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News & Tips: Sirius Minerals, Mitchells & Butlers, Vp & more

Equities are flat following as reaction to the Fed's latest announcement is mixed
September 27, 2018

Shares in London were flat mid-morning as reaction to the latest interest rate hike in the US was mixed. Click here for The Trader Nicole Elliott's latest thoughts on the markets. 

IC TIP UPDATES:

Given the volume of post-period developments, half-year numbers for Sirius Minerals (SXX) are somewhat academic. In particular, the receipt of a $250m royalty funding this month has meant that Sirius could feasibly delay stage two financing up until the summer of 2019, at which point investors will hope to have secured off-take agreements with European polyhalite distributors. Buy.

Mitchell & Butlers (MAB) reported a 2.2 per cent increase in like-for-like sales during the eight weeks to 22nd September, with a more “normalised” split between drink and food sales after the hot summer weather and World Cup had previously proved popular for beverages. But cost headwinds remain largely unchanged are expected to lead to margins being lower than last year. Total sales are up just 0.5 per cent year-to-date impacted by the disposals last year. Shares were up 2 per cent in early trading. Sell.

VP (VP.) has begun to see a recovery in its oil and gas related activities. The group reported a “modest upturn” in a trading statement this morning. The group is on track to deliver results in line with expectations for the full year, but has been hed back in recent times by the low oil price. Naturally, optimism has returned as the oil price has recovered throughout the year, so the announcement is hardly a surprise and the shares are unmoved. Buy.

Results from veterinary practice operator CVS (CVSG) prompted a downward movement in the share price this morning after adjusted cash profits of £48.9m fell slightly short of broker Peel Hunt’s estimate. The impact of heavy snow earlier this year, combined with higher costs, offset what was otherwise a strong top-line performance, with like-for-like sales rising nearly 5 per cent. The underperformance of recent acquisitions has also been disappointing, but bosses and analysts seem confident they can get these issues under control within the current financial year. Our recommendation is under review.

KEY STORIES:

IG Group (IGG) chief executive Peter Heatherington will step-down with immediate effect, to be replaced by chief financial officer Paul Mainwaring in the interim. Shares in the spread-betting specialist fell 9 per cent in early trading.

Saga (SAGA) reported a 4 per cent dip in underlying pre-tax profits during the first-half, due to high customer acquisition costs. That paid off with motor and home customers rising 19 per cent since the year-end, back to levels seen during the first half of last year. Underlying profits at the travel business were flat, although over 64 per cent of the sales target for the first 19 cruises starting June 2019 have been made.

Despite the sustained period of hot weather in Europe this year, Tui (TUI) reported that customer numbers had increased in all its major markets. Demand has returned for Turkey and North Africa after terror attacks had previously put travellers off, while demand for holidays to Spain is “normalising” after years of high demand. Management continue to expect at least 10 per cent growth in underlying cash profits during FY2018, and trading for future seasons is in line with expectations. Shares were up 2 per cent in early trading.

Shares in Impellam (IPEL) crashed 20 per cent this morning after the group warned profits for 2018 would be lower than the prior year. The group has continued to struggle as a result of its reliance on the NHS, where pay caps and reduced agency spend has quelled the typical September uplift in demand. What’s more, the group’s UK specialist staffing brands with exposure to the UK retail sector have seen reduced volumes, again missing the expected seasonal uplift. Add Brexit uncertainty and foreign exchange headaches to the mix, and the group is expecting reduced cash profits. The profit warning this morning was closely followed by the announcement that Alison Wilford, the group’s finance director, was leaving at the end of October to take up a position with a private company. Sell.

OTHER COMPANY NEWS:

Pavel Maslovskiy, who returned as chief executive of Petropavlovsk (POG) after a second boardroom overhaul in as many years, is already “making a vital difference”. That’s according to non-executive chairman Sir Roderic Lyne, who in his summary of the Russian gold miner’s interim numbers said that Dr Maslovskiy was “restoring the confidence of middle management and the workforce” and instituting “remediation measures and an operational optimisation programme”. A turnaround can’t come soon enough. In the six months to June, gold sales dropped 12 per cent, underlying cash profits nearly halved, and all-in sustaining costs leapt from $965 to $1,138 an ounce.

Shares in Equiniti (EQN) have begun to climb their way out of the hole they fell into following the full year results in March. The group saw a brief drop in the share price following the release of a bearish analyst note in early July, but strong half-years results put wind back in its sails. The shares are up another 2 per cent this morning after the group announced an extension of its MyCSP contract with the Cabinet Office. MyCSP is a mutual joint venture partnership between the group and the Cabinet Office that administers the Civil Service Pension Scheme. The contract has been extended out until December 2021 and Equiniti has also reached an agreement with the Cabinet Office to buy out its 24 per cent stake in the partnership for £8m. An employee benefit trust still owns a 25 per cent stake in the group. 

Gambling company 888 Holdings (888) reported a 1 per cent increase in sales to $273m (£208m) during the first half, with adjusted cash profits up 10 per cent to $52.4m. Analysts said this was in line with expectations, but that good progress made in regulated markets outside of the UK, like Spain and Italy, had been held back by a challenging UK market. So far in the second half group sales are down 4 per cent year-on-year, but strip out the UK and revenue is up 6 per cent. Shares fell 8 per cent in early trading.