Disappointing news from the tech sector in the US overnight, where Amazon's financial performance surprised on the downside, has rippled across the Pond with London's indices down in morning trading. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
On 9 September Barclays (BARC) said it expected to increase its third quarter provision for payment protection insurance redress by as much as £1.6bn. Shareholders held their breath. In the end, only £1.4bn extra needed to be set aside for the pre-deadline spike in claims, resulting in Barclays UK’s pre-tax profit dropping to £0.4bn for the period, from £1.6bn in the third quarter of 2018. At group level, costs were stable, the group’s common equity tier one capital ratio held at 13.4 per cent, while dividend payment and the PPI provision failed to put a dent in tangible net asset value. A 10.2 per cent return on average tangible equity was well above target, though management continues to believe that lower interest rates will make a repeat in 2020 “more challenging”. Shares are up 2.4 per cent in early trading. Buy.
Shares in WPP (WPP) were up by around 6 per cent this morning, following a better than expected third-quarter trading update. Reported revenues rose by 5.2 per cent to £3.29bn, while revenue less pass-through costs rose by 3.7 per cent to £2.73bn – or by 0.5 per cent on a like-for-like basis, and by 0.7 per cent like-for-like when including the Kantar business. The advertising group cited an improvement over the three months in major markets and sectors, with a significant uptick in North America and China. Management has left its full-year outlook unchanged, noting that “there will be twists and turns along the way”. Buy.
Begbies Traynor (BEG) has made its fourth acquisition in as many months, landing London-based insolvency and business recovery practitioners Alexander Lawson Jacobs in a cash-and-shares deal. ALJ, a top UK insolvency practice by appointments, consists of 24 directors and employees, and made pre-tax profits of £0.9m in the year to 30 June, on annual revenues of £3.1m. Begbies is paying £2.1m in cash and issuing 296,195 new shares to fund the deal, though as with other bolt-on moves, an additional contingent payment of up to £4m could be due if certain financial targets are hit. The deal is projected to be earnings-enhancing for the current financial year, which keeps us buyers at 87.7p.
Synthomer (SYNT) issued a profit warning in a third-quarter trading update, highlighting the toll of global economic weakness upon the chemical industry. “Depressed European industrial activity combined with increased political and economic uncertainties have resulted in an overall slower trading environment throughout Q3,” the chemicals company said. The pain was particularly felt in performance elastomers, and management now expects full-year volumes for Styrene Butadiene Rubber (SBR) to be around 10 per cent behind 2018 levels, and unit margins to also be lower. Under review.
KEY STORIES:
Shares in sub-prime lender International Personal Finance (IPF) jumped by more than a fifth yesterday, after audits by Poland’s tax authority concluded that lower adjustments were required for historic accounts than previously forecast. IPF has now paid the £3.8m owed for the period covering 2010 to 2017, which analysts at Numis said should release a £137m contingent liability held on the balance sheet. Chief executive Gerard Ryan described the development as “very positive”.
Claims inflation remained elevated for Hastings (HSTG) during the third quarter at between 7 and 8 per cent, across third-party credit hire cost, repair costs and mid-range bodily injury costs. Management said it continues to monitor claims trends and apply price increases to maintain its loss ratio within the full year 75 and 79 per cent target, but that depending on the fourth quarter performance, it could move above that range.
OTHER COMPANY NEWS:
As part of an ongoing tussle over a permit for a new gas pipeline, New York’s governor Andrew Cuomo is threatening to revoke National Grid’s (NG.) license in the state. This comes amid an ongoing investigation into the group’s moratorium on natural gas connections and whether it engaged in improper refusals – the group was recently ordered to reconnect over 1,100 residential natural gas customers. In a strongly worded letter that labels National Grid an “abusive utility”, Governor Cuomo has demanded the regulator explore “potential grounds for revocation of National Grid's license and its liability for the damage that has already been incurred and future damages”. Shares are down over 2 per cent this morning.
