Equities in the UK are down mid-morning as news on wage growth raised fears of inflationary pressures creeping into the economy. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
IC tip of the year JD Sports (JD.) has beaten expectations again this morning with a strong set of interim numbers. The retailer not only reported strong sales and margin growth across Europe, but there are signs of a strong start in the US too. Good underlying trading into the second half has prompted further upgrades from broker Peel Hunt too, reflecting good online growth and ongoing potential overseas. We remain buyers.
“Let me re-iterate: the company’s on plan” was the verdict of Cairn Energy (CNE) chief executive Simon Thomson this morning, though the market seems to have taken a different view. Shares in the FTSE 250 independent are down 6 per cent in early trading, after production from Catcher and Kraken were constrained, and an operating cash outflow at both developments (along with SNE and Nova) caused group cash to drop to just $75m. Under review.
By contrast, the reaction to half year results from Diversified Gas & Oil (DGOC), Aim’s largest hydrocarbon producer (by volume), has been more positive. Though obscured by the timing of the EQT Corporation acquisition, production has stepped up materially – from a first half average of 19.3kboepd (thousand barrels of oil-equivalent per day) to 27kboepd by June and 60kboepd now. And for those who have bought into DGO’s income case, the 62 per cent hike in the second quarter dividend – from 1.73¢ to 2.8¢ per share – is another source of reassurance. Under review.
Shares in TP Group (TPG) were up around 5 per cent this morning on the back of its half-year results to June. Revenues rose 52 per cent to £16m, while pre-tax losses narrowed from £0.96m to £0.8m. And the specialist engineer’s order intake climbed 8 per cent to £29.5m, while its closing order book was up 31 per cent year-on-year at £56.5m. The company says it is on track to meet full-year market expectations. Buy.
Unilever (ULVR) has published its shareholder prospectus containing details about its plans to move its headquarters to Rotterdam. The consumer goods giant plans to keep its London listing, but it’s unlikely that it will remain in the FTSE 100 index. Some fund managers have expressed concerns about the move, as it could affect whether they can still hold Unilever as part of their mandate. Shareholders will vote on the proposed move in October. Shares were flat in early trading. Buy.
Hilton Food Group (HFG) announced that both sales and operating profit were up by a quarter to £864m and £23.6m, respectively, during the six months to July. Management said the increase in turnover was driven by volume growth and higher prices charged for fish. The acquisition of seafood business Seachill has completed and has “delivered on expectations”. The food packaging company has taken full operational control of its Australian joint venture facilities since July. Shares were up more than 1 per cent in early trading. Buy.
Domino’s Pizza franchiser DP Eurasia (DPEU) reported a 28 per cent increase in group sales to TRY510m (£60.5m) during the six months to June. This was driven mainly by growth in Russia, where sales were up 68.8 per cent to TRY153m, or 31.3 per cent on a like-for-like basis. The group opened 79new stores during the period, bringing the total to 672. The reported period does not include the sharp devaluation in the Turkish Lira in recent months. Shares were up 5 per cent in early trading, but we’re concerned about the impact of the weak Lira in future updates. Sell.
Shares in Ashtead (AHT) are up 3 per cent this morning after the group announced results ahead of expectations in the first quarter of the year. Rental revenue growth was 19 per cent, and margins in Canada recovered from a one-off charge in the fourth quarter of last year. Analyst Jefferies has upgraded forward earnings expectations. Buy.
KEY STORIES:
Nucleus Financial (NUC) reported £726m in net inflows during the first-half, 15 per cent down on the same time last year, which management attributed to regulatory-induced circumspection by advisors and more volatile equity markets. Nevertheless, assets under management rose 16 per cent to £14.3bn, pushing up revenue 11 per cent to £21.6m. However, management expects softer inflows to continue during the second-half.
Increased operating expenses - including those related to the acquisition of Luxembourg Investment Solutions - meant operating profit declined by 12 per cent at Sanne (SNN) during the first-half. However, a five month contribution from that business meant revenue was up almost a fifth, while the asset management advisory gained annualised new client fees of £11.5m.
OTHER COMPANY NEWS:
De Beers, the diamond giant majority owned by Anglo American (AAL), took $505m in its seventh sales cycle of the year. The figure is down slightly both year-on-year, and on De Beers’ most recent cycle, although Anglo American notes that the sales figure is provisional.
Revolution Bars (RBG) stated that it is in “very preliminary dialogue” with Deltic over a possible acquisition of the nightclub operator. Last year the two companies were in talks over a possible merger, but this ultimately fell through. Shares were up 2 per cent in early trading.
Shares in Inspired Energy (INSE) are up 2 per cent this morning following its acquisition of Professional Cost Management Group for up to £700,000. The deal will add cost recovery services to the group’s offering, helping clients to recover bill overpayments. Management expects to see an impact on earnings in 2020.
