Join our community of smart investors

News & Tips: Domino's, Purplebricks, Vodafone & more

London shares have started the week on a downbeat note as US-China trade talks stumble.
May 7, 2019

Donald Trump's latest intervention in trade talks with China, in which he threatened to unilaterally raise tariffs on all Chinese goods to the US to 25 per cent, has sent shivers through the London markets in morning trading. Click here for The Trader Nicole Elliott's latest thoughts on the markets. 

IC TIP UPDATES:

Domino’s Pizza (DOM) has warned that poor sales performance and a worse first quarter than last year overseas mean that it no longer expects its international arm to break even this year. In a first quarter trading update, Domino’s revealed that overseas sales had come in at £25.1m, beneath £25.6m secured this time last year. “Internationally, performance remains disappointing and trading visibility is limited,” chief executive officer David Wild says. The news prompted a 9 per cent fall in the share price during morning trading, and with the shares trading at 14 times forward earnings, Domino’s remains at a premium to its competitors in casual dining. Sell.

Citing an “encouraging performance” during its first half (in which adjusted pre-tax profit increased by 7.3 per cent), Treatt (TET) is confident of meeting expectations for the full year. Citrus remains the largest product category – despite “cyclical weakness in some citrus raw material markets” depressing revenue by 2.1 per cent, a favourable product mix saw profits increase by 6.1 per cent versus the first half of 2018. With increasing demand for lower calorie beverages, the group’s “natural calorie-free sugar solutions” delivered revenue growth of 37.7 per cent, whilst fruit and vegetables surged by 64.3 per cent. With a capital expenditure of £4.9m the group continues to invest in capacity to deliver long-term growth. Buy.

Purplebricks (PURP) founder and chief executive Michael Bruce has stepped-down with immediate effect, replaced by chief operating officer Vic Darvey. Management reaffirmed revenue guided to at the time of February’s warning of between £130m and £140m for 2019. However, the estate agency announced plans to exit the Australian market as potential returns are not sufficient to justify continued investment, while it also launched a strategic review of the US business. Sell.

At SDL’s (SDL) AGM today, chairman David Clayton will say that at the end of the first quarter, trading is in line with management’s expectations. Buy.

Middle East-focused oil services firm ADES International (ADES) has borrowed another $140m (£107m), doubling the amount owed to Saudi Arabian bank Alinma. ADES also closed an offering of $325m in 8.6 per cent bonds in April, due in 2024. Even before the new borrowing, the company’s debt load had soared due to acquisitions, climbing fivefold in the 12 months to December 31, 2018, to $424m. The company said the $140m top-up would go to general capital spending. Sell.

Vodafone (VOD) has entered into a definitive agreement for a cable wholesale agreement in Germany with Telefonica Deutschland, allowing the latter to offer high-speed broadband services to consumers on Vodafone’s and Unitymedia’s cable network in Germany. This agreement forms part of a “remedy package” that Vodafone has submitted to the European Commission (EC), which the group says “will enhance broadband competition in Germany to the benefit of consumers and broadcasters”. The EC has yet to approve Vodafone’s acquisition of Liberty Global’s operations across Germany, the Czech Republic, Hungary and Romania. The acquisition’s completion is conditional on its approval. The EC now plans to undertake market testing of Vodafone’s remedy package, with this expected to conclude during May 2019. Under review.

4Imprint (FOUR) is holding its AGM today. Chairman Paul Moody will say that the group is “in a strong position to meet its strategic goal of $1bn in revenue by 2022” following the launch of its brand marketing initiative in 2018. The first four months of 2018 have seen total order intake rise 14 per cent and revenue rise 16 per cent year-over-year. Management expects to see full-year results in line with current market forecasts, albeit it is still early in the year. Buy.

KEY STORIES:

Kier (KIE) chief financial officer Bev Dew will stand down from the board and leave the company shortly after the release of its full-year results at the end of September. A search for his successor has commenced.

Hiscox (HSX) reported 3.3 per cent growth in gross written premiums at constant currencies during the first quarter, despite a 5.6 per cent reduction in reinsurance and insurance-linked strategies. Hiscox Re & ILS has seen some deterioration on Typhoon Jebi and the risk excess book, with claims coming in later than expected resulting in reserve developments that are expected to be at the lower end of the normal range. However, a rebound in equity and bond markets meant year-to-date investment returns are already well ahead of the end of last year.

OTHER COMPANY NEWS:

Having announced on 10 April that it was considering an approach to purchase G4S (GFS), Canada-based security company GardaWorld revealed over the weekend that it “does not intend to make an offer”. According to G4S, it “received no proposals from GardaWorld, nor any requests for information” during the offer period. G4S will continue to “review options” for the separation of its cash solutions business noting that it has received “additional expressions of interest” for the division since Garda’s approach. Shares in G4S fell by almost 6 per cent in early trading.

Motorpoint (MOTR) has announced a share buyback programme worth up to £10m, replacing the £5m programme announced in August. The group first said it intended to expand the programme at the interim results in November, and since then has bought £2.48m in shares. It will purchase a maximum daily number of 58,000 shares, or a quarter of the daily volume traded in April 2019.

Vivo Energy (VVO) has started 2019 trading in line with expectations, with volumes in the three months to March 7 per cent higher year-on-year at 2.44bn litres. The performance was driven by good underlying growth in its fifteen existing Shell-branded markets, and one month of contribution from its eight new Engen-branded markets, alongside its additional markets in Kenya. Volume growth is expected to be in line with full-year guidance of low-to-mid double-digit percentage growth.