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News & Tips: Vodafone, Standard Life Aberdeen, On The Beach & more

Sentiment appears to have stabilised in London, for now.
May 14, 2019

After a final shakeout in the US overnight, some confidence has returned to UK equity markets this morning with gains across the board. Click here for The Trader Nicole Elliott's latest thoughts on the markets. 

IC TIP UPDATES:

Vodafone (VOD) has cut its dividend by 40 per cent to 9ȼ. Chief executive Nick Read said “We are executing our strategy at pace and have achieved our guidance for the year, with good growth in most markets but also increased competition in Spain and Italy and headwinds in South Africa”. Such challenges, along with high spectrum auction costs, have “reduced our financial headroom”. The decision was made to rebase the dividend to help lower the group’s debt and “delever to the low end of our target range” in the coming years. For the year to March 2019, revenues declined by 6.2 per cent to €43.7bn. Pos-tax losses came in at €7.6bn, against profits of €2.8bn - dampened by a loss on disposal of Vodafone India. Net debt sat at €27bn at the period-end. Recommendation under review.

Ahead of its annual general meeting later today, Standard Life Aberdeen (SLA) has reported a three per cent increase in assets under management and administration in the first three months of 2019. The investment manager said the rise was due to positive market movements and deals with Virgin Money and Orion Partners, which added £3.5bn and £0.7bn to the asset pile. Net outflows were also “concentrated in a small number of strategies”. Shares are flat in early trading. Sell.

On The Beach’s (OTB) half-year results is peppered with cautions about the market, mentioning “uncertainties around Brexit ” and “a soft background market”. The numbers look fairly solid, with sales up 41 per cent to £63.5m and adjusted pre-tax profits up 14 per cent, but chief executive Simon Cooper warned the background market was down 10 per cent year on year so far in 2019. The group is doing a good job of diversifying into new markets, but we are reviwig our buy recommendation.

Half-year numbers for pub operator Ei Group (EIG) are out today, highlighting familiar themes of canny site management and like-for-like income and sales growth. The allocation of £31m of goodwill to property disposals takes the shine off statutory profit numbers, though underlying earnings per share are up 10 per cent year-on-year. News that the group has extended its share buyback programme by £30m has pushed shares up 2.4 per cent in early trading. Buy.

Conygar (CIC) reported an 11 per cent reduction in net assets per share during the first half to 178.6p and a pre-tax loss of 13.7m. That reflected £18.8m in development costs being written-off, largely relating to its Haverfordwest site. That was as a result of the weakening of the housing market, the rising costs of construction, which are being significantly impacted by Brexit, and the fact that the retail development at this site is not currently able to commence. We place our buy recommendation under review.  

The hunt for a chief financial officer is over for Jupiter Fund Management (JUP), after the investment manager hired Wayne Mepham, currently global head of finance at asset manager Schroders’ (SDR). Mr Mepham will join at the beginning of September, replacing Charlotte Jones, who takes up the position of chief finance officer at RSA Insurance Group (RSA) in July. We rate Jupiter a sell.

Shares in Portmeirion (PMP) have fallen a quarter this morning, after management warned pre-tax profits would be “significantly below” market expectations. The root of the problem seems to be the business in South Korea, which saw export market sales fall in spite of encouraging levels of growth in recent updates. The impact on the wider business is such that, as of the four months to April, group sales are down 10 per cent. Management expects this drop to recover somewhat over the course of the year, but this is an unwelcome surprise and we are reviewing our buy recommendation.

Eckoh’s (ECK) trading for the year to March 2019 was in line with market expectations. Revenues grew in the UK and the US businesses, and Eckoh saw double-digit new business growth across both divisions in the second half. Net cash sat at £8.3m at the period-end, against £3.6m a year earlier. The group’s shares were up by around 6 per cent this morning. Buy.

Ideagen’s (IDEA) expects results for the year to April 2019 to be “marginally ahead” of market expectations, marking its 10th year in a row of sales and adjusted cash-profit growth. It expects to report a revenue rise of 29 per cent to around £46.7m, with adjusted cash profits up 30 per cent to around £14.3m. The annual recurring revenue book improved by 44 per cent to around £36.4m, helped by an uptick in software-as-a-service (SaaS) bookings and three acquisitions. Net debt sat at £1.3m at the year-end, against net cash of £0.8m a year earlier, after a £19.4m share placing last September and consideration and fees paid for acquisitions, along with dividend pay-outs. The shares were up by around 4 per cent this morning. Buy.

KEY STORIES:

The success of Greggs’ (GRG) vegan sausage roll has continued to surprise, leading management to guide to “materially higher” sales and profits in the year. Sales in the 19 weeks to May have grown “very strongly” as the meatless treat has been rolled out to all of the group’s shops. Vegan sausages aside, Greggs has been experiencing broader-based growth following investments in the product range and shops. It opened net 16 new stores in the period.

Full-year numbers for industrial conglomerate DCC (DCC) are out today, and show an eight per cent rise in statutory earnings per share, despite the dilutive effect of September’s equity placing. Adjust for acquisitions and disposals, and earnings pushed up 12.8 per cent, allowing for an increase in the full-year dividend to £1.38p per share. All divisions saw double-digit increases in operating profit, while net debt has also dropped to less than 10 per cent of annual cash profits

Land Securities (LAND) reported a £123m pre-tax loss for the year to March, up from £43m the prior year after incurring a £441m net deficit on the revaluation of its investment properties. Like-for-like net rental income was up 1.9 per cent as the London portfolio offset a 3.6 per cent reduction in retail. Nevertheless, management raised the annual dividend 3.1 per cent to 45.55p a share.

Premier Foods (PFD) has reported a £42.7m pre-tax loss for the year owing to pension charges, restructuring costs and a £30.6m impairment charge relating to its Sharwoods and Saxa brands. Revenue was stagnant (rising by only 0.6 per cent) though trading profit increased by 4.5 per cent to £128.5m, driven by a strong contribution growth from the grocery business. Despite a £26.5m reduction, the group is still carrying net debt of £469.9m. Looking forward, the group is hoping that capital investment, consumer marketing and product innovation will help turn things around. In the meantime, management admits that there “remains much work still to do.''

OTHER COMPANY NEWS:

Bank of Georgia (BGEO) has followed peer TBC this week in reporting a strong set of first quarter results. The Tbilisi-headquartered lender saw income climb 10.3 per cent year-on-year, while a lower cost of risk helped to reduce the cost-to-income ratio to 35.5 per cent, down 170 basis points in a year. Like TBC, Bank of Georgia’s net interest margin continues to decline as it replaces high-yielding assets with lower risk (and lower capital intensity) mortgages.