Hopes for a positive outcome from trade talks between the US and China are galvanising positive sentiment on London's indices. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Liontrust Asset Management (LIO) gained net inflows of £471m during the final quarter of 2018, taking the total over a nine month period to £1.19bn. However, inflows in the third quarter were offset by £1.23bn in negative market movements, taking assets under management at the end of December to £11.2bn, down 7 per cent on the end of September. Nevertheless, the shares were up 4 per cent in early trading, thanks to continued momentum in winning new business, which keeps us as buyers.
Despite a 17 per cent rise in fourth quarter output, Centamin (CEY) ended 2018 with full-year production of 472,418 ounces of gold. That constitutes a 13 per cent reduction on 2017, though the recent recovery in output to 45,000 ounces a month suggests this year should mark a return to operational capacity. We are buyers.
Results from Shoe Zone (SHOE) prompted a share price jump this morning, after the group revealed a 91.2 per cent increase in the total dividend to 19.5p, including a special dividend worth 8p a share. It followed a steady 1.8 per cent increase in group sales to £161m and an 18.4 per cent rise in pre-tax profits to £11.3m. The group also finished up the year with cash balances of £15.7m. The transition into what the group call ‘big box’ retailing continues, with 19 of these sites at the period end, and another 20 slated for the coming year. We remain buyers.
An operational update from Central Asia Metals (CAML), out this morning, reveals several things: the miner hit guidance for each of its metals in 2018, output from Kounrad is expected to be slightly lower this year, and exploration activities at Shuak have failed to establish a project "sufficiently material in terms of scale...to develop". However, the group says that after screening 22 "business development opportunities", it is actively "reviewing two potential base metals" projects. Buy.
KEY STORIES:
A brief flip through the headlines this morning gives one the impression that J Sainsbury (SBRY) was the laggard of Christmas trading. The market doesn’t seem so sure, sending the shares up modestly in early trading. Chief executive Mike Coupe admits Christmas “came late” but that he was pleased with the 0.4 per cent improvement in grocery sales logged during the third quarter. Overall, total retail sales fell 0.4 per cent, with like-for-like sales down 1.1 per cent. The biggest culprit appears to be general merchandise, which registered a 2.3 per cent sales crunch, even though bosses insisted that the segment outperformed a difficult market.
Shares in Taylor Wimpey (TW.) rose nearly six per cent after the housebuilder reported that completions in 2018 were up three per cent at 14,947. Crucially, it reiterated its stance for the coming year that volumes will remain stable despite the political and economic uncertainty. The group finished 2018 with net cash of £644m, while the implied dividend yield is a sector leading 13.1 per cent.
Shares in Serco (SRP) are up 4 per cent this morning, after the group announced its biggest ever contract win, with an estimated value of £1.9bn over ten years subject to service user volumes and indexation adjustments. The outsourcer will carry out asylum accommodation and support services for the North West, Midland and East of England. 2020 will be the first full financial year of the contract. The announcement has led to analyst upgrades, with Shore Capital remarking the win “highlights a return to free cash”.
Allegations of misconduct against Ted Baker (TED) founder and chief executive Ray Kelvin at the end of last year hasn’t hurt festive trading at the clothing chain. Retail sales rose by 12.2 per cent over the five weeks ended 5 January 2019, with e-commerce sales registering an 18.7 per cent improvement. Online sales now represent more than a quarter of total retail sales. Gross margins also held up despite the promotional backdrop, so full-year results are expected to report in line with expectations.
DNO’s bid for Faroe Petroleum (FPM) has gone unconditional, after the Norwegian group passed a 50 per cent threshhold for acceptances following an increased and final all-cash offer of 160p. DNO had raised the bid 5.3 per cent, in an effort to close out its transaction by 23 January and to "focus now on putting Faroe on a firm operations and commercial footing", after thinking "long and hard about the situation".
Shares in Softcat (SCT) were up nearly a fifth this morning after the group said in a brief statement that trading since its last update in November has “continued to be strong”. As the provider of IT infrastructure products and services approaches the end of its first half (31 January), it is now “materially ahead of where we expected to be at this stage of the year”.
Logistics company Wincanton (WIN) announced a deal with The Weetabix Food Company to provide transport, warehousing and co-packing services from February 2019. The new partnership is made up of two separate, five-year contracts. Wincanton will look after the operation of four warehouses where goods are stored and co-packed for retail promotion, and will also provide a nationwide transport operation for the delivery, management and transfer of finished goods and stock. Shares were up 3 per cent in early trading.
Dutch authorities visited Renewi’s (RWI) ATM soil and wastewater treatment site in Moerdijk yesterday, following their decision to carry out further testing late last year. Management believes it has treated the soil in line with regulations and complied with its environmental permits, but until regulators agree the facility will continue to run at 30 per cent capacity. Sell.
OTHER COMPANY NEWS:
A first quarter trading update from Topps Tiles (TPT) failed to move the dial on the share price this morning after the group revealed a 1.4 per cent decline in like-for-like sales over the period. But the company is probably grateful for small mercies. After all, against a terrible retail backdrop this wasn’t an awful performance, while analysts at Liberum made only small downgrades to their numbers, arguing that there is, in fact, an “improving” like-for-like trend in Topps’ sales.
Majestic Wine (WINE) has revealed a 6.8 per cent improvement in Christmas sales against a difficult retail backdrop. The booze retailer - which admitted to stock-piling ahead of the UK’s upcoming exit from the European Union last November - said improved gross margins were also the result of good trading at Naked Wines, as well as a “solid” performance from its Majestic retail business. Unsurprisingly, Christmas is a peak trading period for the company, with close to a third of annual sales collected.
The high street baker only upgraded profit guidance at the end of November, but Greggs’ (GRG) shares rose steadily again this morning after revealing a 7.2 per cent rise in total sales during the fourth quarter. The group’s new vegan sausage roll is causing quite a stir, but shop sales are going strong, up 2.9 per cent following 149 openings - and 50 closures - during 2018. Now, adjusted pre-tax profits are expected to report around at least £88m, compared to previously upgraded expectations of £86m.
After a fairly disastrous 2018, Mothercare (MTC) shares found momentary relief this morning after revealed an “improved trend” in international sales during the 13 week period ended 5 January 2019. True, overseas revenues still fell 1.1 per cent, but that paled in comparison to an 11.4 per cent slump in UK like-for-like sales during the quarter. The domestic performance reflected high levels of discounting, as well as a difficult consumer backdrop. Most worryingly, however, was a sluggish online performance in the UK, which bosses said was impacted by lower online footfall and lower in-store iPad sales.
Soft drinks company Nichols (NICL) announced a 6.9 per cent increase in sales to £142m during 2018, driven by a 12.6 per cent increase in revenue in the UK to £115m. Management said the company’s brand Vimto was a key driver of this growth as it outperformed the UK soft drinks category and gained market share. Full year profit is expected to be ahead of last year and at least in line with current market expectations.
Palm oil producer MP Evans (MPE) produced 27 per cent more crops during 2018 at 829,100 fresh tonnes of fresh fruit bunches. This was driven primarily by own crops and smallholder crops, while the amount of outside crop declined. Production of crude palm oil was up by a quarter to 192,500 tonnes while palm kernel production increased by nearly a third to 43,500 tonnes.
