress as an operator, and has started work to bring Brasses to first oil at the beginning of the next decade. The shares are up 4 per cent this morning, and remain a buy.
Sage Group (SGE) issued its third-quarter trading update and reported that it has agreed to acquire Intacct - a North American provider of cloud financial management solutions. Sage saw group organic revenue growth of 6.3 per cent during the third quarter, meaning growth of 6.4 per cent overall for the first nine months of the financial year. Organic recurring revenue grew by 9.3 per cent, largely driven by a boost to software subscriptions. The acquisition of Intacct will cost Sage $850m (£654m) in cash and rolled-over Sage options. Shares in Sage were trading down 5 per cent following both announcements.
Clothing chain Joules (JOUL) has revealed a 19.6 per cent improvement in annual group revenues this morning, which has helped deliver a 34 per cent rise in adjusted pre-tax profits. On a statutory basis, bottom line growth looks even stronger, albeit FY2016’s figures were badly knocked by the inclusion of IPO-related and other one-off costs. Over the last year the group has seen a 14 per cent rise in active customer numbers, which has led to higher volumes and thus, improved margins. This has also helped offset the dilutive impact of what remains a dilutive wholesale business. As far as 2018 is concerned, the group says it remains confident momentum will continue despite the “uncertain” macroeconomic outlook. Buy.
Brewin Dolphin (BRW) continued to grow its discretionary funds under management during the three months to the end of June, up 4 per cent to £32.9bn. This included organic new business of £0.6bn and £0.7bn of acquired funds. As a result net fee income grew 16 per cent to £55m. Buy.
Shares in Paragon (PAG) jumped 6 per cent in early trading after reporting an increase in new lending across all business lines during the three months to June. Buy-to-let lending surpassed the £1bn-mark during the year-to-date, while asset finance loans were up two-thirds to £166m. Buy.
International Personal Finance’s (IPF) Mexican business started to recover during the six months to the end of June, with profits doubling to £5.3m. However, the home credit businesses in Czech Republic and Poland continued to face pressure from regulatory restrictions and competition. Credit issuance was flat, with 4 per cent growth in the latter, offset by a 16 per cent contraction in the former. We stick with our sell tip.
Shares in Robert Walters (RWA) were up 2 per cent in early trading today following a record first half increase in operating profit, growing 62 per cent to £16.2m. Once again the recruiter has gone against the tide, posting 20 per cent net fee income growth in the UK, thanks in large part to financial services in London. All of the group’s other geographies reported net fee income up by double digits. It’s not hard to see why we’re staying on buy.
Marston’s (MARS) reported like-for-like sales growth in both its destination and premium pubs as well as its taverns during its third quarter, at 0.6 per cent and 2.4 per cent respectively. The acquisition of Charles Wells Brewing and Beer Business also contributed to a 4 per cent increase in volumes in the brewing division. But shares slid nearly 4 per cent in early trading after management indicated that the operating margin would be slightly below last year but in line with expectations. We’re sticking with a buy.
Shares in Staffline (STAF) are down slightly this morning after it announced a 45 per cent drop in reported profit before tax to £6.3m. The group attributed the drop to a £7.6m increase in non-cash share based payment. Besides this, the group’s staffing division had a record first half, growing onsite locations by 31 and reporting strong organic growth in Driving Plus, Ireland and Agriculture, the newer divisions. Buy.
KEY STORIES:
Private equity investor 3i (III) grew the net asset value of its portfolio by 4 per cent to 628p a share during the three months to the end of June. It generated cash proceeds of £107m after fully realising investments in MKM and DPhone. However, it also invested £172m in Hans Anders and £104m in Lampenwelt.
Metro Bank (MTO) continued its rapid growth in customer deposits during the first half of the year, which were up almost half to £9.8bn. Lending was also up more than two-thirds, but management has deferred its return-on-equity target to 2022, from its initial 2020 target. The challenger bank has also announced a £279m placing with shareholders.
Vertu Motors (VTU) has fallen 3 per cent this morning after it confirmed some investors’ worst fears about the car market. Demand for new cars is softening as are margins in used (likely due to a glut of nearly-new vehicles entering the marketplace). However, management insists that the group remains well-positioned to meet market expectations for the full-year, and even hints that future M&A could be on the cards.
OTHER COMPANY NEWS:
Shares in PayPoint (PAY) were up 2 per cent in early trading, following a quarterly update from the payments service provider reporting organic net revenue growth of 4.2 per cent to £28.4m and strong net revenue growth from both the UK and Ireland, and Romania. The group improved its net cash position compared to the quarter ending 31 March.
If it is to shore up investor confidence, scandal-hit Petrofac (PFC) currently needs to flag every oil services deal that it lands. This morning, it trumpeted a $100m construction management and engineering contract for two Iraqi international oil companies. While the shares have responded with a 3 per cent rise this morning, it’s worth putting a $100m deal in the context of 2016 revenues of $7.87bn.
Vehicle-tracking specialist Quartix (QTX) reported a slight sales decline for the first half, falling to £11.5m from £11.6m a year earlier. The insurance division’s revenue fell to £3.2m from £4.4m, an ‘anticipated’ decline as the company transitions away from its lower-margin insurance business. Quartix saw ‘excellent progress’ in the main fleet business. Fleet revenue grow by 15 per cent to £8.3m. Shares fell 4 per cent in early trading.
A brief statement from car retailer Motorpoint (MOTR) hints that first quarter trading has continued on the positive trajectory seen during the second half of the group’s last financial year. Sales and margins are tracking right where management expects, and it says it remains “cautiously confident” about meeting annual expectations.
Online retailer MySale (MYSL) has provided investors with a 12-month update ahead of announcing annual results later in September. It says online revenues are up 10 per cent over the year, which translated into underlying cash profit growth of 58 per cent. The board remains confident it can grow just as strongly this year too, as active customer numbers rise and new retail partners come on board. It’s pencilled in revenue growth of 15 to 20 per cent for FY2018.
LoopUp (LOOP) - the provider of remote meetings software - saw its shares rise 7 per cent following a half-year trading update. The company saw revenue growth of 44 per cent for the first half with an improved gross profit margin.
