IC TIP UPDATES:
Reach (RCH) has issued a four-month trading update to 28 April 2019, ahead of its AGM today. Management expects full-year performance to be in line with market expectations. Revenues over the period grew by 4.4 per cent, helped by the inclusion of the Express & Star acquisition. Like-for-like group revenues fell by 6.4 per cent, against a fall of 7.8 per cent in the first four months in 2018. Print fell by 7.9 per cent on a like-for-like basis, and digital grew by 8.4 per cent. Net debt at the period-end sat at £22.2m – comprising drawings on its acquisition term loan of £39.7m. The group made an early repayment of £20.3m in December. The shares were up by around 2 per cent this morning. We remain sellers.
A first-quarter trading update for Lloyds Banking Group (LLOY) again captures the dispirited current mood among UK-facing lenders. Despite re-affirming 2019 guidance, group chief executive António Horta-Osório flagged persistent Brexit uncertainty’s “further impact” on the economy, £339m was written off for “adverse movements in banking volatility and charges associated with exiting the Standard Life Aberdeen investment management agreement. Meanwhile that old bug-bear – mis-sold payment protection insurance – has resulted in yet another charge of £100m. The news has reversed the share price gains brought on by yesterday’s announcement of a drop in the required capital buffer. Buy.
In another corporate governance win, Metro Bank (MTRO) took the unusual step of announcing its first-quarter results at 4.45pm yesterday. The challenger bank, which is dealing with the fall-out of its mis-categorisation of loans, trumpeted a rise in customer numbers in the period, but acknowledged that the scandal had seen “a small number of large commercial and partnership customers making withdrawals”. Consequently, deposits are down 4 per cent in three months, though chief executive Craig Donaldson said net inflows returned in April. The shares, down another 16 per cent this morning, are a sell.
Full-year results for door-step lender Morses Club (MCL) showed a small drop in impairments as a percentage of revenues, against a flat net loan book and a modest 2.6 per cent uptick in customer numbers, suggesting the group’s acquisition focus is paying off. Management has proposed a final dividend of 5.8p, which represents a total pay-out increase of 11 per cent for the year. Investors also learned that chief financial officer Andy Thomson will step down in July, after ten years with the group. Buy.
Palace Capital (PCA) completed 37 leases and rent reviews last year at a 14 per cent ahead of estimated rental value, while 55 non-core assets were disposed of £21.8m. At the end of March the company had a gross passing rent of £17.7 million per annum, with a marginal increase in the underlying valuations of the investment portfolio at year-end compared to the prior year. Buy.
Though it offered no commentary with the numbers, asset and wealth manager Schroders (SDR) posted a strong rise in assets under management across all its divisions in the first three months of 2019. Total assets rose 4 per cent to £424.4bn, with the largest rise coming in the wealth management division, which climbed 6.4 per cent to £46.5bn. Buy.
Dalata Hotel Group (DAL) shares lifted 4 per cent in morning trading in response to a pre-AGM trading update that revenues per available room in the Dublin market are up 2.4 per cent on a like-for-like basis, and 3 per cent in the UK over the first quarter - in all but one city, Dalata hotels outperformed market growth levels. The group’s pipeline of almost 2,200 2,200 rooms, situated across major UK cities like Glasgow and Birmingham, and Dublin, is scheduled to open between late 2020 and the second quarter of 2021. Buy.
A Rolls-Royce (RR.) trading update maintained management expectations for the full year, guiding for free cash flows of around £700m, with these expected to be more heavily-weighted towards the second half. The engine manufacturer continues to fix the beleaguered Trent 1000 engine programme, which is still receiving orders, and maintains guidance for in-service cash costs for 2019 and 2020. Sell.
KEY STORIES:
Lancashire (LRE) reported a 0.6 per cent rise in gross written premiums during the first quarter, with all lines generating an increase in business except energy. There were no major net losses during the period, with the insurer reporting a total investment return of 1.8 per cent, compared with a negative 0.1 per cent the same time last year.
Restaurant Group (RTN) has announced the appointment of co-chief operating officer of sports betting and gaming group GVC Holdings, (GVC) Andy Hornby, as its new chief executive officer. Mr Hornby’s start date, and the departure date of incumbent Andy McCue, are unconfirmed at this stage. Shares were flat on the announcement.
OTHER COMPANY NEWS:
A trading update from Equiniti Group (EQN) has indicated strong client retention amongst their blue-chip client base with all renewing relationships being continued. The year to date has seen “encouraging” new client wins with new mandates across all divisions, in particular pensions solutions. US trading has been “pleasing” and the awaited separation of Wells Fargo Shareholder Services from its former parent is expected to conclude in June. Noting that their specialist and non-discretionary services “are largely insulated from the continuing uncertainty in the macro-economic environment”, management’s expectations for FY2019 remain unchanged.
accesso Technology (ACSO) is partnering with zoOceanarium Group – an international zoo and aquarium developer and operator – and Lodging Hospitality Management to implement its ‘accesso Siriusware’ platform at its St. Louis Aquarium and entertainment complex in Missouri, opening later this year. Siriusware “will be used to power the destination's behind-the-scenes tours and animal encounters” as well as general admission at the aquarium.
First quarter trading International Personal Finance (IPF) was described as “solid” by the unsecured consumer credit group, despite a 20 basis point uptick in annualised impairments to 26.6 per cent of revenue. Across the group, credit grew 9 per cent year-on-year, thanks to another strong outing from the IPF Digital platform. However, customer numbers contracted in Europe and Mexican operations were affected by a combination of “weaker than expected collections” and a soft macro-economic backdrop.
IQE (IQE) shares rose as much as 6 per cent in morning trading following news that its new Newport Mega Foundry has received its first mass production order from its leading existing semiconductor laser diodes (VCSEL) customer. The semiconductor business, which suffered supply chain and inventory trouble in 2018, is in advanced talks with more than ten other customers, two of which are expected to reach a successful conclusion over the next few weeks.
Cohort (CHRT) subsidiary SEA has won a two-year £3m contract with the UK Royal Navy to provide miscellaneous sonar equipment. The contract runs from 1 April 2019 to 31 March 2021. Shares were flat on the announcement.
A James Fisher and Sons (FSJ) trading update disclosed that first quarter financial performance at its tankships and offshore oil divisions is ahead of last year’s comparable period. The deep-sea diving and submarine specialist anticipates that its marine support and specialist technical divisions will be more second half weighted this year due to the timing of projects. Its renewables business within marine support secured its first contract for Triton Knoll, a 90 turbine windfarm being built 32 kilometres off the Lincolnshire coast.
