Shares in London rose in early trading after new highs in the US overnight but momentum may be fading. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Are investors losing patience with Ocado (OCDO)? A 5 per cent drop in the share price this morning suggests trading statements which report good top line growth, but offer little visibility on margins, future contracts or the threat of Amazon (US:AMZ) are wearing thin. Given the shares have risen around a quarter since April, some might also be banking a short term profit. Over the last 12 months however, the shares have only risen 4.6 per cent. Despite a reported 13 per cent acceleration in retail revenues, and a 16 per cent rise in average orders per week, we remain sellers. Sell.
Reckitt Benckiser (RB.) non-executive chairman Adrian Bellamy is set to retire following next year’s annual general meeting. During his time at the health and hygiene company he oversaw a number of acquisitions, most recently Mead Johnson, as well as the divestitures of Indivior and French's. He will be replaced by Christopher Sinclair, who joined the board in 2015. Shares in Reckitt were relatively flat on the news. Buy.
Shares in Swallowfield (SWL) rose 14 per cent after the producer of personal care and beauty products reported 36 per cent revenue growth, reduced net debt and a 68 per cent dividend hike in the 12 months to 24 June. Brand Architekts, recently acquired, has been integrated and has seen new product launches during the year. Buy.
Just a day after it released annual results, and revealed further danger over breaching banking covenants, Petra Diamonds (PDL) has announced it is experiencing labour disruption at its Finsch mine and at its Kimberley Ekapa Mining JV operations in South Africa. This was not wholly unexpected - the group had hinted at labour relations volatility ahead of the finalisation of a new wage agreement in the region - but that didn’t stop shares falling a further 4 per cent in early trading.
Regional commercial property developer Palace Capital (PCA) is buying R.T.Warren for £53.3m. To fund the acquisition the company plans to raise £70m through a share placing. The property portfolio being bought contains assets in regions where industrial and office space are both in short supply. Shares in Palace Capital were down 5 per cent. Buy.
Shares in Purecircle (PURE) fell around 4 per cent in early trading after the stevia producer reported a 15 per cent fall in sales to £119m. Operating profit was down 47 per cent to £17.6m while the gross margin slid from £57.8m to £45.8m. Management warned that the results should be viewed in the context of the company being placed on the US Customs and Border Protection Withhold release Order list, which has denied Purecircle access to a market that represented a third of its revenue in 2016. Sales have now resumed in the US but management said it would take time to “rebuild the previous momentum”. Outside North America growth was 8 per cent. Buy.
KEY STORIES:
In its first set of results as a listed company DP Eurasia (DPEU) reported a 38.9 per cent increase in group revenue to 290m Turkish Lira (TRY) while system sales were up by a third. The company operates Dominos pizza locations in Turkey, Russia, Azerbaijan and Georgia, split between owned corporate stores and franchised stores. Online ordering continues to be the main driver of like-for-like growth. The mobile app in Turkey, its largest market representing three-quarters of group sales, is undergoing a revamp. Shares were relatively flat in early trading and are up around 13 per cent since listing in July.
OTHER COMPANY NEWS:
Shares in Bango (BGO) rose 4 per cent in early trading after the mobile payments specialist reported that end-user spend had risen 100 per cent in the first half to £92.31m, while operating costs stabilised. Pre-tax losses narrowed.
Shares in WANdisco (WAND), the software group specialising in active data replication, rose 5 per cent after it announced the launch of one of the first ‘hybrid data lake architectures’ in partnership with Amazon Web Services (AWS). Specifically, WANdisco’s Fusion technology is being used to replicate ‘continuously changing data’ from AWS’ data lakes.
Are things finally turning around for beleaguered French Connection (FCCN)? The clothing chain has announced narrowing losses as part of an interim results statement this morning, citing tangible recoveries in both the wholesale and licensing divisions. Retail losses also shrank thanks to better margins following less promotional activity during the period. Although off 2 per cent this morning, the shares have been supported in recent months thanks to Mike Ashley’s (of Sports Direct) ongoing stake-building in the group.
