Confirmation from Downing Street and Brussels that a Brexit agreement is in place has put a rocket under London's shares mid morning. At the time of writing the domestically focused FTSE250 had performed a dramatic about turn to trade up around 1 per cent after trading down at the open with the FTSE100 also rising sharply. The pound has strengthened appreciably too on the news.
IC TIP UPDATES:
Domino’s Pizza (DOM) shares edged up 4 per cent in early trading after the group announced that it would be exiting its international markets a third quarter trading update. UK sales were up 3.4 per cent on last year’s comparable period, with UK online sales rising by 7.2 per cent. But “the performance of our international business remains disappointing,” chief executive David Wild admitted, and following a review, it has elected to quit its four international markets. Sell.
National Express (NEX) reported a 14.5 per cent increase in group revenue during the three months to September, or 11.8 per cent at constant currency, with all divisions contributing to sales and profit growth. Group operating profit improved 14.3 per cent, with the operating margin also said to be up in the period. This performance was attributed to significant new contract wins, renewals, and mobilisations, including an extended presence in Morocco and renewal and expansion of the group’s second largest North American contract. Buy.
Shares in WH Smith (SMWH) are up 7 per cent this morning following news that the group is planning a $400m (£312m) acquisition of US travel retailer Marshall Retail Group. The deal would greatly expand its presence in the US airport travel retail market, a sector it has been building its presence in since the acquisition of InMotion last year. The deal will be partly funded by a £155m placing of shares. Buy.
Moneysupermarket’s (MONY) shares were down by around 9 per cent this morning. For the third quarter to September, revenues for the group’s money business fell by 5 per cent to £20.6m, amidst ongoing challenges in product availability. Insurance grew by 3 per cent to £49.9m in a “subdued premium environment”, notwithstanding some volatility in Moneysupermarket’s natural search rankings. Meanwhile, energy switching remained strong. Home services revenues were up 21 per cent to £17.7m. Overall, group sales rose by 4 per cent to £101m over three months, or by 11 per cent to £300m over nine months. The group expects trading dynamics to continue until the year-end, with money weakening. Management anticipates meeting full-year expectations. Under review.
Insolvency practitioner Begbies Traynor (BEG) has issued its latest ‘red flag’ report charting company distress in the UK economy. The group found that 489,000 businesses are now in “significant distress” – an increase of 4.7 per cent in the past year, and 40 per cent since the EU referendum in June 2016. The group also found that businesses in “critical financial distress” – defined as businesses with minor court debt judgements of more than £5,000 filed against them – had risen 8 per cent in the past year. Hardly a happy picture, but one which Begbies should continue to benefit from. Buy.
IG Design’s (IGR) latest trading statement this morning reassures that the group is on track for full-year market expectations - which currently predict an adjusted EPS of 31.6p, up from 28.3p last year, according to Bloomberg. The order book is strong going into the second half and leverage is expected to fall to around 1.1 times by the full year. Buy.
Retail landlord Capital & Regional (CAL) has received an offer from Growthpoint Properties to acquire 30.3 per cent of the group’s shares at 33p per share, as well as a subscription to acquire a further 311 million shares in a fundraising at 25p per share. If completed, the transaction will hand Growthpoint a majority stake in the business, and has been championed by management for “allowing existing shareholders the opportunity to realise an attractive premium to the current share price…while affording them the opportunity to participate in the future value of a recapitalised Capital & Regional”. Our buy call is under review.
OTHER COMPANY NEWS:
Rentokil (RTO) has seen ongoing revenue – which excludes the impact of disposed or closed businesses – rise by 9.8 per cent at constant currencies in the third quarter to £723m. Organic revenue growth of 5.5 per cent is the highest level in over a decade. In pest control, ongoing revenue has jumped by 12.3 per cent with growth and emerging markets growing by 12.2 per cent and 12.7 per cent respectively. Some 15 businesses have been acquired during the period with annualised revenues of around £15m. With the Competition and Markets Authority reviews into Cannon UK and MPCL now concluded and the required partial divestments now complete, integration of these businesses is now in progress. Shares are up 3 per cent this morning.
discoverIE (DSCV) announced the acquisition of sensing technology company Sens-Tech and a proposed placing that it intends will raise around £33m. The electronics group is paying an initial cash sum of £58m for Sens-Tech, a UK-based designer, manufacturer and supplier of specialist sensing and data acquisition modules for x-ray and optical detection, and may pay a further £12m based on the acquisition’s performance over the next three years. discoverIE will place 8,034,840 new ordinary shares at a price of 415p per share, which represents 9.6 per cent of the company’s current share capital.
Premier Oil (PREM) has announced drilling success at Tolmount East off the coast of Yorkshire, sending its share price up 3 per cent. The company said the “quality and thickness” of the reservoir sands were at the upper end of expectations. The goal for the gas prospect is 220-300 billion cubic feet (bcf), although Premier did not give an estimate in today’s announcement. Analysts were split on the result, with Colin Smith at Panmure Gordon saying Tolmount East would be “clearly material” at 220bcf but the “well may not have quite as much as the description of the sands encountered may suggest”. BMO analyst David Round said he had already put 310bcf in his NAV estimate.
Unilever (ULVR) reported a 5.8 per cent increase in sales to €13.3bn during the third quarter of its financial year, bring sales growth over the nine month period to 1.5 per cent. Emerging markets contributed strongly, with underlying sales growth of 5.1 per cent, driven by both volume and price. Good performance in home care was also attributed to sales growth over the period. Chief executive Alan Jope said the group continues to expect full-year underlying sales growth to be in the lower half of the 3 per cent to 5 per cent multi-year range, and an improvement in underlying operating margin that keeps Unilever on track for its 2020 target.
Shares in Alpha FX (AFX) are up 6 per cent in early trading – and around 60 per cent so far this year – after the foreign exchange and payments group said full-year earnings are likely to be “ahead of current market expectations”. The Aim-listed group’s board said that since last month’s interim results announcement, strong demand in the core UK corporate market, European clients serviced from its London office and a foray into currency options had all made positive contributions.
A quarterly update for The PRS Reit (PRSR), the private landlord reveals a 116 per cent increase in annualised rental income from completed homes, and an 83 per cent rise in annual rents from contracted homes. Management reports that progress “during the first quarter of the new financial year has continued positively” and in line with expectations.
NewRiver REIT (NRR) has completed the acquisition of Poole Retail Park in Dorset for £44.7m, at a net initial yield of 8 per cent. The retail-and-leisure-focused real estate trust will hold a 10 per cent interest in the asset, and benefit from 10 per cent of the net rental income, funding the deal from existing resources and credit facilities.
