Morning trading saw equities in London hit fresh highs. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
It wasn’t a very Merry Christmas for suit retailer Moss Bros (MOSB). The group admitted to “volatile” trading patterns this morning, which saw in-store like-for-like sales rise 1.2 per cent between August and November, to suddenly crash 8 per cent between December and early January. This has put more pressure on gross margins than previously expected, and thus will have a negative effect on full-year profits when the group announces preliminary results at the end of March. Our recommendation is under review.
By contrast, shares in Ted Baker (TED) shot up 7 per cent in early trading after the clothing chain reported a solid 9 per cent increase in sales over the eight week period to 6 January 2018. E-commerce sales rose by more than a third, and now represent more than 30 per cent of total retail sales (that compares to just 13 per cent at Moss Bros). Gross margins are said to be where management expect - in line with last year - and the group says it should end the year with a clean stock position. We remain buyers.
Amino Technologies (AMO) announced this morning that DELTA - a Netherlands-based provider of internet, TV, telephony and energy - is using Amino’s MOVE TV platform to deliver multi-screen entertainment services. Amino and DELTA already have a relationship in place to provide a “TV everywhere” offering for mobile and tablet viewing. Now, this relationship is extending to allow the platform to manage DELTA’s entire entertainment service delivery outside and inside the home. That said, Amino notes this contract will “not have a significant incremental impact” on its revenues for this financial year. Buy.
Demand for newly built houses provided a positive backdrop for housebuilder Taylor Wimpey (TW.), with completions in 2017 up by 5 per cent to 14,541, of which 19 per cent were classed as affordable homes. The forward order book remains strong, little changed from a year earlier at £1.63bn. Cost inflation remained steady at 3-4 per cent, and a similar level is expected for 2018. Operating margins are expected to be around 21.2 per cent, up from 20.8 per cent in 2016. Buy
Burford Capital (BUR) tripled the amount of capital it committed to financing litigation during 2017 of $1.3bn. Management said this reflected demand for capital in its core litigation business, access to capital through direct balance sheet investing and its new investment management business; and continued expansion of its product offerings and investment strategies. Buy.
Liontrust Asset Management (LIO) increased its assets under management by almost 10 per cent during the final quarter of 2017 to £10.6bn. Net inflows were £571m, in addition to market gains of £345m. Buy.
Building materials group Marshalls (MSLH) saw revenue up by 8 per cent in the year to December 2017, including a contribution from CPM Group which was acquired in October. Sales in the domestic end market - around a third of group sales - rose by 12 per cent, while in the public sector and commercial end market - excluding CPM - sales were up 2 per cent. Buy.
Superdry (SDRY), previously known in results statements as SuperGroup, reported that group revenue was up by a fifth during the first half of its financial year to £402m, £12m of which came from a favourable foreign exchange as an increasing proportion of sales comes from outside the UK. Sales from wholesale improved by more than a third to £125.3m while retail revenue up 12.8 per cent to £242.7m. Group gross margin contracted from 58.8 per cent to 57.1 per cent reflecting a higher proportion of sales coming from wholesale channels, which are lower margin than direct retail sales. Shares fell 3 per cent in early trading. Buy.
KEY STORIES:
GlaxoSmithKline’s (GSK) chief executive, Emma Walmsley, used her slot at the JP Morgan Health Conference - currently taking place in San Francisco - to confirm the group’s interest in the consumer healthcare division of Pfizer, which is up for sale. Ms Walmsley reassured that the group would not overspend on the business which sells products such as Advil pain relief and chapstick.
Shares in long-troubled support services group Interserve (IRV) shot up more than 20 per cent in early trading after the group announced it expected operating profit for 2018 to be ahead of market expectations. Net debt is expected to peak in 2018 due to the phasing of cashflows from the group’s exit from its energy from waste business, alongside exceptionals related to restructuring and refinancing. The group expects to unveil its long-term strategy for growth in the full year results announcement.
Shares in fast-fashion market newcomer Quiz (QUIZ) also rose in early trading after the company reported a 32 per cent rise in sales over Christmas. A strong sell-through of full-price product means margins are where management expect them to be, while online sales rose by a whopping 119 per cent - both via Quiz’s own websites and third party retailers. International sales also rose by an impressive 51 per cent, reflecting new openings in Spain and continued demand in Irish stores and concessions.
Rents rose by 1.3 per cent at Big Yellow Group (BYG), which helped to boost third-quarter revenue by 8 per cent for the self-storage specialist. This is usually the quietest time of the year, but occupancy rates stilled showed an impressive rise from 75.5 per cent to 80.1 per cent.
Shares in recruiter Pagegroup (PAGE) were up more than 7 per cent in early trading after the group announced a strong performance in 2017. Group gross profit was up 13.8 per cent in the fourth quarter of the year, a record. As has come to be expected with the recruiters, growth was driven by every region except the UK, which shrank 2.8 per cent while EMEA and the Americas put in the strongest performance with 19.3 per cent and 18.8 per cent growth respectively. Headcount growth was also strong, with the group adding 276 fee earners in the third quarter of the year followed by 290 in the fourth. Hold.
Not dissimilar to its sector peer Morrisons (MRW), this morning was J Sainsbury’s (SBRY) turn to pleasantly surprise the market with how well it did over Christmas. Total retail sales rose 1.2 per cent over the third quarter (excl. fuel), or 1.1 per cent on a like-for-like basis. Grocery sales alone rose 2.3 per cent, with online sales for food up 8.2 per cent and convenience chain sales up 7.3 per cent. Chief executive Mike Coupe said the group had notched up “record sales” over the festive period, logging more than 340,000 online orders. Online sales actually accounted for a fifth of all sales during the quarter.
OTHER COMPANY NEWS:
Telit Communications (TCM) has announced a strategic partnership with PST Electronics, a specialist in telematics security, connected car supplies and telematics solutions in Brazil and South America. PST will use Telit’s deviceWISE platform to take its Internet of Things products into new global markets. Telit expects its platform will enable 150,000 of PST’s devices and future deployments.
There is not much wrong with this morning’s trading update from video game experts Frontier Developments (FDEV). Sales in the six months to November 2017 are moderately up on last year and the enduring popularity of the recently launched Elite Dangerous gaming franchise means the company is still on track to hit its full year guidance. And yet, without the wildly enthusiastic optimism and rapid revenue growth investors have become used to in recent announcements, shares have taken a 13 per cent dive in early trading. We wouldn’t be surprised if Frontier’s shares cool off a little after their fantastic performance in 2017, particularly when interim results - which will include more information on the costs of the newest gaming franchise Jurassic World - are announced in early February. However the long term outlook remains very exciting.
It’s change at the top for Dixons Carphone (DC.). The electricals retailer has announced its chief financial officer Humphrey Singer is leaving to take up the same position at beleaguered high street chain Marks and Spencer (MKS). Mr Singer will step down from Dixons in July this year, although the board have already commenced their search for his replacement. Mr Singer has worked for Dixons since 2007, and in the role of CFO since 2014.
Paddy Power Betfair (PPB) have appointed Dan Taylor as chief executive of its European business, and so will be look after all the brands outside of the US. Mr Taylor was previously managing director of the group’s operations in the UK and Ireland. Barni Evans, previously Australian brand Sportsbet’s chief commercial officer, has also been promoted to chief executive of Sportsbet. Shares fell nearly three per cent in early trading.
