Join our community of smart investors

News & Tips: Vodafone, Cairn Energy, easyJet & more

Equities remain in positive territory
May 15, 2018

Shares in London are up marginally in morning trading but positive momentum is lacking. Click here for The Trader Nicole Elliott's latest thoughts on the markets. 

IC TIP UPDATES:

The news that Vodafone’s (VOD) popular chief executive Vittorio Colao is preparing to leave overshadowed a decent set of annual results. Shares were down as much as 4 per cent in early trading, despite the company reporting 1.6 per cent service revenue growth, a 12 per cent leap in adjusted cash profits and free cash inflows of €5.6bn - ahead of the €5bn target. Chief financial officer Nick Read - who has long been assumed as Mr Colao’s replacement - will take up the top job in October. Buy

Today’s annual general meeting statement from Cairn Energy (CNE) contains much which investors already knew, but a few surprises too. Most pressing is news that tenders for SNE’s floating production and offloading vessel and subsea infrastructure construction are expected by the end of May. Chief executive Simon Thomson also flagged the group’s exploration activities in Suriname, where Cairn has been awarded a large, operated exploration bock which shares an Atlantic conjugate margin the group’s Senegalese acreage. The shares, up 2 per cent to a multi-year high today, remain a buy.

Despite production shortfalls and changes to the mining plan at its two most important coal mining royalties, Anglo Pacific Group’s (APF) total free cash flow hit £13.3m in the first quarter of 2018, in line with the same period last year. That was aided partly by a 130 per cent increase in the vanadium  price, which alongside operational improvements meant revenue from the Maracás Menchen royalty doubled to £0.8m. Cash also more than doubled to £18.7m, which alongside a $40m undrawn revolving credit facility gives Anglo significant liquidity for any upcoming deals. Buy.

The best sales performance from Premier Foods (PFD) in five years has helped lift the shares by more than 3 per cent in early trading. It’s no secret that in a shrinking retail market, food retailers continue to perform better than their non-food counterparts, and Premier seems no different. Revenues rose by 3.6 per cent during the year ended 31 March 2018, helping to lift adjusted pre-tax profits by nearly 6 per cent to £78.6m. Our recommendation is under review.

Shares in Zytronic (ZYT) are down 8 per cent this morning after a slowdown from financial customers sent revenues for the sector down 29 per cent, more than offsetting progress made in the gaming sector. The group supplies products for ATM manufacture, and unpredictable demand has led to projects being deferred and sales being subdued. We are reviewing our buy recommendation.

Shares in EI Group (EIG) are up more than 4 per cent this morning after the pub group reported a 6 per cent increase in sales to £330m during the six months to March, while pre-tax profits more than tripled to £45m. Chief executive Simon Townsend said the group’s strategic plan to make better use of existing assets is going to plan. The group announced alongside the interim results the launch of The Old Spot Pub Company, with its first site in Worcestershire. This will be EI Group’s tenth managed investments partner. Buy.

KEY STORIES:

Shares in CYBG (CYBG) dipped 5 per cent in early trading after the challenger bank reported first-half figures below consensus expectations. Underlying pre-tax profits were up more than a quarter to £158m, but that was weaker than expected due to lower than expected income. However, loan growth of around 5 per cent was in line with management’s mid-single digit target.   

Charter Court Financial Services (CCFS) grew its loan book more than a quarter during the first three months of the year, to £5.5bn. It wrote new loans totalling £668m, led by buy-to-let and specialist residential mortgages. It also completed two securitisations, raising £621m and grew customer deposits 16 per cent to £4.3bn.

Hargreaves Lansdown (HL.) gained net new business of £3.3bn during the first four months of the year, from 60,000 new clients. That helped boost assets under administration to £88.8bn, up 3 per cent on the end of last year. Net revenues during the first 10 months of the asset gatherers financial year are up 16 per cent to £367m.  

Animalcare’s (ANCR) annual results alleviated some of the concerns surrounding its reverse takeover of European veterinary group, Ecuphar. True, margins have been hampered a little, but revenues rose strongly on both a reported and like for like basis and management is confident that the integration is progressing smoothly.

Though there has been little reaction in its share price, Falcon Oil & Gas (FOG) is out with potentially big news today. Drilling partner Origin Energy has found four additional shale ‘plays’ to the Velkerri dry gas shale in the Beetaloo basin in Australia, where Falcon has a carried stake. Falcon reports Origin believes "the Beetaloo provides the JV with a diversified portfolio of material multi-TCF (trillion cubic feet) plays, each with the potential to redefine Australia's energy market".

Annual results from BTG (BTG) are in line with management’s lower expectations. Although it is good to see an increased contribution from the higher margin product sales business (rather than the license revenues), problems with the group’s two newest products, Varithena and PneumRX, are still plaguing the sentiment.

Shares in Gear4music (G4M) are down 2 per cent this morning following release of the group’s full year results. Revenue and gross profit both grew massively, but heavy investment in employees, systems and marketing all weighed on profitability, pushing pre tax profit down 43 per cent in the year. Management had previously said 2018 would be a year of targeted investment, adding profits would return to growth in 2019. Hold.

Total revenue at easyJet (EZJ) was up by a fifth to £2.2bn during the six months to March thanks to a combination of higher load factors, capacity reductions by other airlines, and the partial movement of Easter holidays into the first half. The budget airline carried 36.8m passengers, an increase of 3m on the same time the year before, including 0.7m from easyJet’s new routes from Berlin’s Tegel airport launched in January. Chief executive Johan Lundgren called the results one of the “best ever” for EasyJet during a winter trading period. Shares were up 3 per cent in early trading.

OTHER COMPANY NEWS:

Shares in Patisserie Valerie (CAKE) held steady on the release of interim numbers from the cafe chain. Revenues grew by more than 9 per cent last year following 10 new store openings, leaving pre-tax profits up by 14 per cent to £11.1m. The group also finished up the year with £28.8m in net cash, and chose to raise the interim dividend by a fifth to 1.44p a share. As at 31 March 2018, the group trades from 206 stores, with three more expected to open before the end of the month.

Shares in motor retail chain Lookers (LOOK) have struggled to find momentum, but more encouraging soundbites from the Society of Motor Manufacturers and Traders (SMMT) has helped support the shares this morning. As part of a first quarter trading update, Lookers revealed a 4 per cent decline in new car sales - far better than the wider sector squeeze of 12 per cent. Even better, gross profit from new car sales actually rose, while aftersales (which account for 41 per cent of gross profits) also moved higher year-on-year.

Online bingo operator Jackpotjoy (JPJ) reported a 13 per cent increase in gaming revenue during the first quarter to £80.7m, thanks to sales growth across all divisions and a 7 per cent year-on-year increase in average active customers per month to 256,699. Adjusted cash profits fell by 7 per cent over the quarter to £27.1m dur to a planned increase in marketing costs and added tax in the UK. Management expect this momentum to continue through to the full year. Shares were up more than 2 per cent in early trading.