Shares in London started the day negatively. Click here for The Trader Nicole Elliott's latest views.
IC TIP UPDATES:
Investors are getting jittery about housebuilders after Persimmon (PSN) delivered a rather cautious trading update earlier this month. So a broadly upbeat statement from Crest Nicholson (CRST) was pounced on for highlighting a modest increase in sales outlets, and the shares fell 5 per cent. However, trading has been strong. Average selling prices have risen as has the number of completions, while the forward order book is up 13.6 per cent from a year earlier. Buy.
Full-year figures for AB Dynamics (ABDP) detailed a 26.2 per cent rise in adjusted operating profit (excluding share option costs) to £5.9m. Track testing revenues are up by a third, while demand for driving robots and guided soft targets are at an “all-time high”. Despite a capital expenditure outlay of £8.0m (2016: £1.6m), AB exited the period with £9.6bn in cash and no debt. Buy
Selling its non-core retirement village asset for £102m, or a 13 per cent discount to its book value, meant Helical (HLCL) suffered a 1.7 per cent reduction in its net asset value during the first-half. However, on a like-for-like basis, the estimated rental value of its core portfolio increased 3.4 per cent during the six month period. Management increased the dividend 4 per cent. Buy.
Bango (BGO) announced the launch of operator-billed payments for those Google Play users with 9mobile in Nigeria. The 9mobile 9pay wallet allows Nigerian customers to make payments in Google Play without requiring a bank account. Chief executive Roy Anderson said this “is an important milestone for Bango”, enhancing the company’s presence in Africa. Shares were up just over 1.5 per cent at the time of writing. Buy.
Shares in Walker Greenbank (WGB) fell more than 25 per cent in early trading after the interior furnishings company warned that profits for the full year are expected to be around 10 per cent lower than previously expected. Momentum in sales seen at the interim results have not been sustained into the second half of the year and branded sales in the UK have “weakened significantly against management’s expectations”. The company is planning to put more focus on the international business where sales are ahead of the same time last year. Income from licencing is expected to be up around 15 per cent like-for-like. Our buy tip is under review.
Wizz Air (WIZZ) has ordered 146 new aircraft from Airbus, worth around $17.2bn (£13.1bn). Deliveries will begin in 2022, with the bulk coming in around 2025 and 2026. This order is in addition to the 110 Airbus planes Wizz Air bought in 2015. Chief executive József Váradi called the orders a “game changer” for the budget airline which will allow the company to lower its operating costs. Shares fell 1 per cent in early trading. Buy.
EasyHotel (EZH) has agreed to take over a 104 room hotel in Newcastle. This will be the company’s second leased site, operating on a 25 year lease with an annual rent of £442,000. The move is part of easyHotel’s plans to accelerate growth with the aim to grow its earnings at a lower capital cost and maintain the company’s return on capital employed target of 15 per cent. Shares were flat in early trading. Buy.
Half year sales at Premier Foods (PFD) improved by 1.5 per cent to £353, though profits were flat at £48m. The return to profit was primarily weighted towards the second quarter and a strong period for international revenue. Branded sales were flat in the period but non-branded sales were up by 10 per cent. But the weak first quarter and high debt levels still have us concerned. Sell.
The Zimbabwean army’s overnight seizure of power in Harare is unlikely to have many knock-on effects for the UK stock market. One exception, however, could be Caledonia Mining (CMCL), whose operatorship of the state-owned Blanket gold mine might explain this morning’s 2 per cent decline in the group’s somewhat illiquid shares. The company has made no comment on the fast-moving situation, but we place our buy call under review.
ADES International (ADES) has signed a long-term joint-venture agreement with Vantage Drilling. Under the terms of the deal, the Egypt-focused oil services outfit will get capex-light revenues and exclusive marketing rights in Egypt for Vantage’s ultra-deepwater fleet, in exchange for Vantage’s access to the Mediterranean basin. Buy.
KEY STORIES:
Blue Prism (PRSM), the Aim-quoted business specialising in robotic process automation, issued a trading update for the full year ending 31 October. The group generated “strong sales momentum” in the second half. 400 software deals were secured, 206 of which were new customers and 181 of which were upsells to existing customers, with 13 renewals. The renewal rate was 100 per cent for the full year. With this in mind, bosses now anticipate revenue will be “comfortably ahead of current consensus expectations” (which they deem to be £21.8m). Meanwhile, adjusted cash losses are expected to be “broadly in line” with consensus expectations (which they deem to be £7.3m). The board also announced this morning that chief financial officer Gary Johnson will retire from his role on 25 January next year. He will be replaced by Ijoma Maluza, who will join the company in advance on 18 December. Shares in the company have risen by around 340 per cent in the last 12 months.
Trading at the UK’s biggest housebuilder Barratt Developments (BDEV) remained strong in the period from July to November, with total forward sales up by 8.4 per cent, while net private reservations per average week were up from 265 to 268. A total of 79 new sites were launched against 69 a year earlier.
Shares in Experian (EXPN) are more or less flat on the release of its interim results this morning. The group reported 5 per cent growth in both revenues and underlying operating profit, driven by the group’s B2B division, complemented by progress in consumer services. Analysts are expecting growth to accelerate in the second half of the year, driven by product launches in B2B and the start of a big contract with mortgage company Fannie Mae.
Yesterday afternoon Idox (IDOX) issued a trading update for the full year ending 31 October. Shares plummeted more than a fifth on the announcement. The provider of information services said that it had grown both revenues and profits, and had won important contracts. However, customer disruption after the General Election in June meant that there was a delay to the sign-off on some contract wins, particularly in health and transport, into the next financial year. This has thus impacted 2017 profit expectations. Management expects cash profits for the full year of approximately £23m, against £21.5m in 2016. Net debt also increased year-on-year, to £32.7m from £25.1m – thanks to acquisitions and the costs of delayed contract wins. But, the board anticipates completion of these contracts over the weeks ahead, meaning they are starting 2018 “with strong momentum”.
OTHER COMPANY NEWS:
Game Digital (GMD) reported a 3.6 per cent fall in revenues to £782.9m for the year ending 29 July, with a loss per share of 7.1p against EPS of 1.5p the previous year. Adjusted cash profits were £8m, against £25.6m a year earlier. The group’s UK retail performance suffered against the backdrop of a challenging market, with fewer new game launches and a new release’s underperformance. Spain saw a better performance. Chief executive Martyn Gibbs noted that their markets “remained volatile last year”, but they have made strategic progress. Their UK console market returned to growth in the second half after the Nintendo Switch launch. The group continues with its transition away from a retailer of boxed products and towards providing physical and digital gaming products and services. It was also announced this morning that non-executive director Caspar Woolley has decided not to stand for re-election at the AGM in January, after his three-year term.
A third quarter update from Card Factory (CARD) was enough to send the shares up 5 per cent in early trading. That likely reflects the strong showing in like-for-like sales terms during the period, but could be a slightly overzealous reaction. As analysts rightly point out, the mix of sales has started to lean towards non-card, which is at a lower margin. There’s also less clarity over the future of the dividend - which we pointed out at the time of interim results - and brokerage Peel Hunt has taken it’s pre-tax profit forecast of £84.5m down by £1m this morning.
Shares in Utilitywise (UTW) have taken a dive of more than 7 per cent following an update from the group. The utility services group is delaying its full year results after its auditor, BDO, requested it seek additional advice on its “estimation methodology for expected consumption levels on live contracts”. It has sought out a third party firm to carry out a review, which is expected to conclude in early December. Earlier in the year the group announced it would be returning £7.6m to a customer after it learned of “material levels of underconsumption” on some contracts. After it learned of the miscalculation, the job of estimating consumption levels moved from the sales department to accounting.
Shares in Fenner (FENR) jumped 6 per cent in early trading on the back of a strong set of final results. Pre-tax profits of £45.3m came in 4 per cent ahead of analysts’ expectations and rose 95 per cent on the year before. The polymer specialist struck an optimistic tone when discussing prospects for the coming year too, prompting analysts at N+1 Singer to propose upgrading current year forecasts. Dividends rose by 40 per cent to 4.2p for the year.
A strong set of full-year results from Avon Rubber (AVON) was underlined by a 30 per cent jump in the dividend today – an increase that management of the fire safety and milk business would continue annually until the shareholder payout is covered two times by earnings.
One of the criticisms put to the now ousted leadership of Petropavlovsk (POG) concerned the group’s historically ill-timed debt issuances. Let’s hope then – for the sake of both the new management team and shareholders – that things can be different this time round. The company today announced the sale of $500m of guaranteed notes, maturing in 2022 and carrying a 8.125 per cent coupon, which will be used to “substantially refinance the loans” provided by Sberbank and VTB Bank. Shares have held firm at 8.1p this morning.
Chinese premier Xi Jinping’s comments prioritising ‘quality’ economic growth have sparked a small sell-off in mining shares this morning, with iron ore giants Rio Tinto (RIO) and BHP Billiton (BLT) both down 2 per cent, and steeper declines for more leveraged players Glencore (GLEN), Anglo American (AAL) and Vedanta Resources (VED). China’s slowing rate of industrial output – still high at 6.2 per cent in October – was also taken as a negative for commodity demand and prices.
Never far from the business pages, Glencore is also the subject of two news reports. The first, from Bloomberg, suggests the commodities group is nearing the completion of a $700m deal with the Ontario Teachers’ Pension Plan to create a new base-metals royalty company. The Financial Times has also reported that Glencore’s close links with newly-floated En+ Group (ENPL) were cited in Anglo American’s decision to block non-executive director Jim Rutherford from joining the Russian group’s advisory committee.
