Shares in London remained steady through morning trading today as investors digested the US Federal Reserve's latest tightening plans.
IC TIP UPDATES:
It’s rare for a retirement to cause such a pronounced movement in the share price, but the departure of Richard Cousins from catering giant Compass (CPG) has hit the stock this morning. Shares are down 3 per cent despite the company’s best efforts to shore up confidence in his successor, former chief operating officer of Europe, Dominic Blakemore. Mr Blakemore will assume the role on 1 October 2017, although he will work in transition with Mr Cousins until the latter leaves the business next March. We remain buyers.
Looks like our decision to stay bearish on pub and restaurant group Mitchells & Butlers (MAB) was the right call back in August. A trading statement from the company this morning revealed only a 1.8 per cent improvement in like-for-like group revenues over the 52 weeks ending 16 September 2017, blaming the poor summer weather for a deterioration in underlying trading into the fourth quarter. Analysts at Peel Hunt have trimmed forecasts, both in terms of margins and profitability as costs also continue to rise. Sell.
Brooks Macdonald (BRK) grew funds under management by a quarter during the 12 months to the end of June to £10.5bn. An increase in administrative costs, primarily related to legacy matters, took a chunk out of statutory pre-tax profits. However, underlying pre-tax profits were up almost a fifth to £18.4m. Management also announced the sale of Braemar Estates, its property management business. Buy.
Car retailer Marshall Motor Holdings (MMH) has decided to offload its leasing division to a subsidiary of the Bank of Ireland for more than £42m. However, the deal is still subject to regulatory approval from the Financial Conduct Authority (FCA). Marshall Leasing has been part of the group since its inception in 1979, but the market is becoming increasingly consolidated and scale is increasingly important in supporting the capital-heavy nature of the business. Bosses therefore believe the business will be better served under different ownership. The shares rose 3 per cent in early trading - we remain buyers.
Park Group (PKG) said cash balances had increased and were ahead of the same time last year, when it updated the market ahead of its annual general meeting. Management said this highlighted the growth in its order books, particularly for the consumer business, where orders are booked during the first half of the year. The shares were up 4 per cent in early morning trading. Buy.
NCC (NCC), the cyber security group, stated in a first quarter update this morning that it is trading in line with management’s expectations in terms of full-year adjusted cash profits. Continuing revenue rose by 5.6 per cent to £62.7m. The Escrow business saw 7.1 per cent sales growth to £9.0m, while Assurance grew 5.3 per cent to £53.7m. Shares were down 2 per cent at the time of writing. Sell.
President Energy (PPC) has acquired Chevron's interest in certain oil producing assets in the Neuquén Basin, adding more than 1,200 barrels of oil a day in the process. In return, President will pay $400,000, plus $15m to the Rio Negro province for a 10-year concession (with a further $7m in 2018). We rate the shares, up 4 per cent today, a buy.
KEY STORIES:
Apart from the top line, which rose 1.4 per cent, the rest of the half-year numbers from window and door specialist Safestyle (SFE) make for pretty sorry reading. Two profit warnings in two months hardly left room for surprise in these numbers, but higher costs, a 130 basis point squeeze in margins, a 12 per cent plunge in underlying cash profits and an 11.7 per cent fall in EPS should hardly give investors reason for cheer. Or should it? The shares rose close to 7 per cent in early trading as analysts argued the bad news is at an end. Trading has not deteriorated in the last fortnight (since the last warning), while a number of self-help measures are driving better cost efficiencies and even the announcement of a £2.5m share buyback. No further downgrades either.
IG Group (IGG) reported a 21 per cent increase in revenue during the three months to the end of August. The Asia Pacific area generated the largest gains in leveraged over-the-counter sales, which were up almost a third to £33m.
Anglo American (AAL) is up 2.4 per cent today, after Indian billionaire Anil Agarwal’s Volcan Investments announced it would be buying a further £1.25bn to £1.5bn worth of shares in the miner. The proposed acquisition means that Volcan, which is the majority shareholder in Vedanta Resources (VED), will be the largest shareholder in Anglo, following March’s £2bn exchangeable bond deal. In a somewhat confusing statement, Vedanta sought to reassure the market it has nothing to do with the transaction, and that the Indian conglomerate “remains committed to its strategic priorities”.
Predictably – given the Federal Reserve’s signal that it will stick to its plans to raise interest rates – gold and silver fell overnight. Consequently, most precious metals miners are down this morning, though investors in Fresnillo (FRES) will at least take some comfort to learn that none of the Mexican miners operations have been damaged by the earthquake that hit the country on Tuesday.
OTHER COMPANY NEWS:
Shares in Capita (CPI) fell 10 per cent this morning, after the outsourcing group reported a 1 per cent fall in reported revenue to £2.13bn, and a 26 per cent fall in pre-tax profits to £28m. Management expects underlying pre-tax profits “before significant new contracts and restructuring to rise modestly in the second half”, but this will be countered in part by the divisions that are progressing slower than anticipated.
Aim-listed asset manager Miton (MGR) reported closing assets under management of £3.4bn as at 30 June 2017, up from £2.5bn a year earlier. Pre-tax profits were £2.4m, down from £2.9m, and cash was £18.2, up from £17.4m.
Shares in Venture Life (VLG) fell 14 per cent in early trading, after the small-cap consumer self-care company reported 28 per cent revenue growth to £7.8m, and a 27 per cent rise in gross profit, but noted that cash profits for the year will not meet current market expectations (they are still expected to rise by at least 50 per cent against the previous year). This is due to significant investment in the group’s brands business, and some delays in orders for international distributors. Revenue guidance remains unchanged.
Hurricane Energy (HUR) published its half-year results today, and for the first time, in dollars. The cash balance at the end of June stood at $29.1m, with debt making up the remainder required to fully fund the early production system on Lancaster. The group’s data room was reopened earlier this year, following completion of the fundraising, and Hurricane reports that it continues to engage with “financially and operationally capable counterparties” regarding a potential farm-in.
