London shares are up a little in the wake of a serious rebound in US equities overnight. Click here for the latest thoughts of the Trader Nicole Elliott.
IC TIP UPDATES:
Full year results from online fashion retailer Asos (ASC) have been dubbed “outstanding” by City analysts this morning, after the group reported a 26 per cent rise in sales, and a 28 per cent improvement in pre-tax profits to £102m. Confidence in the shares was knocked back in July after the group admitted annual revenues would report a growth rate around 25 per cent - the lower end of the 25 to 30 per cent guided range. But this morning, the 13 per cent jump in the stock suggest investors were more than satisfied with a 130 basis point improvement in retail gross margins, as well as the group’s continued £43m net cash position. We remain buyers.
Demand for warehouse space from online retailers continues to outstrip supply, leaving Segro (SGRO) well placed with an 891,000 sqm development pipeline, of which nearly three-quarters has already been pre-let. Rental income in the three months to 16 October rose by £12.6m, with total contracted rent for the first nine months up from £36.4m a year earlier to £52m. Buy
Trading in Berkeley Energia’s (BKY) Australian-listed shares has been halted, and the London shares are off 38 per cent this morning (and off by nearly 60 per cent since the beginning of the month). The drop follows a Reuters report which suggested the Spanish government has decided not to deliver the permits to the Salamanca uranium mine. The story quoted an unnamed government source who said Spain’s new government “will wait for the ongoing proceedings to go through but it will say no”. Another source is reported to have said Berkeley is “living in a parallel universe” if it thinks the mine will become a reality, which has prompted the company to seek “immediate clarification”. Under review.
Precious metals prices have made 2018 a tricky one for Hochschild Mining (HOC), though the Central and South America-based extractor continues to hold its own operationally. Today, the group has boosted its full-year production forecast, and lowered its all-in sustaining cost base (to a still-high range of $940-970 per ounce). We remain buyers.
First Derivatives (FDP) has signed a material original-equipment-manufacturer (OEM) agreement with BISTel, a South Korea-based provider of smart manufacturing solutions. First Derivatives’ technology ‘Kx’ will be used to store and analyse significant volumes of sensor data within BISTel’s real-time, adaptive applications for smart manufacturing. Deployments are expected in the first half of 2019. The OEM agreement was achieved after multiple proofs of concept. While First Derivatives’ shares were up 6 per cent this morning, they have fallen in recent weeks. This came after bearish research earlier this month. Our recommendation is under review.
KEY STORIES:
Shares in Crest Nicholson (CRST) fell seven per cent after the housebuilder warned that sales in some areas were not as strong as expected, and that profits for the year to October 2018 will be between £170m and £190m, against previous forecasts of over £200m. Much of the problem reflects the company’s exposure to the high end of the market where sales have slowed significantly.
BHP Billiton (BLT) has downgraded its full-year output guidance for copper by 3 per cent to between 1,620 and 1,705kt, owing to lower volumes expected from outages at the Spence and Olympic Dam mines. The commodities giant has left guidance for iron ore, petroleum and coal unchanged, and has made no changes to unit cost guidance to the year to June 2019. A third quarter operational review, out this morning, suggests the sale of the US onshore assets to BP should complete by the end of the month.
Shares in Flybe (FLYB) fell 35 per cent in early trading after the airline warned that it expects full year adjusted profits to be lower than market expectations due to poor trading in the second half. The company stated that consumer demands for domestic flights and those to continental Europe has weakened in the second half, hurt further by higher fuel prices and weak sterling. Visibility on fourth quarter revenue is limited, but at this point management expect a full-year loss before tax of £12m, compared to a £19.2m loss last year, including the £10m benefit of an onerous lease provision release.
OTHER COMPANY NEWS:
accesso Technology (ACSO) has announced a strategic partnership with Groupon to use its ‘Ingresso’ distribution platform to give Groupon customers instant access to tickets across Ingresso’s supplier network. The deal will also allow current accesso clients to make their tickets available on Groupon – which has 49.5m global active customers. Shares in accesso were up 3.5 per cent this morning.
Morocco-based oil and gas explorer Sound Energy (SOU) has started drilling the first of three wells in the group’s Greater Tendrara permit. Investors should have an idea of the potential of the Triassic and the underlying Paleozoic rocks within 45 days.
Softcat (SCT) saw revenues exceed £1bn for the first time in the twelve months to July 2018, up 30 per cent. Pre-tax profits rose 35 per cent to £68m, and net cash sat at £72.8m after the payment of £45.3m in dividends during the year. The full-year dividend has been hiked to 8.8p from 6.1p, with a special of 15.1p against 13.5p a year earlier. The group said it had benefited from exceptional market conditions in 2018. Despite current political and economic uncertainty – and “notwithstanding tough comparative figures” – it is confident of achieving further profitable growth this financial year. The shares were down 9 per cent in morning trading.
