Equities across the board in London are in the red as geopolitical concerns refuse to go away. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Costain (COST) has been appointed as the sole maintenance service provider across United Utilities’ (UU.) operations under an initial five-year framework, extendable to a ten-year period. Starting this month, the framework is expected to be worth £35m a year. Marking the first time United Utilities has outsourced its water and waste water asset maintenance, Costain’s technology and consulting solutions will enable a transition from a “fix-on-fail” approach to more proactive maintenance. Costain’s shares were flat in early trading. Recommendation under review.
A pre-close trading update from Mears (MER) points to “solid progress” in the first half of the year with FY2019 performance anticipated to be in line with guidance. The group is continuing to unwind the working capital absorbed in capital intensive development activities. The property acquisition facility has been curtailed from £30m to £15m with a further reduction anticipated in the second half of the year. The group expects to report a small reduction in average daily net debt at interim results on 13 August. We remain sellers.
KEY STORIES:
James Cropper (CRPR) shares fell over 6 per cent in morning trading as rising paper prices pulped profits once again for the paper manufacturer. For the second consecutive year pulp prices have outstripped market expectations, increasing cost pressures on James Cropper’s paper business in excess of £6.5m over two years. Statutory pre-tax profits nearly halved to £2.6m from £4.5m. But the company maintained its dividend at 13.5p and believes that paper will become more resilient to the pulp market, enabling profitable growth.
Shares in Gear4Music (G4M) fell 8 per cent this morning following the group’s full year results announcement. The nline musical instrument retailer had a tough start to the calendar year when it reported capacity problems over the christmas period meant profits would come in lower than the previous year. In recent years the group has been sacrificing margins in a bid to capture market share, leading to a 48 per cent jump in sales, but a net loss over the year. Management is now shifting to repairing the margin damage.
OTHER COMPANY NEWS:
In its maiden year as a listed company, Mind Gym (MIND) has announced a 14.2 per cent increase in revenue to £42.1m for FY2019 whilst adjusted cash profits have risen by 11 per cent to £8.7m. Accounting for 9 per cent of overall turnover, digital revenues surged by 72 per cent to £3.6m. Repeat revenues declined slightly from 88 per cent to 84 per cent. With growth across geographic divisions, EMEA and the US saw revenue increase by 16 per cent and 12 per cent respectively. Shares are up over 2 per cent in early trading.
Full-year results from Northgate (NTG) indicate that revenue increased by 6.2 per cent to £746m in FY2019 – vehicle hire revenue rose by 9.9 per cent to £518m whilst vehicle sales revenue fell by 1.1 per cent to £228m. With an 11 per cent increase in average vehicles on hire, rental profit in Spain surged by 37 per cent to £39.7m. Comparatively more sedate in the UK and Ireland, rental profit increased by 5 per cent to £24.6m. Net debt remained steady at £437m. Shares were flat in early trading.
Redcentric’s (RCN) revenues came in at £93.3m for the year to March 2019 – down from £100m. Recurring sales constituted 86 per cent of the top line, versus 87 per cent. The group notes that over the past three years, it has operated within a very competitive market. It has been “materially” impacted by Crown Hosting – pertaining to the joint venture between the cabinet office and Ark Data Centres, which provides flexible data-centre colocation – and by the FCA’s ongoing investigation. Crown Hosting is expected to reduce revenues by £2.6m in FY2020. More positively, Redcentric won multiple health and social care network tenders, and net debt reduced by £10.1m to £17.6m. It has proposed a final dividend and a share buyback programme.
Carnival (CCL) reported an 11 per cent increase in revenue to $9.51bn (£7.45bn) during the six months to May, but an 8 per cent decline in operating income to $902m. The cruise operator has lowered its full-year earnings outlook twice over the past six months, sending shares tumbling. The company said adjusted EPS will be between $4.25 and $4.35, lower than the March guidance of $4.35 to $4.55, due to changes to the US policy around travel to Cuba, disruptions to Carnival Vista, and expected lower net revenue yield. During the first half, EPS was $1.14, compared to $1.33 during the same period the previous year. The bulk of Carnival’s revenue came from North America, followed by Europe, Australia, and Asia. Shares fell 1 per cent in early trading.
Trainline (TRN) announced that Morgan Stanley, as stabilising manager, has exercised its over-allotment option to purchase 40,748,321 shares at 350p each, or 15 per cent of the total number of shares in the offer. Private equity firm KKR, the principle stakeholder, now has holding of 24.8 per cent of issued shares, compared to 33.3 per cent had the option not been exercised. Shares were flat in early trading.
