Shares in London's main indices gave up a little value in morning trading as political intrigue continues. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Lloyds (LLOY) has been forced to increase provisions for the historic mis-selling of payment protection insurance to up to £1.8bn during the third quarter, due to a higher-than-expected level of claims in August. The lender received between 600,000 and 800,000 personal information requests during the final month prior to the claims deadline, above its assumption of 190,000 a week. The lender had an unutilised provision of £1,08bn at the time of is half-year results in June. Given that management now expects capital build this year to be below its target of between 170 and 200 basis points, it has decided to suspend share buybacks, leaving £600m of the £1.75bn programme unused at mid-September. We place our buy recommendation under review.
Shares in International Consolidated Airlines (IAG) were down more than 2 per cent in early trading as British Airways pilots begin a two day strike over an ongoing dispute about pay and conditions. Around 1,700 flights have been cancelled as a result with around 4,000 pilots involved in the strike, and is expected to cost the airline up to £40m per day. Pilot union Balpa said cost cuts have eroded confidence in the airline, but British Airways chief executive Alex Cruz said investment in the operator has never been so high. Sell.
OTHER COMPANY NEWS:
In line with its July trading update, full year results from Abcam (ABC) indicate a 9.2 per cent constant currency increase in revenue to £260m for FY2019 with adjusted cash profits rising by 4.6 per cent to £92.4m. Catalogue revenue has increased by 12 per cent to £243m whilst custom products and licensing revenue growth came in at 4.3 per cent to £17.1m. Statutory earnings have been weighed down by a £12.8m impairment charge on historic software development costs. Commencing a new five-year expansion plan, the adjusted cash profit margin is expected to decline from 35.6 per cent to 32-25 per cent next year as the group invests in growth. Shares are down over 11 per cent this morning.
Hurricane Energy’s (HUR) share price has climbed on Monday morning after the company confirmed reports about flaring at its Lincoln Crestal test well. Hurricane said the ongoing drill stem test at the well had “produced oil to surface, resulting in a flare”. Its share price climbed 7 per cent on the news to 46p. Hurricane said it would announce flow rates and oil type when the well test was done.
Eddie Stobart Logistics (ESL) confirmed that it has received a preliminary expression of interest from DBAY Advisors relating to a potential takeover offer by one of its funds. DBAY will have until 5pm on 7 October to make a formal offer. Shares in Eddie Stobart have been suspended since 23 August amid an accounting investigation.
Associated British Foods (ABF) expects full-year sales at Primark to be 4 per cent ahead of last year at constant currency, but down 2 per cent on a like-for-like basis. Operating margin improved from 9.8 per cent to 11.7 per cent, driven by a weaker US dollar, better buying and stock management. Strong profit performance from Primark and the grocery business helped to offset the continued decline in sugar, with group adjusted earnings per share expected to be in line with last year. Shares fell more than 3 per cent in early trading.
Telit Communications’ (TCM) revenues – excluding its automotive business, which it sold in February 2019 – grew by 7.6 per cent to $180m for the first half to June. Total group revenues landed at around $191m, down from around $202m. Pre-tax profits came in at $58.1m, against a loss of $12.8m, after a $57.2m gain from the automotive disposal. Net cash sat at $44.7m, against net debt of $34m.
Pure Gold Mining (PUR), a TSX dual-listed developer, has announced construction has started at its Madsen Red Lake brownfield project in Ontario. The company’s share price rose 10 per cent on the news, taking its market capitalisation to £139m. The company raised $90m (£73m) last month in debt and a royalty sale to complete the financing of the project. The underground mine is forecast to produce 125,000 ounces a year at its peak.
Shares in Luceco (LUCE) were up more than 6 per cent in early trading after the manufacturer and distributor of wiring accessories, LED lighting and portable power products reported a 10 per cent increase in sales to £82.7m during the six months to June, as it moved from a £3.1m operating loss last year to a £7m profit. Chief executive John Hornby attributed the strong first half performance to the operational improvements implemented across the group over the last 12 months, which are expected to help sustain profit growth into the second half despite slower revenue growth as the company faces tough comparatives.
