Shares in London have started the day with small gains. Click here for The Trader Nicole Elliott's latest views on the markets.
IC TIP UPDATES:
Murmurings of uncertainty regarding the government’s proposed energy price cap hammered Telecom Plus (TEP) earlier in the week. The multi-utility company - famed for providing all its customers with fair, stable energy rates - would be a big beneficiary of a price cap. But interim results have restored some of the positive sentiment. A 7 per cent increase in statutory pre-tax profits was better than management had previously anticipated, meaning full year profit forecasts have been updated. Buy.
Shares in VP (VP.) rose a further 4 per cent in early morning trading after the tool hire specialist reported a 13 per cent increase in underlying pre-tax profits during the first-half. Capital investment in its rental fleet was up 9 per cent to £32.5m, while its return on average capital employed nudged up to 16 per cent. Buy.
XLMedia (XLM) continues to smash expectations. Shares rose 14 per cent in early trading after management revealed adjusted cash profits in the full year will be materially ahead of expectations. The group’s recently acquired websites are being integrated according to plan and have reported better growth than management had hoped for. Buy
Tarsus’ (TRS) trading update was less impressive than its digital media peer, but nonetheless reassuring, given the challenges in the UK media market. Strong visitor numbers at the group’s three largest shows means trading in the year to date has been in line with expectations. The Dubai Airshow - which took place last week - brought in record numbers of orders. Buy
IMImobile (IMO) reported a 48 per cent jump in revenues to £53.1m in the first half. Meanwhile, cash profits rose by 8 per cent to £5.7m. The cash profit margin was down year-on-year, thanks partly to higher exchange losses on the Naira, Nigeria’s currency, among other operating costs. This Nigerian currency devaluation contributed to a decline in gross profits for the overall Middle East and Africa region. India and South East Asia achieved huge gross profit growth of 84 per cent, while Europe and the Americas also saw a good improvement. After the reporting period, IMI purchased Sumotext - a US-based communications platform, expected to enhance the group’s presence in North America. This will mean further sales and marketing investment this year, equivalent to around £0.5m. Buy.
In the name of being prudent, Marshall Motor Holdings (MMH) has announced its decision to close five franchised dealerships and one used car centre. The affected brand partners have agreed that the sites to be closed are not sustainable in the long term due to high levels of fixed cost, and it’s hoped that existing customers will be adequately served by nearby dealerships also under MMH’s ownership. Closure costs of approximately £6m will be offset by disposal proceeds from a freehold sale, as well as the realisation of working capital and/or disposal of stock held in the affected dealerships. We remain buyers.
Shares in white goods retailer AO World (AO.) fell another 3 per cent today as the group’s long-term strategy to spend big to grow fast started to weigh on progress. Adjusted cash profits in the UK nearly halved as a result of higher marketing spend, while losses in Europe widened as the group continued to invest and build scale. That led to an overall group loss of £12m (2016: loss £2.8m) and a basic loss per share of 1.9p (2016: loss 0.1p). We remain sellers.
Shares in recruiter Empresaria (EMR) were down 13 per cent this morning after the company warned it would miss profit expectations for the full year. The group will still report record profits, but reduced margins in Germany and a weak market in the Middle East has impacted the business. This puts the shares back to lower than they were when we first tipped them back in March, but we still have faith in the groups incentive structure and diversified business. Buy.
Equiniti (EQN) this morning updated the market on its progress in 2017. Trading is in line with expectations for the full year, with high profile clients such as Rentokil Initial (RTO) and Jardine Lloyd Thompson secured during the period. The acquisition of Wells Fargo Shareholder Services is proceeding as expected and completion is expected in Q1 2018. The introduction of IFRS 15 is expected to have a limited impact. Buy.
KEY STORIES:
The rising value of high quality film and television content has sent Entertainment One’s (ETO) share price soaring since the summer. Even so, the company has managed to deliver on extremely high expectations in its interim results. Strong revenue growth in the television and family divisions helped offset a decline in film, which suffered compared to an exceptionally strong FY2017 first half. Profits and revenues came in ahead of broker expectations, sending the shares up another 3 per cent in early trading.
CYBG (CYBG) grew underlying income 3 per cent last year, while underlying pre-tax profits jumped by a third to £293m. The latter was helped by a reduction in operating expenses, while credit impairments remained benign. Its net interest margin remained steady at 2.27 per cent, while its underlying return on equity was up to 7.5 per cent, from 5.2 per cent the same time the previous year.
It’s seemingly the same old story for Screwfix owner Kingfisher (KGF). The group reported good third quarter figures in relation to its UK and Ireland business - sales there rose 2.5 per cent overall - but France continues to shrink. Like for like sales fell 4.1 per cent, although total sales inclusive of new openings and actual exchange rates fell just 3.5 per cent. That’s not the only pain - the group also cited disruption to its ONE Kingfisher plan around product availability and clearance ranges and a surcharge in its tax bill of roughly €25m which is not expected to recur after this year.
Today marks Carolyn McCall’s final set of easyJet (EZJ) results before the chief executive leaves for broadcasting giant ITV (ITV). While fears mount about rising levels of capacity in the market, easyJet revenues actually moved higher than some analysts’ expectations thanks to higher load factors and record passenger numbers. Strong cost control and good savings meant the group offset some of the inflationary pressure, although pre-tax profits still fell 17 per cent year-on-year to £408m.
Despite trading being in line with expectations in the third quarter of 2017, shares in equipment hire group Aggreko (AGK) were down close to 9 per cent in early trading. The group continued to struggle in Argentina, where repricing and off-hire levels (the proportion of time an asset is not generating hire revenue) helped push revenues for the power solutions utilities business down 15 per cent against last year. The average off hire rate was 24 per cent for the first nine months of the year, with the full year figure expected to rise to the historic average of 30 per cent. This is a considerable drop from the 15 per cent rate reported back in August.
OTHER COMPANY NEWS:
Crossrider (CROS) has announced senior management changes within its subsidiary company CyberGhost. Shalev Katav has become managing director of CyberGhost, while Robert Knapp - founder and current managing director of CyberGhost - will become chairman and corporate development manager. Crossrider will purchase 3.8m of the consideration options granted to Robert Knapp as part of the acquisition of CyberGhost back in March this year. This amounts to €3.2m.
CML Microsystems (CML) saw revenues rise 23 per cent in the first half to £16m, with pre-tax profits up 19 per cent to £2.3m. The group had no borrowings as at 30 September, with net cash of £12.45m. These results also marked the introduction of CML’s first interim dividend, of 2p per share. CML specialises in mixed-signal and radio frequency semiconductors.
To feel good about today’s results from Stride Gaming (STR), just ignore the weakness in the social gaming division. That way, revenues rose by 29 per cent and adjusted cash profits rose by a quarter. That reflects a 26 per cent rise in deposits and an improved yield per player - i.e. how much cash is ultimately generated for the group per customer. Postyear-end, Stride acquired a 51 per cent stake in Passion Gaming, an Indian-based, Rummy focused online company for $3.8m (£2.9m).
