Shares in London are down sharply on escalating trade war concerns. Click here for The Trade Nicole Elliott's latest views on the markets.
IC TIP UPDATES:
Shares in Ashtead (AHT) have plunged 6 per cent this morning following release of the full years. The hire group performed strongly on an underlying basis, but statutory figures showed a drop in pre tax profits and EPS in the fourth quarter of the year. Rental revenue growth was 20 per cent, thanks in large part to the additional work generated by hurricanes Harvey, Irma and Maria. The clean up efforts following the three storms generated an estimated $100m (£75.8m) in rental revenues. We are reviewing our buy recommendation
KEY STORIES:
A slow-down in transactional volume in the existing housing market means that retirement home specialist McCarthy & Stone (MCS) will not be selling as many apartments as it had hoped in the year to August 2018. As a result, operating profits will be £65-£80m against £96m the previous year. A strategic review on operations is expected to complete in September. Before then, chief executive Clive Fenton will be stepping down. With uncertainty over leasehold legislation and no sign of an improvement in the housing market, the shares are unlikely to make any progress from here and fell 15 per cent today. However, with a strong balance sheet and attractive dividend, the shares on just 0.8 times net assets look low enough.
Yesterday afternoon, the Competition and Markets Authority (CMA) said it was considering whether the anticipated acquisition of Fidessa (FDSA) by Ion Investment Group would lead to a substantial lessening of competition within any markets in the UK. The CMA has invited comments on the transaction, with a deadline of 2 July. It is expected to make a decision on the deal by 13 August. Clearance from the CMA and the Financial Conduct Authority (FCA) are among the final hurdles for Ion, which this morning announced that its offer is now unconditional as to acceptances.
Shares in Capita (CPI) are up three per cent since market open, against a slight drop in the FTSE overall. The beleaguered outsourcer issued two RNS updates this morning, the first confirming that it has been selected for a defence fire and rescue project with the Ministry of Defence and another announcing it has agreed the sale of supplier assessment services for £160m in cash. Capita gave no details on the value of the MOD contract, but a statement by Under-Secretary for Defence Tobias Ellwood in the House of Commons yesterday said the contract would last 12 years and its contingent liability would reach a maximum of £37m in the 2020/21 financial year, before reducing until 2025/26. Of the two, the sale of supplier assessment seems more likely to be the catalyst of the share price move.
Another profit warning from Debenhams (DEB) confirms our bearish outlook on the company’s future. Underlying sales might have moved in the right direction, but thinner gross margins coupled with worse trading in May and June has prompted bosses to expect pre-tax profits to land between £35-£40m this year, which compares with current consensus estimates of £50.3m. That’s especially concerning as the group is already up against weak comparative figures. Shares fell 8 per cent in early trading.
For a company so new to market, to disappoint investors on earnings guidance for the coming year is a big mistake. The 46 per cent fall in trainer specialist Footasylum (FOOT) - part of the JD Sports family dynasty - simply says it all. It’s forced analysts at Peel Hunt to revise their forecasts down: cash profits by 12 per cent, and pre-tax profit by a quarter. The FY2018 numbers - also out today - did meet market expectations.
OTHER COMPANIES:
Shares in Taptica (TAP) were up 15 per cent this morning, on the news that the mobile advertising group expects to see adjusted cash profits “moderately ahead” of market expectations for the 2018 financial year. Sales growth should be in line with expectations. Both revenue streams - performance-based marketing and brand advertising – enjoyed growth, with an increasing contribution from the Asia-Pacific region. Meanwhile, Taptica achieved cost efficiencies within its Tremor Video segment – acquired last year – and improved the gross margin here. The group is continuing to review acquisition opportunities.
Shares in Flybe (FLYB) fell nearly 2 per cent in early trading after the airline reported a pre-tax loss of £9.4m during the year to March, though this is better than the ££48.5m loss before tax it had reported the previous year. Sales increased by 6.4 per cent to £753m, but this was offset by a 10.9 per cent increase in cost per seat. Flybe is in the process of reducing its capacity, which saw a 5.2 per cent decline during the second half compared the an 11 per cent increase in network capacity during the same period the previous year. Load factor improved by 6 percentage points to 75.6 per cent, but this still lags other European airlines.
