Data from China this morning saw international trade grow, but by less than expected. Here's The Trader Nicole Elliott with this morning's market outlook.
IC TIP UPDATES:
Shares in Pets at Home (PETS) have spiked close to 8 per cent this morning following a better than expected first quarter report. Sales of £256.5m represented growth of 5 per cent or 2.7 per cent on a like-for-like basis - ahead of analysts’ expectations. But there’s no word on whether margins have materially improved (the group previously estimated a 100 to 200 basis point decline this year) and analysts have shied away from upgrading numbers at this early stage. It’s their belief that interims in November will provide a better idea of whether this good momentum can be sustained. Our recommendation is under review.
Bellway (BWY) expects to deliver a 13 per cent increase in turnover for the year to 31 July, with operating margins likely to exceed 22 per cent. Housing completions rose by 10.6 per cent to 9,644, and forward sales are 16 per cent ahead of this time last year. Buy.
TP Icap (TCAP) reported revenue growth across all four of its divisions during the six months to June, with its core global broking business generating an 11 per cent rise in sales. Within the energy and commodities division performance was mixed, with stronger activity in the oil business offsetting a weaker power, gas and commodities performance. However, revenue was still up 8 per cent. After stripping out acquisition and integration costs, underlying operating profit was up almost a quarter to £144m. Buy.
Followers of the cross-linked polyethylene block foam market will have been eagerly awaiting this morning’s half-year numbers for Zotefoams (ZTF). Once again, they impressed. Revenue jumped 14 per cent at constant currency, while the gross profit margin ticked up 130 basis points thanks to a better sales mix, beneficial exchange rates and higher sales. Our profitable buy recommendation is under review.
Shares in IWG (IWG) have plummeted 8.4 per cent this morning following the release of the group’s half year results. Revenues for the workspace-as-a-service group were flat for the period, while gross profit declined 13 per cent in constant currency to £211.3m. The network however, continued to grow, with locations growing 2 per cent to 2,996 and workstations up 7 per cent to 481,773, as the group focused on intensifying its use of space. We are reviewing our buy recommendation.
Shares in Telit Communications (TCM) rose 14 per cent in early trading, after chief executive Oozi Cats purchased shares worth £687,500. This follows yesterday’s share price plunge of over 40 per cent, as the company announced pre-tax losses, a suspended dividend and a broker switch. In May, Mr Cats sold shares equivalent to £24m. Our recommendation is under review.
KEY STORIES:
ASOS (ASC) has signed an agreement to open a new North American e-commerce fulfilment centre in Union City, outside of Atlanta, Georgia. Fit-out is expected to commence shortly, with operations officially up and running by Autumn 2018. This will hopefully allow the company to offer faster and more convenient delivery options to US customers. The cost will total around $40m (£30.6m). During the first six months of the year, ASOS’ US business grew sales by 39 per cent at constant currency.
Shares in Paddy Power Betfair (PPB) have taken a hit this week after the group announced yesterday that chief executive Breon Corcoran is leaving the company after 16 years. This morning the company released its interim results which confirmed that revenue is up 9 per cent during the period to £827m, albeit this is slower growth than last year. Cash profits for the year are expected to be between £445m-£465m, missing estimates from analysts at Stifel of £480m. Customers bet 12 per cent more online over the first half but wagers were flat in the retail shops. Shares fell more than five per cent in early trading.
Standard Life (SL.) reported a mixed set of results, just a week ahead of the expected completion of its merger with Aberdeen Asset Management (ADN). UK pensions and savings reported a 2 per cent increase in underlying profits, but against a one-off in Europe in 2016 profits on the continent was down more than a quarter. However, Standard Life Investments suffered £4.6bn in net outflows, with £5.4bn in net outflows from its flagship GARS product. Nevertheless, underlying profits still beat consensus expectations at £362m.
Rotork (ROR) announced the sudden departure of its chief executive, along with half-year pre-tax profit of £48.8m, up from £38.3m a year earlier. The hasty departure of Peter France will raise a few eyebrows, though shares recovered after an initial dip in early trading. Naturally, currency translation effects were to the fore, together with an improvement in activity in upstream oil & gas. And the engineer anticipates a marked second half weighting and margins ahead of those in the first half. The company raised its interim dividend by 5 per cent to 2.05p.
Hargreaves Services’ (HSP) shares got an 8.5 per cent boost this morning following release of its full year results. A raft of exceptionals weighed heavily on the figures, but on an underlying, continuing basis, operating profit more than doubled to £9.8m. It was a Red Book property valuation, however, that got analysts excited. The total development value of the group’s portfolio was independently estimated at £83m, well north of the group’s current book value of £31m.
Quarto Group (QRT), the small-cap global publisher of illustrated books, simultaneously announced its half-year results and the news that it has received an approach to acquire its entire share capital. The bidder’s identity has not yet been disclosed due to the early-stage nature of discussions. The board believes the potential offer price to be “attractive and reflective of the inherent value of the business”. Quarto notes that the City Code on Takeovers and Mergers does not apply in this instance. Shares rose 21 per cent in early trading. The interim figures revealed a 13 per cent revenue decline and increased net debt, with no dividend announced.
Shares in InterContinental Hotels Group (IHG) fell five per cent in early trading after the company reported that revenue was up just two per cent at the half-year point to $857m (£657m). Revenue per available room increased 2.1 per cent though occupancy was relatively flat. The company opened 23,000 rooms, up 31 per cent year-on-year. But management warned that macro-economic and geopolitical challenges face the business, but they remain confident to meet full year expectations.
Shares in SIG (SHI) fell 4.5 per cent in early trading after the group announced adjusted pre tax profit for the six months to June this year were down more than 24 per cent in constant currency. This is the result of a raft of exceptionals as the group looks to tidy up its balance sheet, stripping out non-core businesses and restructuring. Net debt reduced by £93.4m in the period to £167m.
OTHER COMPANY NEWS:
Paysafe’s (PAYS) half-year results met a muted market reaction, after the payments company reported a 10 per cent revenue increase, reduced net debt and improved EPS. On Friday 4 August, it was announced that an agreement has been reached between the boards of Paysafe and a newly-formed company owned by funds managed by Blackstone and CVC, regarding the terms of a recommended cash offer for the entirety of Paysafe’s share capital.
Firestone Diamonds (FDI) has lost more than a fifth of its value this morning, after the Lesotho-based miner dropped its full-year production guidance from 1.0 million carats to as little as 800,000 carats. The reduction in output is due to a shift in the mining plan to weathered kimberlite and additional waste rock.
The successful integration of two recent acquisitions has given half-year profits at Synthomer (SYNT) a nice boost. Underlying pre-tax profits rose by close to a fifth to £71.6m, although this growth rate was also given a helping hand by favourable foreign exchange rates. Specifically, this currency boost helped offset margin weakness in the Nitrile Latex market in Asia and ‘rest of the world’ divisions.
Ebiquity (EBQ) saw its shares fall 4 per cent after the company issued 67,904 shares following the exercise of employee share options. One of the option exercises was undertaken by Laetitia Zinetti, managing principal of the media management division, who subsequently sold 56,020 shares representing 0.07 per cent of the company’s issued share capital.
Support services group Marlowe (MRL) has appointed Robert Flinn as chief executive of its fire and security division. Mr Flinn joins from Ingersoll Rand’s Trane business, where he was managing director of Northern Europe. He will replace Nigel Jackson, who joined the board as executive director following the acquisition of Swift Fire & Security in April last year.
