Shares in London were in favour again on Friday morning. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Increased operating expenses - including investment in digital banking - meant a 4 per cent decline in pre-tax profits for HSBC (HSBA) during the first quarter. However, a strong performance within the retail and commercial banking pushed income up 3 per cent. Management also announced a £2bn share buyback, although investment priorities elsewhere mean it will likely be the only one to take place in 2018. The tier one capital ratio remained within at 14.5 per cent. Buy.
International Personal Finance (IPF) reported a 3 per cent increase in credit issuance during the first quarter, led by its digital lending and Mexico business. However, European home credit contracted by 4 per cent, as regulatory and competitive pressures continued to weigh on its businesses. However, management maintained its full-year outlook for credit growth in that business at around 12 to 15 per cent. Sell.
Shares in Morgan Sindall (MGNS) rose over four per cent after the construction, regeneration and fit out specialist delivered an upbeat trading statement covering the first four months of 2018. Margins have improved on the construction side, while office fit out is expected to beat previous estimates for the year. The group’s overall committed order book stood at £3.7bn. Buy
First quarter results from British Airways owner International Consolidated Airlines (IAG) beat consensus expectations this morning - hence the early rise in the share price. The opening period was helped by weak comparatives from this time last year, as well as the timing of Easter. Passenger revenues rose 3.4 per cent, while operating profits hit close to the top of the consensus range. The growing headwind from high fuel costs has meant bosses are sticking to their original full-year guidance, despite improving trends around unit revenue and unit costs. We remain buyers.
Pearson’s (PSON) share price has leapt 5 per cent following the announcement of first quarter results, topping up the strong momentum seen in the past few months. Management is still expecting flat sales in the core North American education business as trading conditions remain tough, while earnings are forecast to fall. The best news is that net debt continues to come down, but we remain concerned about the long term potential. Sell
KEY STORIES:
Corporate advisory work continued to drive revenue for Numis (NUM) during the six months to the end of March. Revenue for that business was up three-quarters on the prior year at £51m, boosting group pre-tax profits by 86 per cent to £20m. However, equities business was relatively flat, as a rise in volatility led institutions to shy away from transactions.
Smurfit Kappa (SKG) reported a 7 per cent rise in underlying sales for the first quarter and reckons full-year trading figures will be materially better than 2017. Pricing initiatives, along with lower average recorded fibre costs, also resulted in a 2.7 percentage point improvement in the cash profit margin to 15.7 per cent, while cash profits were up more than a fifth. The group - which recently received an unwelcome takeover approach from International Paper - also reduced leverage, which stood at 2.2 times cash profits at the end of March, within its target range.
Shares in Vivo Energy (VVO) have started trading this morning, after the pan-African petrol station and retail group raised at least £548m in an initial public offering. Funds raised from the IPO, along with around $122m in cash, will be used to acquire South Africa-based Engen, and have helped to value the company at just under £2bn.
Bosses at InterContinental Hotels (IHG) are “confident” about the year ahead following a strong opening quarter. Comparable revenue per available room (RevPAR) grew by 3.5 per cent on rate rises of 1.9 per cent and occupancy levels up 1 per cent. Reported at actual exchange rates this would have been even higher. The net system also grew by 4.3 per cent year-on-year, taking the total number of rooms to 800,000 across 5, 367 hotels. Around 8,000 rooms opened during the period, across 53 hotels.
Compare that to fellow hotel operator Millennium & Copthorne (MLC) which reported a 3.1 per cent decline in revenue per available room (RevPAR) at reported currencies. Losses from exchange rates amounted to roughly £11m and reduced reported hotel revenues by 2.1 per cent to £187m. In constant currencies, hotel revenue increased by 3.9 per cent, with good contributions from the New York One UN Plaza hotel and the M Social in Aukland which opened last October.
OTHER COMPANY NEWS:
E-banking and payments group FairFX (FFX) has successfully moved its international payments business onto City Forex’s platform, having acquired the company on 21 February this year. The FairFX payments business processed more than £500m in foreign exchange volumes last year.
Shares in fantasy model maker Games Workshop (GAW) stayed relatively flat in early trading following a very brief trading statement. Solid growth has continued to the end of April and managers therefore expect sales and profits to report ahead of expectations. A further update ahead of the end of the group’s financial year is due on 3 June, but that hasn’t stopped some analysts from pushing through forecast upgrades this morning.
