Due to its heavily weighted resources and financials sectors, the FTSE 100 fell this morning. Read Nicole Elliott's take on the markets.
IC TIP UPDATES:
Shares in Card Factory (CARD) have nudged up this morning following news of a 3.1 per cent rise in like-for-like sales during the first six months of the financial year. Adjusting for the number of trading days this figure was more like 6.7 per cent - an improvement on the first quarter and on last year’s first half growth rate too. In fact, analysts at Peel Hunt point out it’s the strongest quarter for like-for-like growth since the company floated. Most of this has been achieved without raising prices either. We remain buyers.
Prudential (PRU) reported a consensus-beating set of results for the first half of the year, with operating profits up 5 per cent on a constant currency basis to £2.39bn. Crucially, Asia new business profits were up almost a fifth to £1.09bn. The life assurer also announced plans to merge UK asset management arm M&G with its UK and Europe to form savings and investment provider M&G Prudential. Buy.
Buy tip Aldermore (ALD) grew its loan book 8 per cent during the first half of the year to £8.1bn. Mortgages were up 9 per cent to £6.2bn, while business finance loans were up a similar amount. The challenger bank’s common tier one equity ratio also increased to 11.8 per cent. Management anticipates this ratio reaching 12 per cent by the year-end, when it will consider commencing dividend payments. Buy.
A string of blockbuster releases has been good news for Cineworld (CINE) during the first half of the year, pushing admissions up 10 per cent to 50.7m. Group revenue is up 12.4 per cent at constant currency to £420m while pre-tax profits increased by 57.5 per cent to £48.2m. Higher admissions pushed box office revenue up 12.6 per cent and retail revenue by 16.3 per cent. The company acquired new sites in Ely in the UK and Zichron in Israel, bring the total number of screens at the group to 2,136. Eleven new site openings are planning for the second half of the year. Shares were up more than three per cent in early trading. Buy.
KEY STORIES:
It’s another bad update from DFS (DFS). Exactly one week after announcing a new acquisition - which investors responded well to - the sofa seller has issued another statement quantifying how badly first half cash profits will be affected by sluggish trading. Why aren’t we calling this a profit warning? Well, it’s sort of the same profit warning which was released in June. Except this one reveals the problem was worse than first thought, with poor sales across April, May and June. The previous warning only referred to a “recent” weakening in demand, leading many to assume just May had been a struggle. Bosses at the company have confirmed cash profits will report at the lower end of previous guidance (£82m-£87m).
Pagegroup (PAGE) reported a positive set of results this morning, with operating profits up 9.2 per cent in constant currency for the first half of 2017. The group has also managed to improve its conversion rate to 16.2 per cent, from 15.7 per cent in the same period last year. Most importantly to investors, perhaps, is the announcement of a 12.73p special dividend, the third consecutive year of such payouts.
Shares in Go-Ahead Group (GOG) fell 3 per cent in early trading after the travel company announced that it has failed to win the replacement contract for the West Midlands rail franchise. Chief executive David Brown said the “award winning franchise” has been part of the group’s rail business for 10 years. While this is disappointing, analysts at Liberum said that the franchise’s contribution to group earnings was modest in absolute terms. Go-Ahead does not disclose the profitability of individual rail contracts, but analysts have said that West Midlans is the smallest of its franchises. The contract was awarded to a joint venture between Abellio, East Japan Railway Company, and Mitsui.
Tui (TUI) has had a good start to the second half of its financial year. Group revenue was up 16 per cent during the third quarter to €4.8bn (£4.3) brings turnover for the ear so far to €10.4bn, 11.6 per cent ahead of last year. Occupancy in its hotels was up three percentage points to 74 per cent with a two per cent increase to revenue per available bed. Demand for holidays was strong over the period with customer volumes up seven per cent year to date. Shares fell one per cent in early trading.
Shares in Coca-Cola HBC (CCH) were up nearly nine per cent in early trading after the soft drink bottler reported that revenue was up 5.7 per cent during the first half. Volumes improved by 1.4 per cent with growth across all three segments. In developed markets strong performance in Greece and Ireland offset weakness in Italy. The Czech Republic and Hungary drove growth in developing markets, while Ukraine, Romania, and Serbia gave a boost to emerging markets.
Half-year earnings per share for Glencore (GLEN) came in pretty much in line with market expectations, thanks in large part from another robust performance from the marketing division. Consequently, the profit guidance range for the commodity group’s trading arm has been revised up by $100m to $2.4-$2.7bn.
At 269p, the share price of integrated steel manufacturer Evraz (EVR) was last this strong in 2013. Half-year results show why the market is so bullish: free cash flow in the period quintupled to $549m year-on-year, alongside an 11 per cent reduction in net debt, a step-up in capital expenditure, and the declaration of a whopping $430m interim dividend, equivalent to a 8.9 per cent yield.
Not for the first time in recent memory, shareholders in Amec Foster Wheeler (AMFW) find themselves in a peculiar position. As half-year results reminded us today, its merger with Wood Group (WG.) remains on track to complete in the fourth quarter of 2017, but the shares remain a fifth off Wood’s all-equity offer price of 564p a share. Operationally, the picture remains challenging: underlying revenue contracted 24 per cent in the period, due to challenging conditions in the upstream oil and gas and solar divisions. Then again, efficiency cost savings are delivering benefits “ahead of schedule”, and the retained operations order book ticked up 2 per cent. In other news, Amec non-executive Roy Franklin has been appointed as chairman of Premier Oil (PMO), fresh from the oil and gas group’s epic $3.8bn capital restructuring.
Unfavourable exchange rates were not enough to spoil half-year results for Irish food producer Kerry Group (KYGA). Group revenue was up 4.8 per cent to €3.2bn (£2.9bn), with volume growth in the taste and nutrition and consumer foods divisions of 4.2 per cent and 2.3 per cent respectively. This is despite what chief executive Stan McCarthy called “a background of significant adverse currency movements” and higher prices for raw materials. The group managed to maintain its trading margin at 10.6 per cent. Shares were up close to four per cent in early trading.
OTHER COMPANY NEWS:
The Vitec Group (VTC) reported improved sales and pre-tax profits in the first half, with the dividend rising from 9.9p to 10.4p. The company, which provides equipment and services to the “image capture and sharing” market, recently disposed of US broadcast services Bexel and Haigh-Farr. This was with a view to focusing on driving growth in its core markets. Shares rose 3 per cent.
Shares in EVR Holdings (EVRH) rose by over 12 per cent in early trading, following the company’s announcement that its subsidiary MelodyVR has signed five agreements for music licensing, collection and distribution with European Rights Holders for content distribution in eight European countries. EVR Holdings creates virtual reality music content.
Phoenix Global Resources (PGR) has completed its reverse takeover of Andes Energia, combining Andes’ acreage in the Vaca Muerta with the Argentinian oil and gas assets of Mercuria Energy. Under the terms of the deal, the Swiss commodities group will hold a 78 per cent interest in the enlarged company, which has combined reserves of 63 million barrels of oil equivalent and a market capitalisation of £1.23bn.
Half-year results for Wentworth Resources (WRL) brought further disappointment for investors looking for signs of improved financial strength. Towards the end of the period, Wentworth successfully completed a private placement to raise $5.53m (£4.2m), which meant that the cash balance at least ended with $3.83m. But gas sales revenue declined to $5.1m, compared with $6.64m in the 2016 comparable, while working capital shot up to $9.08m. The group, whose shares were marked down 3 per cent on these results, is now focused “on petitioning purchasers of gas to improve the timeliness of settling amounts owing and working with our two main creditors, local banks and the operator of the Manzi Bay concession”.
