There are a lot of risers in the FTSE 100 this morning, including Halma, EasyJet and Meggitt. Click here to read The Trader Nicole Elliott's Market Outlook.
IC TIP UPDATES:
Shares in Easyjet (EZJ) have jumped 5 per cent this morning after the budget airline announced a “resilient” performance in the year to September, in spite of a challenging environment. Weakness in consumer confidence led to a 1.8 per cent decrease in revenue per seat, but passenger numbers overall were up 8.6 per cent to 96.1m. We are reviewing our buy recommendation.
Citing favourable market conditions, Legal & General (LGEN) today announced plans to issue a sterling-denominated bond which can be used as Tier-2, or loss absorbing, debt. Favourable conditions are also evident in several of the financial services group’s divisions, too. Since the half-year, a further £1.2bn and $0.6bn of pension risk transfer business has been written, with a further £3bn expected to complete by the year-end. Though lifetime mortgage advances have fallen 15 per cent year-on-year, this has largely been offset by a rise in individual annuity sales, while external net flows to the investment management business are now up around 20 per cent in 2019. The shares are well up on our October tip, though we remain positive.
Spectris (SXS) shares lifted by 6 per cent in early trading despite flat sales growth over the period between July and October. Its Malvern Panalytical and HBK businesses have kept their heads above water with like-for-like sales growth, although Omega saw sales drop 7 per cent over the period owing to the US-China trade war. The profit improvement programme, which is expected to deliver benefits in the range of £15m and £20m this year, remains on track. Buy.
Palace Capital (PCA) reported a 3.9 per cent reduction in adjusted net asset value per share during the first-half, primarily due to an increase in portfolio investment and the surrender of the lease at Priory House. The occupancy rate reduced to 84 per cent as space was reserved for refurbishment, although 12 lease renewals and five rent reviews completed at an average 3 per cent above estimated rental values and a 25 per cent uplift on previous passing rents. We place our buy recommendation under review.
Telecom Plus (TEP) reported revenues of £353m for the half-year to September 2019, up by 13.6 per cent. Adjusted pre-tax profits rose by 5.9 per cent to £27.5m, with statutory pre-tax profits up by 9.2 per cent to £21.1m. The group – which provides a range of utility services, with one single monthly bill for its members – maintained its full-year guidance, anticipating adjusted pre-tax profits of £60-65m. The shares, which have fallen since June’s full-year numbers, were up by around 3 per cent this morning. Under review.
Eckoh (ECK) has reported a 37 per cent jump in revenue to £18m in the six months to 30 September with adjusted cash profits (Ebitda) more than doubling to £4.2m. The secure payments specialist has swung into a statutory pre-tax profit of £2.6m. With double digit sales growth across operating regions, revenue from the US has surged by 104 per cent and the total business contracted has increased by 15 per cent to a record £19.4m. Buy.
Shares in AO World (AO.) have risen 15 per cent this morning after management announced it would shut its operation in the Netherlands, in order to focus on the “transformation” of the German business and the growing UK division. Poor trading in the European division led to wider adjusted losses in the six months to September. We are reviewing our sell recommendation.
KEY STORIES:
Scapa (SCPA) was pushed into a pre-tax loss by the loss of its contract with ConvaTec (CTEC), for which it has filed for $83m in damages in the US. Trading profits fell in both Scapa’s industrial and healthcare arms (its ConvaTec business sat in the latter division), although overall revenues lifted by 10.4 per cent on a constant currency basis.
Halma (HLMA) shares rose by around 11 per cent in morning trading after boosting half-year revenues and statutory pre-tax profits by 12 per cent. The specialist in “life-saving technology” experienced growth across its four divisions: process safety, infrastructure safety, environmental & analysis and medical.
Big Yellow (BYG) reported just 0.3 per cent like-for-like occupancy growth during the first half of the year to 84.1 per cent as management cited slower growth and a weaker backdrop. However, the self-storage group said it maintained its target for 90 per cent same store occupancy across the portfolio. Average achieved net rent per square foot rose by 1.6 per cent on the prior year, which helped boost underlying revenue by 4.2 per cent.
OTHER COMPANY NEWS:
Shares in Intermediate Capital Group (ICP) are up by almost six per cent this morning, after half year numbers for the alternative asset manager revealed an 11 per cent bump in assets under management, a surge in fund management profits, and a 50 per cent increase in the interim dividend. Most impressively, the group has raised its minimum operating profit margin target from 43 to 50 per cent.
With its cash takeover by Stonegate expected to complete in the first quarter of 2020, full-year numbers for pubco Ei Group (EIG) are somewhat academic. But a statutory post-tax loss of £209m for the period contains several interesting below-the-line adjustments: a £152m early debt repayment, a £42m loss on the sale of property, a £20m negative revaluation of the remaining estate, and a whopping £232m goodwill impairment to reflect a lower long-term growth rate assumption, and a higher discount rate “to reflect market indicators identified following the proposed acquisition of the group”.
Alfa Financial Software (ALFA) has won a new contract with the German subsidiary of a major international bank. The bank is one of the largest automotive finance providers in Germany. The contract is expected to rank in the upper tier by monetary value compared to other Alfa implementations. The shares were up by around 2 per cent this morning.
Equals Group (EQLS) has acquired the entire issued ordinary share capital of Casco Financial Services – a UK-based payment services provider. The initial consideration for the acquisition is £1.725m with a potential further consideration of £2m dependent on future performance.
James Cropper (CRPR) half-year profits were up, which the paper and packaging company partly attributed to a softening in pulp prices. Its Technical Fibre Products division delivered its best ever sales performance, and plans to grow TFP capacity by 50 per cent by the end of 2020 remain on track.
A trading update from Equiniti (EQN) indicates that although the group expects revenue to be towards the upper end of market expectations for the full year, underlying cash profits (Ebitda) will be at the lower end of company compiled consensus of £136-142m. This is due to weaker higher-margin UK corporate activity. Client retention has remained strong and the payments specialist has secured new clients across all divisions. After completion of the US separation in the first half of 2019, there are no further non-operating charges in the second half of the year. Due to the timing of business in the fourth quarter, leverage is expected to be slightly above the higher end of the consensus range of 2.3-2.5 times. Shares are down 11 per cent this morning.
Homeserve (HSV) has seen revenue increase by 13 per cent to £458m in the first half of year whilst statutory pre-tax profit has risen by 17 per cent to £19.7m. Customer numbers in North America are up 13 per cent to 4.2m and adjusted operating profit there jumped by almost a quarter to $23.4m (£18m). With membership and HVAC performing at the top end of the group’s expectations, the emergency repairs business has increased its full year adjusted operating profit outlook by $5m. The group has also acquired a 79 per cent stake in home experts business eLocal Holdings for $140m which is expected to add $5m to adjusted operating profits in 2020, rising to a $16m contribution in 2021. Shares are up 6 per cent this morning.
Meggitt (MGGT) has signed a six-year, $130m deal with the Defense Logistics Agency in Philadelphia, USA, to supply fuel bladders.
