Renewed trade war fears have led to traders taking profits on the recent rise in the markets with London shares in the red mid-morning. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
There really isn’t a lot to complain about in annual numbers from clothing chain Joules (JOUL). The group met all expectations, with group revenues up by nearly a fifth to £186m. This, combined with gross margin growth, left underlying pre-tax profits up by 29 per cent to £13m, while EPS grew at the same rate to reach 11.8p. As new openings continue, and the group’s truly multi-channel business model evolves, we can only view this morning’s share price dip as indicative of some incremental profit-taking. We, however, remain buyers.
Forecast beating interim results from ITV (ITV) were not enough to spark a leap in the share price. That might be because the broadcaster can thank the fantastic performance of the English football team or the less fantastic longevity of Love Island for the reported growth in advertising (clearly, neither of these will be repeated in the second half). Still, there’s a lot to like in ITV’s studios and online businesses, both of which reported double digit revenue growth in the reported period and the launch of a new strategy or “refresh” as chief executive Carolyn McCall puts it, is certainly welcome. Buy
Shares in Wizz Air (WIZZ) fell 3 per cent in early trading after the budget airline announced more than a fourfold increase in flight cancellations to 145 due to the French air traffic controller strikes, leading to a 14 per cent fall in profits during its first quarter to €50m (£44m). Passenger delay and compensation costs more than doubled to €9.1m. In better news, sales were up by 17.9 per cent to €553m and carried a fifth more passengers than the same time the year before at 8.6m. The strikes are an unfortunate headwind, but are an exceptional circumstance. Buy.
Good weather and the World Cup was good for trading at Marston’s (MARS) during the second half of its financial year. Total managed and franchised pub sales were up 5.2 per cent in the 42 weeks to 21 July. In taverns, managed and franchised like-for-like sales for the 42 week period were 3.8 per cent ahead of last year, including growth of 5 per cent in the last 16 weeks. Most of these locations have an outdoor space, which proved popular with patrons watching the football. Destination and premium pubs were hurt by the World Cup, since people were less interested in going to food-led pubs over the period. Volumes in the beer brewing business were up 61 per cent. Management is confident the group will meet full year expectations. Shares fell nearly 1 per cent in early trading. Buy.
Antofagasta (ANTO) is on track at the half-year. Production guidance of 705-740,000 tonnes of copper, and net cash cost guidance of $1.35 per pound, remain in place. That performance was down to a mixture of factors, including a softening in the Chilean peso and by-product credits, and a delay in sales from Los Pelambres in the first six months of 2018. Output is expected to pick up in the third quarter. The shares, off 1 per cent this morning, received a boost yesterday following reports that Chinese authorities plan to stimulate the economy with a liquidity injection. We remain long-term buyers.
Eland Oil & Gas (ELA) has a near-term production target of 30,000 barrels of oil per day from its acreage in OML 40 in Nigeria. With the discovery of six oil-bearing reservoirs at its Opuama-10 well, the company is well on track to meeting that goal, and the shares remain a buy.
Shares in Tyman (TYMN) were up nearly 3 per cent in early trading after the door and window supplier reported a 6 per cent rise in sales to £275m with underlying operating profit up 8 per cent to £38.2m. Management called contributions from recent acquisitions Ashland and Zoo Hardware “encouraging”. Chief executive Louis Eperjesi each division had successfully implemented pricing and surcharge actions in response to increased input costs incurred over the period, and that the group will remain “disciplined” in cost recovery. Buy.
KEY STORIES:
The lack of activity in Vertu Motors’ (VTU) shares this morning - on the back of what can only be called a resilient AGM trading update - perhaps underlines the ongoing confusion about the state of the car industry in the UK. With a lack of clarity over tariffs post-Brexit, the future for both imports and exports looks uncertain. New car registrations fell by more than 4 per cent over the four month period ended 30 June, whereby Vertu managed to report growth of 0.2 per cent (2.1 per cent on a like-for-like basis). But fleet and motability sales continue to struggle. Commercial cars and used vehicles are selling well. But higher sales of premium brands in prior periods left margins down at 8.9 per cent compared to 9.2 per cent. It’s a muddled picture to say the least.
Shares in opioid addiction specialist Indivior (INDV) have fallen by a fifth this morning on the back of a lacklustre set of interim numbers. The group withdrew its full-year guidance on 11 July this year after a competitor launched a rival copy of its drug Suboxone into the US market. Indivior says until it can be sure how much of the generic drug was sold, it is unable to provide investors with renewed guidance. It has, however, promised to do so no later than when third quarter results, which are currently scheduled for 1 November. This isn’t the only problem. Sales of Sublocade, the new, monthly opioid treatment have also failed to gather much momentum as transferring patients onto the new drug remains a struggle. Management admits sales fell below its “financial plan” but remains confident of the drug’s potential in the long-term.
Shares in Fresnillo (FRES) are the cheapest they have been since the end of 2016. That is partly down to weak gold and silver prices, and partly due to shifting expectations. Full year gold output guidance has been raised around 3 per cent, while total forecast silver output has been downgraded by around 4 per cent. The latter is partly due to a “temporary” change to the mining plan at San Julián, where the construction of a water reservoir has been delayed by “a longer than expected permitting process”. The Mexican precious metals giant is off 4 per cent in early trading.
Half-year results for Tullow Oil (TLW) carried their fair share of tributes to outgoing founder and chairman Aidan Heavey, but shareholders appear to have found several sources of optimism in the company he leaves behind. Revenue and free cash flow for the first six months of 2018 came in at $905m and $402m respectively, though the bottom line was hampered by a chunky $149m provision related to an arbitration case with Kosmos. Still, long-term capital expenditure is expected to drop to $150m and cost savings have come in well ahead of 2015 expectations.
Ryanair (RYA) announced it would cut the number of aircraft it has based in Dublin from 30 to 24 this winter. The company said it wants to move resources to more profitable routes like Poland. Forward bookings and fares have been falling across Ireland, due in part to recent strikes by Irish pilots. The airline expects to cut some routes from Dublin or reduce frequency as a result. Shares were up nearly 3 per cent in early trading.
Vehicle tracking company Quartix (QTX) reported a 7 per cent increase in sales to £12.9m during the first half. This was driven mainly by an increase in fleet revenue, while insurance revenue was flat. Flat revenue in insurance was as expected since the company has restricted the business to those applications which it feels appropriately value the group’s service and technology. The subscription base grew by 7 per cent to 112,530 vehicles while fleet installations grew by 6 per cent to 15,220. Shares were up 1 per cent in early trading.
OTHER COMPANY NEWS:
Informa’s (INF) combination with UBM completed on 15 June 2018, meaning the latter contributed 15 days’ performance to the media and events group’s half-year results. Reported revenues rose 4.6 per cent to £957m, or 4.3 per cent on an underlying basis (excluding UBM). Underlying adjusted operating profits rose 1.9 per cent to £294m, despite higher depreciation and currency headwinds. Statutory pre-tax profits fell from £149m to £120m, largely reflecting one-off acquisition costs. Encouragingly, management expects to beat the original synergy target of £60m run-rate savings by the 2020 year-end, now anticipating £75m run-rate savings by the end of 2021. The interim dividend was lifted 6 per cent to 7.05p.
Rathbone Brothers (RAT) grew funds under management 2 per cent to £39.9bn in the first half, against £39.1bn as at the December year-end. The wealth manager’s investment management business saw net organic growth of £0.4bn, representing an underlying annualised rate of 2.1 per cent – lower than 2.9 per cent a year earlier. Meanwhile, funds under management for unit trusts rose 26 per cent to £5.8bn. Statutory pre-tax profits rose 64.3 per cent to £43.7m – benefitting from the company reassigning the leases on its legacy Curzon Street offices. In June, Rathbone announced its acquisition of Scottish manager Speirs and Jeffrey via a £60m placing.
Earthport’s (EPO) year to June was challenging, comprising client contract implementation delays and a previously-announced change at a significant e-commerce client. While revenues rose around 5.3 per cent to £31.9m, the adjusted gross margin fell from 68.3 per cent to 67. 1 per cent, because of network delivery costs and geographical transaction mix. Administrative expenses rose around 9.1 per cent to £28.8m – comprising 90 per cent of sales – and adjusted cash losses widened from £2.9m to £4.8m. The cash balance improved from £11.9m to £28.3m, including the £24m net proceeds raised last October. Meanwhile, Alexander Filshie has been appointed chief financial officer – having previously held the same role at foreign exchange settlement organisation CLS Group.
The jigsaw pieces are slowly falling into place for Savannah Petroleum (SAVP). Yesterday, the governments of Niger and Nigeria signed a memorandum of understanding for the export of crude oil from Niger’s Agadem basin to its southerly neighbour, thereby providing a potential route to market for Savannah’s exploration work. Completion of the complex Seven Energy acquisition, arguably the largest part of the jigsaw, is still pending.
Idox’s (IDOX) revenues fell 19 per cent to £35.2m for the first half, while adjusted cash profits fell 72 per cent to £2.7m. The group’s pre-tax loss came in at £43.2m, against a profit of £3.4m a year earlier. Management said the six months were a “difficult period” for the company. The poor performance of its public sector software, digital, health and engineering information management segments led it to review the carrying value of its businesses, ultimately causing a significant impairment of goodwill and, in turn, the large reported loss. In response to these issues, the group is restructuring its digital business and is working to reduce costs, among other actions.
