London shares were up marginally in morning trading as confidence remains thin on the ground. Click here for The Trader Nicole Elliott's latest thoughts.
IC TIP UPDATES:
A poor month for the retail industry in October weighed on recent trading at clothing chain Ted Baker (TED). But a third quarter update this morning actually struck a positive tone ahead of the Christmas trading peak. Despite less than encouraging figures from the Office for National Statistics (ONS), Ted implied that sales volumes had improved towards the end of the period, and that it remains on track to meet full-year expectations. During the period under review, retail sales grew 5.1 per cent at constant currency, although it’s understood this would have been closer to 7 per cent excluding the October drag. On the wholesale side, sales rose 14.2 per cent, with management estimating progress there will be well ahead of expectations for the year as a whole. We remain buyers.
Prudential (PRU) reported a 17 per cent increase in life new business profit during the first nine months of the year and combined net inflows of £12.8bn for Eastspring and M&G Prudential, compared to net outflows of £8bn during the same period in 2016. In its core Asia market new business profit was up 15 per cent at constant currencies during the third quarter. Buy.
Shares in Close Brothers (CBG) were up 4 per cent in morning trading after the alternative lender reported growth across all three of its divisions. That included a 1.4 per cent uplift in its banking loan book and a 7 per cent increase in managed money for its asset management business. Buy.
Macfarlane (MACF) issued a trading update this morning for the period from 30 June to 31 October, noting continued momentum - buoyed by organic growth and the effect of acquisitions. Management expects full-year performance to meet their expectations. Packing distribution sales for the year-to-date have improved by 11 per cent. Operating profit for this division is expected to be “well above” 2016 for the full year. Meanwhile, the manufacturing operations business’s sales are 3 per cent below 2016, thanks to a focus on higher margin sales. Full-year operating profit here is expected to be similar to 2016. Overall, Macfarlane says pre-tax profits for the year-to-date are “well above” the same time frame last year. Shares were up 1.8 per cent at the time of writing. Buy.
EasyHotel (EZH) is set to open two new franchise hotels in the Netherlands in the second half of 2018. An 87 room hotel will open at the Hague Scheveningen Beach, and a 75 room location will open in Maastricht City Centre. The Netherlands is the budget hotel chain’s second largest market behind the UK, with seven locations including the two announced today. Shares fell more than 1 per cent in early trading. Buy.
Result from Royal Mail (RMG) came in ahead of some analysts’ expectations, but a fall in the share price suggests there’s limited reason to get over-excited. True, an encouraging performance from parcels helped offset the expected 4 per cent decline in letters revenue but it’s worth remembering the group is also enjoying a strong currency translation tailwind on that front. Management also flagged intensifying cost pressures for the second half, not helped by the anticipation of further challenges relating to industrial relations. We remain sellers.
KEY STORIES:
Shares in Virgin Money (VM.) dipped 5 per cent on the morning management announced loan book growth for 2018 would be at the lower end of its guided range of between 3 and 3.5 per cent. As a result of lower front book spreads on its mortgages, it also expects its banking net interest margin to reduce to between 1.65 and 1.7 per cent. The challenger bank also announced its intention to enter the SME banking market, developing a savings product and launching a business current account by the end of 2018.
National Grid (NG.) has submitted a rate filing request with the Massachusetts Department of Public Utilities. The filing concerns its Massachusetts gas utilities and, if granted, would support more than $550m (£417m) of annual capital investment, supported by an annual revenue increase of $87m. The filing however, looks unlikely to be granted easily, with analysts expecting pushback from the DPU. Hold.
Shares in Victoria (VCP) are up nearly 10 per cent after the company announced that it would buy fellow flooring company Keraben for €274m (£245m). The deal will be funded by a placing of near 23m new ordinary shares at 783p each to raise around £180m.
Shares in Dart Group (DTG) are up nearly 10 per cent after the travel logistics company reported that revenue was up by more than a third to £1.7bn during the first half with operating profit up 22 per cent to £205m. This reflects a 41 per cent increase in passenger sectors flown by Jet2.com to 7.14m, which included a 41 per cent increase in the number of Jet2holidays package holiday customers to 1.81m. Load factor was in line with the previous year at 93.2 per cent, while capacity increased by 41 per cent.
3i (III) reported an 8 per cent increase in its portfolio’s net asset value during the first-half, after completing four new private equity investments for a total £715m. It also made its first US infrastructure investment in Smarte Carte. However, it realised £374m from its investments, compared with £666m the same time the prior year.
Shares in Mediclinic (MDC) took a tumble this morning after the group confirmed it had still not reached an agreement with hospital operator Spire (SPI) about a potential takeover. News of the deal first broke late in October, but Mediclinic has seemingly failed to thrash out terms. As per the company’s own set of interim numbers - also released today - revenues grew 10 per cent at actual exchange rates (flat at constant currency) while cash profits rose 5 per cent on the same basis (down 5 per cent otherwise). Underlying earnings per share fell 12 per cent to 11.3p, largely reflecting the impact of an impairment charge relating to its existing stake in Spire.
Investec (INVP) reported operating profit growth across all three of its business units during the first half of the year. Specialist banking increased operating profits by 13 per cent to £239m, driven by its South African operations, which offset a 22 per cent reduction at its UK operations. Meanwhile the asset management and wealth management businesses gained net inflows of £2.1bn and £1.5bn respectively.
Sales at pub group Young & Co (YNGA) increased 6 per cent during the first half to £144m with adjusted operating profit up 10 per cent to £27.8m. Managed pubs reported a 6.8 per cent increase in revenue and a 4.6 per cent rise in like-for-like sales, while the tenanted pubs under the Ram Pub Company saw comparable sales improve 1.6 per cent. The acquisition of Smiths of Smithfields completed this week, along with the location in Cannon Street. Shares were flat in early trading.
OTHER COMPANY NEWS:
Ashley Highfield, chief executive of Johnston Press, has stepped down from chair of the corporate responsibility committee on the board of William Hill (WMH). The place will be filled by former Betfair chief executive Mark Brooker.
Shares in Vitec (VTC) were up just over 2.5 per cent, after the company reported that trading for the four months ending 31 October was in line with expectations. The photographic business performed well. The broadcast division benefitted from new product sales. The JOBY and Lowepro brands, acquired from DayMen Group in September, are being successfully integrated into the photographic business. Net debt at the end of October was £48.3m, down from £52.6m at the end of June, thanks to better cash generation and the consideration received from the Bexel sale in August.
