Concerns over Italy's economic stability coupled with weaker manufacturing data from Europe and the ongoing political ructions over Brexit in the UK have prompted traders to take profits this morning. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Yesterday afternoon Royal Mail (RMG) issued a profit warning after productivity improvements of 0.1 per cent during the first half now leaves the 3 per cent full-year target well out of reach. Management have now reduced the target for cost savings to £100m for the year, down from £230m previously. Operating profit before transformation costs is now expected to in the range of £500m to £550m. The volume of letters sent fell by 7 per cent during the first half, but medium term guidance of between 4 per cent and 6 per cent decline each year remains. Shares fell around 15 per cent after the announcement yesterday, and are down a further 8 per cent this morning. Sell.
Shares in Interserve (IRV) are up 2 per cent this morning after it announced the sale of its access and hard services business. Enigma Industrial Services will buy the company for £3.6m, with the potential for a further £1m subject to certain financing targets being met, however, the business was lossmaking and its sale will require IRV to take a loss on disposal of £8.4m. The deal marks Interserve’s departure from the industrial contracting sector. Sell.
The Massachusetts Department of Public Utilities has issued its rate filing for National Grid’s (NG.) gas business in the state. The rates became effective from yesterday, and allow for a 9.5 per cent return on equity on an equity ratio of 53 per cent. The allowed annual capital investment is $413m. This is below the original levels requested by National Grid, but is broadly in line with analyst expectations. Buy.
Wizz Air (WIZZ) carried 17.5 per cent more passengers during September at 3.2m on the back of a 16 per cent increase in capacity to 3.4m seats, bringing load factor up 1.2 percentage points to 94.1 per cent. Over the rolling 12 month period capacity has increased by 20.9 per cent to 35.6m seats with passenger numbers up 21.8 per cent to 32.8m. Expansion during September focused on routes to and from Poland. Shares were flat in early trading. Buy.
KEY STORIES:
The drama surrounding the recent collapse of House of Fraser keeps coming. After market close last night, Sports Direct (SPD) boss Mike Ashley - who bought the failing department store out of administration - announced a wholesale sacking of the chain’s management and board of directors. The sackings included House of Fraser chief executive Alex Williamson, who had only been in the role for little more than a year.
OTHER COMPANY NEWS:
Passenger numbers at Ryanair (RYA) increased by 11 per cent to 13.1m during September, with load factor flat at 97 per cent. This includes the recent partnership with Lauda, which is not reflected in last year’s numbers. Strip out this contribution and traffic increased by 6 per cent to 12.6m. This is despite disruption from employee strikes, which saw 400 flights cancelled during the month. Shares fell more than 2 per cent in early trading.
Shares in MP Evans (MPE) are up nearly 4 per cent in early trading after the palm oil producer announced a £1m share buyback programme. The Board believes that the current share price substantially undervalues the Group's assets, the performance of the business to date and its future prospects. The programme with last up to three months.
Revolution Bars (RBG) reported a 8.7 per cent increase in sales to £141.9m during the year to June, but a decline of 0.6 per cent on a like-for-like basis despite growth of 1.9 per cent during the first half. Management said the company was impacted by corporate activity, management change, extreme weather, and the World Cup during the second half. The six new sites opened contributed to the overall sales growth, and the new locations are said to be achieving “good overall returns”. Around £11.1m of exceptional costs pushed the company into an operating loss of £3m.
