Heavy selling of high flying technology stocks in the US overnight has failed to rattle the London markets with the FTSE100 marginally positive in morning trading. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
This morning, Sirius Minerals (SXX) signed a deal with US agricultural giant Archer Daniels Midland for the supply of binder for the Yorkshire miner’s POLY4 product, unveiling its long-term North American offtake partner in the process. Sirius chief executive Chris Fraser said the deal demonstrated “the significant role POLY4 will play in world fertiliser markets”, though no additional off-take tonnage has been agreed, and Sirius is now committed to designing and constructing “a binder handling facility with the support and expertise of ADM”, for an unspecified cost. We remain buyers, but await more details.
Provident Financial (PFG) reported a drop of around a quarter in adjusted pre-tax profits during the first-half, with the consumer credit division recording a loss of £23.2m. The can be attributed predominantly to the loss of customers following last year’s migration to a new operating model at the home credit business, those customers were down around a third on the same time last year. However, management reconfirmed its intention to pay a nominal dividend at the full-year. Buy.
Sales at Greencore (GNC) were up 0.5 per cent during the third quarter to £640m, and year to date have improved 14 per cent to £1.88bn. Growth in the third quarter was driven by the food to go business, where reported revenue increased by 10.7 per cent. The group is considering phasing out long life ready meals manufacturing at its Kiveton site and transfer volume to other parts of its ready meal network. Employee consultation is required, and if approved would happen around March next year. Shares were down 1 per cent in early trading. Sell.
Broadly speaking, revenues and the gross margin were unchanged from Taylor Wimpey’s (TW.) 2017 half-year, along with pre-exceptional earnings, with attention centring on a £30m set-aside to cover the replacement of flammable cladding in some of the group’s properties following the Grenfell Tower tragedy. The ultra-tight spread shows the shares are tightly held, hardly surprising given an implied dividend yield of 8.8 per cent. Buy.
Imperial Brands (IMB) will sell just over 13m ordinary shares in Madrid-listed Compañía de Distribución Integral Logista Holdings. The £235m in proceeds will be used to pay down some of Imperial Brands’ debt. Following the placing, the Imperial Brands will indirectly hold more than 66m Logista shares, representing approximately half of Logista's issued share capital. Shares in Imperial Brands were up nearly 1 per cent in early trading. Buy.
Agriculture business NWF Group (NWF) reported a 9.9 per cent increase in group revenue to £611m during the year to May, with sales growth across all three divisions reflecting increased activity and higher commodity prices. Management said the “record results” benefitted from “exceptional circumstances”. Pre-tax profit was up by a fifth to £10.2m while net debt more than halved thanks to strong cash conversion and continued working capital improvements. Shares were flat in early trading. Buy.
KEY STORIES:
Buoyed by its deal to acquire BHP’s US shale portfolio, first half results for BP (BP.) paint a picture of a company firing on all cylinders. Oil and gas production ticked up, three major projects came online, and the quarterly dividend was increased for the first time in four years. Strong earnings from its upstream and Rosneft divisions meant underlying replacement cost profit jumped four-fold to $2.8bn. Even net debt declined – by $0.7bn, to $39.3bn.
Who said resources services work was dead? Half-year results for Weir Group (WEIR) showed a 23 per cent jump in revenue at constant currency, with a 35 per cent leap in orders from the oil and gas division. There’s little sign that Weir has compromised on margin, either. Operating profits climbed 38 per cent by the same measure, meaning the margin was 170 basis points higher at 15.1 per cent (excluding exceptional items and intangibles).
Losing 226,000 customers might sound like a bad thing, but for Centrica (CNA) it represents a slowing in the rate of loss. Account holdings in the energy supply group’s consumer division were down 1 per cent overall, with household customer losses partially offset by growth in connected home and services. Business supply has also faced challenges, with customer losses though these too are shrinking. It does not look likw the group has succeeded in turning things around yet.
Standard Chartered (STAN) reported underlying pre-tax profits in line with consensus at $2.4bn during the first-half, up more than a fifth on the prior year. Impairments were around a half lower than the same time last year, although costs and income were weaker than expected, with the underlying cost-to-income ratio rising to 66.9 per cent, from 66 per cent. However, the return on equity was 6.7 per cent, up on 5.2 per cent last year, and against a medium-term target of 8 per cent.
Randgold Resources (RRS) is "seeking to restart mining and processing operations" at its Tongon mine in the Ivory Coast. Ongoing strikes - which Randgold claims break a government backed deal - and what the gold miner has referred to as "social issues" have hampered production for months. Half-year results are due next Thursday (9 August).
A combination of flat revenues, a steeper wage bill and an increased contingent consideration relating to acquisitions effectively halved reported profits for LSL Property Services (LSL) at the half year mark, with the underlying operating margin down 280-basis points to 7.6 per cent.
Oil and gas services firm Petrofac (PFC) is to sell a 49 per cent stake in its Mexican contracts to Anglo-French firm Perenco, for $200m. The group said it will likely book a $100m impairment associated with the transaction, when it completes in the fourth quarter of this year.
Fresnillo (FRES) shares were knocked when the Mexican precious metals miner unveiled its half year production figures. Financial figures, out today, reflect broader challenges. Costs rose considerably in the period, thanks to higher stripping charges at Herradura, while the bottom line was heavily impacted by changes in the peso-dollar exchange rate and the inflation rate on deferred taxes. Cash also fell 20 per cent, year-on-year to $709m.
Ahead of its interim results due next week, Glencore (GLEN) has unveiled its production headlines for the first half of 2018. The restart and ramp-up of the Katanga mine – source of much recent controversy and scrutiny – meant own-sourced copper output climbed 8 per cent, with cobalt up a whopping 31 per cent. Zinc, coal and ferrochrome production were in line with the first half of 2017, while its nickel mines jumped 21 per cent on new production from Koniambo.
Dixons Carphone (DC.) has said up to 10m of its customers have been affected by a recent data breach. The electricals group said an ongoing investigation into the hack had revealed that approximately 10m records containing personal data may have been accessed in 2017 - up from original estimates of just 1.2m. It’s thought that none of these records contained payment card or bank account details and there is no evidence of any fraud. All affected customers have been contacted.
Greggs (GRG) shares responded well to interim results, out this morning, which showed that rising demand for healthier ranges continues to drive growth. Although profits at the half-way stage fell by 7 per cent on the back of restructuring and investmentcosts, management said it expected underlying pre-tax profits would now report in line with last year by the year-end. In May, Greggs shares fell by almost a fifth after the group warned on full-year profits after a slowdown in sales following bad weather in March and April.
Shares in home improvement product supplier Travis Perkins (TPK) are down more than 11 per cent after the company reported a 5.8 per cent fall in adjusted operating profit to £179m during the first half, or an 11.5 per cent fall to £162m once you strip out the property profits. A “challenging UK DIY market” hurt sales and profitability in the Wickes brand. Significant cost reduction plans underway and should see benefits weighted towards the second half. The period was more positive for trade-focused businesses in general merchanting, plumbing and heating, contracts and toolstation.
OTHER COMPANY NEWS:
Premier Oil (PMO) has taken the decision to exercise the mandatory conversion options on its convertible bonds due 2022, retiring a further $28.8m of debt in the process. Disposals and other early conversions, together with a robust oil price, have helped the North Sea-focused driller bring its balance sheet back under control in 2018.
When most producers in the sector are on the up, Nostrum Oil & Gas (NOG) continues to languish. An operational update, out today, shows stubbornly high debt, a small decline in the cash position, and revenues of $190m in the six months to June, down on the $210m taken in the same period last year. And though chief executive Kai-Uwe Kessel has been “delighted” by recent drilling results, first half production after treatment was just 32,524boepd.
Shares in 4imprint (FOUR) were up 7 per cent this morning, after the marketer of promotional products reported 17 per cent revenue growth for the first half to $348m, all of which was organic. The total number of orders processed rose 17 per cent to 683,000, while new customer orders were up 13 per cent. As announced within the 2017 preliminary results, the group is investing in building awareness around its own 4imprint brand. In line with management’s expectations, this investment meant underlying operating profit was broadly flat year-on-year at $16.3m. Still, the early results of this brand marketing initiative have exceeded bosses’ expectations.
Are investors getting increasingly nervous about Just Eat’s (JE.) ability to maintain its market position? The online takeaway ordering market is becoming increasingly crowded, and Just Eat will be forced to up its game to remain ahead of the pack - a pack which now includes Uber after the taxi service decided to roll out its delivery service across the UK. Shares fell 4.5 per cent in response to interim figures, out today, which showed revenues up by a whopping 45 per cent, but pre-tax profits down by 3 per cent as the group absorbed costs associated with its acquisition of Hungryhouse.
We’re going to interpret the fall in Games Workshop (GAW) this morning as indicative of profit-taking, seeing as the stock has risen by 86 per cent over the last 12 months. Results were largely as expected, with sales up 39 per cent and profits up 94 per cent to £74.5m respectively. That was despite a slight contraction in margins as the business struggled momentarily to deal with the surge in demand combined with a higher number of trade sales. But the group faces a tougher first quarter now, given how well the company did this time last year. In fact, management has already said it expects sales to be 5 to 10 per cent lower year-on-year.
Shares in Sabre Insurance (SBRE) rose 3 per cent on its half-year results. Gross written premiums were broadly flat year-on-year at £109m, while the combined operating ratio – meaning claims and expenses as a percentage of premium income – improved to 68.6 per cent from 71.7 per cent. While an interim dividend of 7.2p has been declared, a solvency coverage ratio of 209 per cent (179 per cent post-dividend payment) – above its 140-160 per cent preferred range – means Sabre could opt to pay a special dividend in future. Management reckons the group is still “positioned to trade well” despite the broader market appearing to have entered a period of weaker pricing.
Thomas Cook Group (TCG) warned that full-year underlying operating profit would be at the lower end of market expectations after popularity of higher margin destinations like Turkey and Egypt was not enough to offset pressure on margins on Spanish holidays. Bookings for packaged holidays have slowed as customers put off making reservations to enjoy record temperatures at home. Still, bookings for summer are up 11 per cent overall thanks to growth in the group airline. During the third quarter revenue was up 10 per cent to £2.5bn while gross profit fell 3 per cent to £443m. Shares were up more than 4 per cent in early trading.
Paul Hewitt will step down from his role as non-executive director at Playtech (PTEC) from 31 July to join Provident Financial in the same role. Mr Hewitt will stand down as chair of the board's risk and compliance committee on the same date. Independent non-executive director Claire Milne will become take over his role on the board. Shares were flat in early trading.
