Shares in London's large and mid caps are selling off in morning trading. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
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Shares in AA (AA) closed down a little over 4 per cent yesterday after it was announced that chief financial officer (CFO), Martin Clarke, had resigned with immediate effect after nearly five years of service. He unveiled a strategy to “reinvigorate the AA” just last year, spearheading major refinancing to address the group’s £2.7bn net debt. Mark Strickland, has been appointed interim CFO effective 30 April as the Board seeks a permanent successor. This unexpected departure only adds to the group’s woes after revealing disappointing full year results earlier this month (including a dividend cut). We remain sellers.
Countrywide (CWD) expects adjusted cash profits to be down by around £5m during the first half compared with the prior year, at the upper-end of previous guidance for a decline of between £3-£5m. Brexit uncertainty continued to weigh on consumer confidence during the first quarter, with total income of £140m, behind £145m the same time last year. However, full-year adjusted cash profits are expected to be in line with management expectations. Sell.
As expected, Sirius Minerals (SXX) has launched a fundraising to cover development costs for its potash mine in Yorkshire. A placing and open offer has been initiated to raise gross proceeds of around $400m at a price between 15p and 18p per share. In addition, Sirius is to offer guaranteed convertible bonds with an aggregate principal amount of approximately $644m, of which $244m will be put towards buying an equivalent amount of the company's existing 8.5 per cent guaranteed convertible bonds due 2023. There is also an issue of senior secured guaranteed bonds in a gross amount of $500m. And Sirius has secured a revolving credit facility with a maximum commitment of $2.5 billion, which will reduce as further senior secured guaranteed bonds are issued after the initial bonds. Under review.
Greene King (GNK) shares fell as much as 6 per cent in morning trading, despite a year-end trading update that revealed record like-for-like local pub sales growth of 4.6 per cent. Easter like-for-like sales were up 4.6 per cent against last year’s period, while Chef & Brewer saw especially strong sales growth of 15.3 per cent. Like-for-like profits in pub partners were down 1.4 per cent, however, while own-brewed beer volumes fell 3.4 per cent against a UK ale market down 4.2 per cent. Greene King forecasts adjusted pre-tax profits sitting between £244m-£247m, ahead of Peel Hunt estimates of £240.5m and consensus forecasts of £243.7m. The pub group has also made progress with its debt refinancing plan, and by year-end it had paid £393m, or 51 per cent of the debenture for its acquisition of Spirit. Buy.
Shares in Whitbread (WTB) were down more than 3 per cent in early trading after the group announced weaker than expected UK demand for FY2019, continuing into the new financial year. Like-for-like UK accommodation sales declined by 0.6 percent and revenue per available room fell by 1.7 per cent. Group revenue did increase by 2.1 per cent to £2.0bn but disposal costs relating to the sale of Costa saw statutory pre-tax profit plummet by 39.1 per cent to £260m. The group is now a “focused hotel business”, growing its UK network to over 76,000 rooms and targeting further expansion in Germany where increased investment is expected to widen losses to £12m for FY2020 (from £8m). Recommendation under review.
Jupiter Fund Management’s (JUP) first quarter saw another £482m of net outflows, though this was partly offset by a £1.87bn positive swing in market movements. The largest source of outflows were mutual funds, though £0.5bn related to a client transferring to a segregated mandate. Sell.
Shares in redemption product provider Park Group (PARK) are down 9 per cent this morning, after a trading update flagged a deferral of profit from the card business. This will result in reported pre-tax profits marginally below consensus forecasts of £12.9m for the year to March 2019, while higher costs involved in rolling out new initiatives will likely dent profitability “in the current year before growth resumes thereafter”. Under review.
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Wealth management giant St James's Place (STJ) saw a £2.18bn of net inflows in the first quarter of 2019, equivalent to 2.3 per cent of funds under management, or 9.1 per cent on an annualised basis. Strong investment returns also lifted funds under management by 8.3 per cent to £103.5bn, though chief executive Andrew Croft inevitably flagged the “current political and macro-economic uncertainty” and its capacity to “impact investor sentiment”.
Standard Chartered (STAN) has received approval to begin a $1bn buyback of its shares, in a surprise sign of management confidence in the bank’s outlook. The announcement accompanied a strong set of first quarter results, which included a 10 per cent rise in underlying pre-tax profit to $1.4bn, a “further and final charge of $186m” which resolves all “material legacy conduct and control issues”, a 5 per cent increase in interest-earning assets, and an uptick in the statutory return on tangible equity.
OTHER COMPANY NEWS:
Focusrite (TUNE) shares were flat following the announcement of the audio equipment manufacturer’s half year results, which disclosed a 22.6 per cent rise in pre-tax profits on the prior comparable period and an improvement in its gross margin, in spite of the impact of US tariffs. Its Novation segment, which is dedicated to music creation, contracted 13.9 per cent after the decline of its Launchkey offering. Focusrite has progressed with its product range, introducing two new products and introducing five software updates, reflecting its solid annual research and development spend of around 6 per cent of revenue.
A DS Smith (SMDS) trading update forecasts improved gross margins for the second half of the packaging group’s financial year to April 2019, as all regions have achieved growth with particular strength in the UK, Italy and Poland. Progress has, however, been somewhat offset by weakness in export-led markets, particularly in Germany. Operating cashflow generation is nevertheless expected to be stronger than in the comparable period last year.
Rodney Cook, chief executive of Just Group (JUST), is to step down with immediate effect after nine years at the retirement finance outfit, leaving two months to “ensure there is a smooth transition process”. In that time, the group will need to step up its hunt for both a CEO and a CFO, with David Richardson currently filling both roles on an interim basis.
