Click here to read Nicole Elliott's Market Outlook from this morning's trade. Plus what to expect from the upcoming G7 summit.
IC TIP UPDATES:
Castings (CGS) will tell shareholders at its annual general meeting today that after a strong first quarter, the iron casting and machining company has experienced “a slight softening in demand” from the majority of its main commercial vehicle customers. Castings expects continued improvement from its stricken machining business CNC Speedwell, however, as it begins to realise some of the benefits from improvements made here. We remain sellers.
Half-year results from John Laing (JLG) indicate net asset value has ticked up by 0.6 per cent to £1.6bn for the six months to 30 June whilst the portfolio value has risen by 3.5 per cent to £1.54bn. Encountering performance issues in the renewable energy portfolio in Australia and Europe, the group has incurred £121m of write-downs, partially mitigated by £78m of value enhancements. Investment in solar and wind assets in these regions has therefore been put on hold whilst investment in US renewable energy assets will be limited to recycling of capital from disposals. Coming up against a tough 2018 comparator, pre-tax profit has plummeted by 80 per cent to £35m. Shares are down over 8 per cent this morning. Under review.
The Australian Securities and Investments Commission has proposed an overhaul of derivatives trading for retail investors, including banning the sale of binary options and restricting the leverage used in contracts for difference. In all instances, the restrictions are equal or more punitive than the measures the European Securities and Markets Authority adopted last year, and therefore worse than the market was expecting, according to analysts at Canaccord Genuity. Australia accounts for around 15 per cent of revenues at spread-betters IG Group (IGG) and Plus500 (PLUS), while CMC Markets’ (CMCX) APAC division contributed 29 per cent of net operating income in the year to March. We are sellers of CMC.
Betting technology business Sportech (SPO) reported a 4 per cent decline in sales to £32.6m during the first half, with gross profit flat on the prior year at £22.8m. The loss before tax from continuing operations of £2.4m is due in part to lower adjusted cash profits, and higher depreciation and amortisation costs. Over the period the company appointed a new chairman and chief executive, as well as a new chief technology officer and added new chief operating officer and chief compliance officer roles. Shares were up nearly 2 per cent in early trading. Out buy tip is under review.
CRH (CRH) reported record cash profits of €1.54bn for the half-year to June, up by 36 per cent – or by 19 per cent excluding new accounting rules pertaining to leases. The building materials group’s sales came in at €13.2bn, up by 11 per cent. Trading benefitted from positive underlying demand in both Europe and North America. In the UK, construction activity continued to dwindle amidst Brexit uncertainty. CRH has bought back €550m in shares year-to-date, and is planning to repurchase a further €350m by the year-end. It lifted the interim dividend by 2 per cent to 20¢ per share. Buy.
Shares in NMC Health (NMC) have leapt 30 per cent this morning, following reports that two groups had made offers to buy a stake in the group. The Financial Times reports one of the groups is backed by Chinese conglomerate Fosun. The group also reported its interim results today, clocking up a 22.5 per cent increase in adjusted cash profits and sales growth of 32.6 per cent. Buy.
KEY STORIES:
Ocado (OCDO) has once again had a fire at one of its warehouses. The incident reported at the group’s Erith fulfilment centre was nowhere near as serious as the one that destroyed its Andover centre in February, but it did require some customer orders to be cancelled. The blaze happened in a waste hopper just outside the building. Shares are down 1 per cent on the news.
OTHER COMPANY NEWS:
Macfarlane Group (MACF) shares rose 3 per cent in early trading after the packaging specialist secured revenue and profit growth against a challenging backdrop. “Sales revenue from existing customers was impacted by weaker demand and sales price deflation,” chairman Stuart Paterson said, “but this was offset by good new business growth” and the benefits of a slew of 2018 acquisitions.
South32 (S32) is close to selling its South African thermal coal division, after working out a cash and “deferred payment mechanism” with local company Seriti Resources. The miner, a spinoff from BHP (BHP) in 2015, has taken a $504m pretax impairment charge on the possible sale in its 2019 financial year results. South32 said the writedown considered a “modest” upfront payment for the assets, which brought in $1bn (£820m) in revenue in the 12 months to June 30, a 24 per cent drop year on year. South32 chief executive Graham Kerr said the company’s intention was to turn the division into a “sustainable, black-owned and operated business, consistent with South Africa's transformation agenda”.
Gambling company Playtech (PTEC) reported a 69 per cent increase in revenue to €736m (£672m) during the first half, and an 85 per cent decline in reported net profit to €16.8m. The improvement in revenue was thanks to a good performance from both the business to consumer business Snaitech as well as the core business to business division. The decline in profits was due in part to higher depreciation and amortisation charges and finance costs. The company still expects to generate full-year adjusted cash profits between €390m and €415m. Shares fell 1 per cent in early trading.
Rank Group (RNK) reported a 1 per cent increase in revenue to £695m during the year to June, while group operating profit declined by a fifth to £39m due in part to higher operating costs. All businesses delivered like-for-like revenue growth, with a new operating model launched for Grosvenor Casinos. Chief executive John O’Reilly expects the acquisition of Stride Gamin (STR) to complete in 2019-20, and will “help step change our digital business, deliver strong synergies, bring proprietary technology in house”.
