London shares have sold off again as investor concerns about political tensions in the Far East feed into profit taking. Click here for The Trader Nicole Elliott's latest thoughts.
IC TIP UPDATES:
Shares in toy company Character (CCT) rose 5 per cent this morning following news that the company has been appointed as the main distributor in the UK and Ireland for Pokémon. The agreement with US-based global master toy licensee Wicked Cool Toys will see action figures, playsets and other toys based on the hit animated series, join Character's portfolio from summer 2018. Buy.
Shares in Micro Focus (MCRO) rose 8 per cent, after the company released the performance of HPE’s software business for the three, nine and twelve months to 31 July 2017. For the quarter, reported revenue declined 3 per cent but the operating margin was 24.9 per cent, against 17.8 per cent a year earlier. Looking forward, adjusted revenue (adjusting for divestitures and currency exchange rate changes) is expected to range between $2.89bn and $2.96bn for the 12 months ending 31 October 2017 – down from the $3.05bn achieved in the 12 months to the end of July. This is “driven by the active reduction of less profitable professional services in sub-scale service lines and geographies” among other factors. And, only 2 months of this performance will be included in Micro Focus’s interim results to end of October. Buy.
Shares in insurance services provider Charles Taylor (CTR) fell sharply this morning following release of the group’s half year results, though they have since recovered and are now down a little less than one per cent. Amortisation of intangibles related to recent acquisitions by the group impacted statutory profits severely, but adjusted figures were up 1.2 per cent to £6.1m. Management said the group is trading in line with expectations and have increased the dividend per share 5 per cent to 3.31p. Buy.
KEY STORIES:
Shares in Franco Manca owner Fulham Shore (FUL) plunged 22 per cent this morning after the group revealed as part of an AGM statement that it cash profits for the current financial year will fall short of market expectations. Trading weakened significantly over the summer according to company bosses, specifically at locations across London suburbs. That’s in spite of a benign pricing environment too, as Fulham Shore has committed to keeping prices where they are for fear of alienating customers. It also plans to pay the National Living Wage in accordance with current legislation - all of which puts pressure on the bottom line. Finally, it also plans to offload its singular franchise of the Bukowski Grill as it ‘simplifies’ its operations.
We moved away from our bear call on Sports Direct (SPD) at the time of results in late July, and this morning’s update suggests this was the right course of action. Shares rose in early trading on news that trading across the flagship sites has exceeded management’s expectations and, thus, optimism for the current financial year remains positive. Bosses still expect between 5 per cent and 15 per cent growth in underlying cash profits during FY18. Chief executive Mike Ashley also took the time to note that the company now owns 100 per cent of premium clothing and accessories retailer Flannels, although founder of that business Neil Prosser will remain an “integral part” of SPD’s premium lifestyle division.
“Transformation is not easy,” said Xaar (XAR) chief executive Doug Edwards this morning, neatly encapsulating his company’s interim results for 2017. Half-year revenue of £44m was “in line with board expectations”, though it is clear that the inkjet printing company is gradually turning around. Statutory earnings fell, despite a dip in gross research and development investment, while net cash dipped £11m in the period to £38.3m.
Yesterday, Acacia Mining (ACA) explained how it was going to protect cash generation, by gradually shuttering concentrate production from its Bulyanhulu mine. Today’s target was volatility: the embattled Tanzanian gold miner has spent $3.2m acquiring put options covering 210,000 ounces of gold at a strike price of $1,300 per ounce – which covers just under a quarter of current annual production.
OTHER COMPANY NEWS:
Shares in WANdisco (WAND) fell 5 per cent, after the software group’s pre-tax losses in the first half widened to $6.3m from $5.4m a year earlier. And, the company had debt of $3.0m, rising from none as at 31 December 2016. That said, revenues rose by 71 per cent compared to the first six months of 2016, and total bookings increased 73 per cent to $10.2m, while cash burn reduced.
Somero Enterprises (SOM), the provider of high-tech concrete-levelling equipment and services, reported 7 per cent revenue growth to $42.4m and a 15 per cent rise in pre-tax profits for the first half. The interim dividend also rose by 10 per cent. There was some sales weakness in China, where there was a “slow start to the year”, and also in the US. Overall, the results are “in line with management expectations”.
Petrofac’s (PFC) order backlog may have shrunk at the half-year mark, but the group is on a hot streak of new contract wins since the beginning of July. Today, the scandal-hit oil services firm announced it had been awarded a deal worth more than $700m to develop an onshore processing facility on Sakhalin, the Russian island north of Japan.
The order book of Amec Foster Wheeler (AMFW) will also be $604m larger by the second half of this year, after the group was awarded an engineering, procurement and construction fixed price contract as part of the development of a methanol plant in Louisiana. The project is being developed by Yuhuang Chemical, a US-based subsidiary of China’s Shandong Yuhuang Chemical Co.
ADES International (ADES) has been looking to shore up its credentials following its listing in London this year. That goal was given a boost today, after the oil services group announced the appointment of former BP (BP.) executive Ahmed El-Khatib as its chief financial officer. Mr El-Khatib most recently served as Middle East business development director for the oil major.
Support services group Interserve (IRV) has won a five-year, £90m facilities management contract for the Department for Transport. It will provide a range of services including cleaning, security and engineering at over 1,100 buildings across the UK. Shares were down less than one per cent in early trading. Hold.
Retirement home specialist McCarthy & Stone (MCS) has made solid progress in recovering the momentum lost in the wake of last year’s referendum, which led to a drop in retired people opting to downsize into specialised retirement apartments. Total completions for the year to 31 August rose from 2,296 a year earlier to 2,302, while the year end order book was up 21 per cent from a year earlier.
Shares in LoopUp (LOOP) rose 12 per cent, after the provider of remote meetings software reported revenue growth of 44 per cent in the first half of 2017 to £8.7m, with particularly strong growth in the US. Gross profit also rose 50 per cent. The group notes that it has a “healthy” new business pipeline in place for the second half and a debt-free balance sheet, having paid down a final debt instalment of £0.3m in January.
