Shares in London's main indices were in positive territory on Friday morning. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Hotel Chocolat (HOTC) has announced a new development - and, essentially, franchising - agreement with Retail Brands, an operator of retail franchises in the Nordic region. Hotel Chocolat first opened a store in Copenhagen six years ago, and operates three stores in Denmark. The existing Danish estate will transfer to the franchisee, with Hotel Chocolat retaining an option to buy back the business after a period of five years. Goods will also be sold to the new partner on wholesale terms, and a royalty levied on future sales. We remain buyers.
Shares in Reckitt Benckiser (RB.) are up 7 per cent this morning after the consumer goods company reported that sales in the first half were up by a third to £6.14bn with operating profit up 29 per cent to ££1.29bn. The integration of infant formula business Mead Johnson aided this top line growth in the final two weeks of the reported period. On a like-for-like basis, group revenue was up 3 per cent. Adjusted operating margin came in at 23.6 per cent, which is a 50 basis point improvement on a pro-forma basis or a 30 basis point reported decline. A better performance in the infant formula and child nutrition business target prompted management to increase total net revenue growth expectations for the full year to 14-15 per cent (previously 13-14 per cent), implying like-for-like revenue growth at the upper end of 2-3 per cent. Buy.
Pearson’s (PSON) shares rose 3 per cent on this morning’s half-year results. Revenues fell 9 per cent, but were up 2 per cent on an underlying basis – simultaneously lifted by growth in the North America and core segments, and dampened by a decline in the growth business. Statutory operating profits rose from £16m to £233m, driven by the sale of the group’s Wall Street English language (WSE) and Utel businesses, while adjusted underlying operating profits rose 46 per cent to £107m. It’s important to note that the group’s first half contributes only a small proportion of profits to the overall year. Management still anticipates full-year underlying profit growth. Recommendation under review.
KEY STORIES:
Jupiter Fund Management (JUP) suffered £2.3bn in net outflows during the first-half, worse than the consensus £1.9bn analysts expected. However, £322m in market gains meant assets under management were up 3 per cent to £48.3bn. Net management fees were up 7 per cent, helping push pre-tax profits up 3 per cent to £96.5m.
BHP Billiton (BLT) has sold its onshore US oil and gas portfolio, for $10.8bn in cash. Supermajor BP (BP.) is acquiring the lion’s share, taking what it calls “world-class unconventional assets” in the Eagle Ford, Haynesville and Permian shale basins. BP says the $10.5bn deal will be “accretive to earnings and cash flow”, and could be funded within its “existing financial frame”. Should it want to fund $5-6bn of buybacks and increase its second quarter dividend, as the company has also announced this morning, the group may need to hurry up on its disposal plans. Divestment of the onshore portfolio, which has weighed on BHP’s cash flows in recent years, was a key goal of activist shareholder Elliott, when it bought into the group last year. On an initial reading, BHP shareholders look the happier, pushing shares in the commodities giant up by 4 per cent on the promise “to return net proceeds from the transactions to shareholders”. BP is off 2 per cent.
OTHER COMPANY NEWS:
Ahead of its takeover by Sibanye-Stillwater, Lonmin (LMI) remains on a knife-edge. A third quarter update, out today, shows that net cash improved from $17m to $23m in the three months to June, but one might have expected more from a period in which unit costs reduced 11.5 per cent, and average rand-based prices for the miner’s platinum metals jumped 13.1 per cent year-on-year.
Shares in newly-listed uranium vehicle Yellow Cake (YCA) are 5 per cent to the good this morning, after Canadian producer Cameco announced it would shut its McArthur River mine, source of around 11 per cent of global supply. Yellow Cake listed in London earlier this month, raising $170m to stockpile 8 million pounds of U308, in a similar effort to boost unsustainably-low prices of the energy source.
