Shares in London fell in early trading amid some poor interim results and concerns about equity valuations centred on US tech. Click here for Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Shares in Equiniti (EQN) are down 8 per cent in early trading following the release of the group’s interim results. Revenue growth slowed to just 1.5 per cent over the period, with organic revenues slipping by 0.6 per cent. Management chalked this up to a combination of currency headwinds and second half bias. Nevertheless, the outsourcing group managed to win clients across all divisions over the period, while retaining all of its existing clients. We maintain our buy call.
Barclays (BARC) reported a slightly disappointing set of first-half figures. Pre-tax profit for the core business reported a 25 per cent reduction in pre-tax profit, after taking £700m in provisions for past mis-selling of payment protection insurance, as well as the non-recurrence of the proceeds from its disposal of Visa Europe. What’s more, impairment charges were up 17 per cent, driven by increased impairments in consumer, cards and payments. The better news was that non-core losses fell by two-thirds following the disposal of its Africa operations. Our buy recommendation is under review.
UBM (UBM) reported revenue growth of 18 per cent and pre-tax profit growth of 19 per cent for the first half, helped by strong performance from the events business in Asia. Events now comprises over 85 per cent of the group’s total revenues. North American events’ sales declined, largely because of a poor performance from fashion. The integration of the recently acquired Allworld business is on track and trading is ahead of plan. UBM’s smaller division, OMS, struggled but should see improvements in the next half. We keep our buy call.
Essentra (ESNT) revealed that it will combine its smaller businesses into a separate division, and focus on larger business segments, namely components, healthcare packaging, and filter products. It’s too early to say if remedial measures underway are having a positive effect on trading, but the specialist packaging group saw a 4 per cent fall in underlying revenue and a 35 per cent decline in adjusted operating profit at constant currencies. New chief executive Paul Forman is only seven months into his tenure and it will be some time before we’ll be able to tell whether his turnaround strategy is working. Sell.
KEY STORIES:
Executives are dropping like flies at BT (BT.A). After the departure of the head of television earlier this year, the company has now announced that both the head of consumer and head of strategy will be leaving to “pursue new opportunities outside the group”. BT has had a tough 2017 so far and this morning’s first quarter update shows that things aren’t getting much better: the company paid £225m to Deutsche Telekom and Orange to settle warranty claims owing from its EE acquisition and subsequent BT Italia accounting scandal.
An increase in customer numbers has helped revenue growth, but that level is poor compared to peer Sky (SKY), which announced full-year results yesterday. The two companies are both having to spend huge amounts of money on content, which has taken a chunk out of adjusted cash profits. BT also has the pension deficit to contend with and the fact that it is going to have to start investing more in its fibre broadband, particularly given the steps taken by a Competition Tribunal yesterday to increase competition in the market.
Shares in Numis (NUM) jumped 6 per cent during morning trading after the broker said that a marked increase in the size of equity issuance transactions by clients of its corporate broking and advisory business, during the first six months of the year. As a result of higher fees, revenue and sales are expected to be comfortably ahead of last year for 2017.
It’s been a hard year or so for Laird (LRD) but things are finally looking up now that the company has completed its four-for-five 85p rights issue. The fundraising has brought the group’s balance sheet back under control, while a 47 per cent rise in interim adjusted pre-tax profits helped lift the shares by as much as 5 per cent this morning. Chief executive Tony Quinlan said the first half performance was “much improved”, driven by continued focus on operational efficiencies. Having scrapped its full-year dividend at the time of annual results in March, the group has also reinstated shareholder returns, declaring an interim dividend of 1.13p (2016: 4.53p).
Glencore (GLEN) recently lost out to Yancoal in the tussle for control Rio Tinto’s (RIO) Hunter Valley operations. Yesterday, the commodities giant announced it had returned to the table, acquiring 49 per cent of the asset for $1.14bn cash, plus royalties and a commitment to subscribe to $300m worth of Yancoal shares in its upcoming equity placing. Analysts at Investec said this equates to a 24 per cent premium to Yancoal’s original bid, underlining just how keen Glencore has been for the stake.
The power failure that grounded British Airways flights has been shrugged off by International Consolidated Airlines (IAG) at the half-year stage. Total revenue was up 0.9 per cent to €10.9bn (£9.7bn), most of which was gained during the second quarter, while pre-tax profits increased 28.6 per cent to €783m. Non-fuel unit costs at constant currency increased 3.5 per cent over the period, which takes into account the financial fallout from the power failure. The airline group expects operating profits at the full-year to show double-digit percentage improvement so long as fuel costs and exchange rates remain constant. Shares were up around 1 per cent in early trading.
OTHER COMPANY NEWS:
The popularity of online shopping is good news for Clipper Logistics (CLG). Group revenue increased 17.2 per cent to £340.1m in the year to April while pre-tax profits were up by around a fifth to £16.1m. Clicklink Logistics Limited, its joint venture with John Lewis, launched during the year to operate the retailer’s click and collect service. Clipper also started new contracts with other retailers like Halfords, Inditex, and Links of London. Shares rose just over 1 per cent in early trading.
Shares in Berendsen (BRSN) were down slightly this morning following the release of the group’s results for the first half of 2017. Underlying revenues were up 2.4 per cent in the period, but operating profit fell 13.6 per cent to £65.9m as the issues with the UK business continued. However, the board reiterated its prediction of £150m in adjusted operating profit at the full year mark. Hold.
