IC TIP UPDATES:
Supermarket chain Tesco (TSCO) has confirmed its strategic alliance with Carrefour. First revealed in early July, the grocer has confirmed it will work with the French retail giant to negotiate with global suppliers, and make joint purchasing decisions on branded products, and goods ‘not for resale’. The arrangement will be governed by a three-year framework, and turn operational in October this year. Buy.
Wizz Air (WIZZ) increased capacity by more than a fifth during July to more than 3.6m seats. It carried 3.5m passengers, a 22.9 per cent increase on July the year before, with load factor up 0.8 percentage points to 95.4 per cent. Over the rolling 12 months capacity is up 21.8 per cent to 34.6m seats, carrying 23.1 per cent more passengers at 31.7m. Shares were flat in early trading. Buy.
Half-year revenues for SDL (SDL) rose 1.3 per cent, or 2.8 per cent on a continuing basis, to £143m. Meanwhile, the gross margin improved from 50.5 per cent to 52.9 per cent on a continuing basis, buoyed by an improvement within the dominant language services business. Reported pre-tax profits were down at £7.8m, from £20.9m – but the previous year’s figure included the profit on disposal of discontinued businesses in 2017. Continuing pre-tax profits were up 30 per cent. Management expects to meet its full-year expectations, and the recent Donnelley Language Services acquisition should enhance earnings in 2019. Buy.
HSBC (HSBA) continued to count the cost of growth initiatives, reporting an 8 per cent rise in adjusted operating expenses during the first half. That meant underlying pre-tax profits dipped 2 per cent on the same time last year, despite a rise by the same proportion in adjusted income. The return on equity also declined slightly to 8.7 per cent, from 8.8 per cent a year ago, shy of chief executive John Flint’s 11 per cent target. As expected, no further share buybacks were announced. Buy.
KEY STORIES:
Floor covering maker Victoria (VCP) has agreed to acquire European tile manufacturer Cerámica Saloni for €96.7m (£86.2m). It's planning to raise around £60.5m of this through a placing of 7.3m shares at 827p each. Chairman Geoff Wilding said the deal, expected to complete tomorrow, should be “materially earnings accretive” even before synergies are found. Shares fell 2 per cent in early trading.
BHP Billiton (BLT) is facing the very real prospect of strike action at its Escondida mine in Chile, for the second year in a row. Last week, union members at the copper mine voted overwhelmingly to reject the latest wage offer from the commodities giant, and has given BHP until today to improve its offer.
Though cash and earnings figures fell short of expectations in the first half of 2018, the major headline for oil and gas firm Kosmos Energy (KOS) today is its $1.23bn acquisition of Gulf of Mexico-firm Deep Gulf Energy. The deal, which adds reserves and around 25,000 barrels of oil-equivalent daily production, will allow Kosmos to start paying dividends from the start of 2019, the company said.
Shares in IWG (IWG) have plummeted more than a fifth this morning after it ended discussions with its three private equity suitors. The board told Starwood, Terra Firma and TDR that following months of discussions it had concluded that none of them was capable of offering a workable transaction at a recommendable price. The group has also released its half year numbers today, showing a 29 per cent drop in operating profits at constant currency due to heavy investment in growth and talent.
Spire’s (SPI) shares crashed in early trading after management cut full-year guidance. The private hospital group reported slower than expected growth in its self-pay division, while insurance and NHS outsourcing continue to struggle.
OTHER COMPANY NEWS:
easyJet (EZJ) carried 4.5 per cent more passengers during July than the same time the year before at 8.5m, increasing load factor by 0.1 percentage points to 96.9 per cent. Over the rolling 12 months passenger numbers are up 6.2 per cent to 83.6m with load factor 1.4 percentage points higher at 93.6 per cent. The airline “experienced a number of cancellations” during July due to air traffic controller strikes, runway closure at Gatwick, and bad weather. Shares were flat in early trading.
