Both the Turkish lira and Turkey's sovereign bond market are trading at record levels, says The Trader Nicole Elliott in this morning's Market Outlook. Click here for the latest on this and the markets.
IC TIP UPDATES:
Shares in Secure Trust Bank (STB) were up 4 per cent in early morning trading after the challenger bank revealed that repositioning the business towards lower risk lending had reduced impairment losses during the first half. The impairment ratio improved by 20 per cent, while the cost of risk declined to 1.9 per cent, compared with the 2.5 per cent the same time the previous year. Net lending also grew more than a quarter to £1.8bn. Buy.
Prudential (PRU) reported a 4 per cent decline in gross written premiums during the first-half, which together with substantially lower investment returns, resulted in a drop in pre-tax profits of almost a quarter. However, on an embedded value basis - which takes into account longer-term investment returns - operating profits were up almost a fifth on the prior year at £3.4bn. The core Asia businesses generated a 7 per cent rise in EV operating profits, while the US reported a 13 per cent increase. Buy.
KEY STORIES:
Shares in French grocery retailer Casino (EPA:CO) have fallen to a two-decade low after Bernstein, a New York-based brokerage, downgraded the stock due to concerns over how the business had accounted for transactions with related parties, specifically French franchisees. Analysts are concerned that this, combined with high levels of debt and limited cash flow could affect the company’s valuation going forward. The group signed a deal with online grocery group Ocado (OCDO) late last year to build robotic warehouses and facilitate digital growth. Ocado shares also fell in early trading after the concerns over Casino emerged.
All else considered (and the nature of a subpoena from the US Department of Justice really is worth considering), commodities giant Glencore (GLEN) put in a solid performance in the first half of 2018. Net income picked up 13 per cent in the period, thanks to a “volatile but favourable trading and commodity price environment”. The performance was reflected in the cash flow statement, which in turn allowed net debt to reduce 16 per cent to $9bn, which CEO Ivan Glasenberg described as “the best position since our IPO”.
The US government has granted BP (BP.) a waiver for its development of Azerbaijan's offshore Shah Deniz fields. The project, in which Iran’s NICO holds a stake, had the potential to trigger economic sanctions from Washington. However, the Trump administration provided no clarity on BP’s stake in the Rhum natural gas field in the North Sea, which is half-owned by a subsidiary of the Iranian, and the oil major is in the process of selling to Serica Energy (SQZ). That, as we argue here, puts investors in the independent in an unwelcome position.
OTHER COMPANY NEWS:
Revenues for retail stockbroker Share (SHRE) rose 15 per cent to £10.2m for the half-year to June. Meanwhile, costs climbed by £1.6m (18 per cent), largely due to regulatory changes and higher transactional costs. Mitigating actions are expected to come into effect in the second half. Pre-tax losses came in at £275,000, down from a profit of £75,000. Still, Share’s assets under administration rose 18 per cent to £5bn. It also acquired new customer accounts, including an agreement with the Special Administrator of Beaufort Securities to acquire around 15,000 customer accounts. The shares were down 4 per cent this morning.
Shares in Paddy Power Betfair (PPB) fell 3 per cent in early trading after the bookie said it now expects full-year cash profits are now expected to be between £460m and £480m, compared with previous guidance of between £475m and £490m. Management said the introduction of additional taxes in Australia and losses from the recently acquired FanDuel fantasy sports betting business. Group sales during the first half were up 7 per cent to £867m, though this was 3 per cent below consensus. This was mainly driven by growth in the second quarter after the first quarter was flat.
Flooring products manufacturer Victoria (VCP) has completed the acquisition of European tile maker Cerámica Saloni, after it originally had announced the deal on Monday. The €96.7m (£86.2m) deal was funded in part through a placing of more than 7.3m shares at 827p each, raising £60.5m. Management expect to find “significant operational synergies” as a result of the deal.
Analysts at Numis have dubbed interim results from Stock Spirits (STCK) a “credible performance” after revenue growth of 5.3 per cent and EPS growth of 9.1 per cent came in ahead of expectations. Conditions remain challenging across many of the group’s core markets, most notably Poland, where the group managed to grow sales by 4 per cent at constant currency despite an intensely competitive pricing environment. Crucially, this has helped management and analysts maintain full-year forecasts.
