London shares started the day with a minor sell off. Click here for The Trader Nicole Elliott's latest thoughts.
IC TIP UPDATES:
Revenue at online travel agent On The Beach (OTB) was up 17 per cent in the year to September, and 14 per cent when you strip out the now completed acquisition of Sunshine.co.uk. The company is expecting a one-off cost as due to refunding passengers after the failure of Monarch airlines, though On The Beach has insurance that should cover most of the costs. Shares fell 3 per cent in early trading. Buy.
A first quarter update from South32 (S32) failed to wow markets, as the suspension of metallurgical coal output from the Appin mine caused a 53 per cent drop in saleable production, compared to the three months to June. Output was also down in every other division save nickel, both on a quarter-on-quarter and year-on-year basis, though stronger prices meant the net cash position increased to $1.7bn, “despite an increase in working capital, the continuation of our capital management program and the prepayment that will increase our stake in Arizona Mining”. Our profitable buy call is under review.
Shanta Gold (SHG) took another step forward on its operational tightrope walk today, as the embattled gold miner announced a slight dip in production and grades in its third quarter. However, Shanta remains confident 2017 output can hit the 80,000 ounce-mark at an all-in sustaining cost of $800 an ounce, as underground development works complete. We remain buyers.
Shares in IWG (IWG) are down more than 30 per cent this morning after the group announced it expects to miss full year profit expectations by a wide margin. This is due to weaker than expected sales stalling the recovery of the group’s mature business. We are reviewing our buy recommendation.
KEY STORIES:
Bad weather in Europe and the hurricanes in the Americas made it a tough third quarter for Unilever (ULVR), as group turnover fell 1.6 per cent during the period. But year-to-date group revenue is up 3.1 per cent to €40.9bn (£36.7bn) with underlying sales growth of 2.8 per cent. The sale of the spreads business is progressing according to plan, and strip out this unit and sales were up 3.5 per cent to €38.7bn. The Anglo-Dutch consumer goods giant is in the process of buying preference Dutch shares as part of the review of its dual-hedged legal structure, which aims to simplify its capital structure and improve corporate governance. Shares fell 4 per cent in early trading.
More passengers heading to London Southend Airport has been good news for Stobart Group (STOB). Its aviation division saw passenger numbers increase by a quarter of the first half of the year to 610,492, which helped group revenue more than double to £125m. Some delays in commissioning hurt the energy business where short-term volumes fell by a third, but cash profits per tonne are still ahead of target and long-term volumes are unaffected.
Shares in Interserve (IRV) tumbled once again following another catastrophic update from the group. It has continued to struggle in both its construction and support services businesses, and has taken a further £35m provision against its energy from waste contracts. Given these challenges, management has said “there is a realistic propsect that we will not meet the net debt to EBITDA test contained in our financial covenants”.
OTHER COMPANY NEWS:
Statpro (STAT) issued a trading update for the nine months to the end of September. Revenue and profits “continue to be in line with the board’s expectations for the current year”. The percentage of group annualised recurring revenue that is software as a service has increased to 83 per cent from 75 per cent (at constant currencies) a year earlier.
Daytona JV Ltd, the German joint venture of Domino’s Pizza Group (DOM), is set to acquire German chain Hallo Pizza for €32m (£29m) in cash. The deal will bring the joint venture’s store count in Germany from 209 to between 300 and 340, helping it towards its goal of 1,000 stores in the country. The acquisition is expected to complete in the first quarter of next year.
Keywords Studios (KWS) announced that it has acquired d3t for £3m. D3t provides outsourced software development services to video game developers and publishers around the world. Keywords’ management note the acquisition ties into the group’s strategy to “grow organically and by acquisition as it selectively consolidates the highly fragmented market for video game services”.
