Shares in London have made modest gains in morning trading although the recovery is muted as traders watch events elsewhere in the world. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
A number of the major supermarkets will be reporting Christmas trading over the next few days. Unfortunately, judging by Wm Morrisons (MRW) update this morning, it isn’t a pretty picture. Like-for-like sales excluding fuel fell 1.7 per cent in the 22 weeks to January 5. The wholesale division was impacted by poor trading at McColl’s, although the first ten McColl’s converted to Morrisons Daily convenience stores are reportedly performing well. Management still expects to hit its full-year expectations, and we still have faith in the group’s long-term prospects. Buy.
With a 7 per cent decline in core wholesales in 2019 and lower average selling price, Aston Martin Lagonda (AML) has issued a profit warning. The luxury carmaker expects full year adjusted cash profits (Ebitda) will be £130-140m, falling short of consensus analyst expectations of £205m, with a 12.5-13.5 per cent margin well below its previously guided 20 per cent. The company has also been impacted by higher marketing costs and the post-election rally in sterling. Having built the DBX order book to 1,800 vehicles, Aston has satisfied the conditions to be able to draw down a further $100m in debt over the next four weeks. Shares are down over 12 per cent. Sell.
Ideagen’s (IDEA) chief financial officer Graeme Spenceley will retire from his position in July. He will remain with the group as company secretary – a non-board and part-time position. Emma Hayes will be joining the group as chief financial officer from 1 July. She is currently group finance director for capital delivery and commercial at Severn Trent. Buy.
KEY STORIES:
Burford Capital (BUR) has made a spree of announcements this morning, though an update on recent trading is conspicuous by its absence. First are the management changes, which include the appointment of Aviva Will and David Perla as co-chief operating officers and Craig Arnott to the role of deputy chief investment officer. However, the litigation funder will continue to be managed by chief investment officer Jonathan Molot, chief financial officer Jim Kilman, chief strategy officer Elizabeth O’Connell, and her husband, chief executive Christopher Bogart – whose appointment to the board will be put to a shareholder vote in May. By that point, the group hopes to have filed its 2019 results with the US Securities Exchange Commission, as part of a listing on NASDAQ, though Burford stressed the timing of the secondary float is “difficult to predict”. In one bit of good news, plaintiffs have dropped a US securities class action filed against the group last August, in the wake of Muddy Waters’ short report. That likely explains the shares’ 6 per cent rise in early trading.
Safestore (SAFE) reported a 6 per cent rise in revenue at constant currencies during the year to October, although lower gains on the value of its investment properties meant operating profit declined 17 per cent. Occupancy for the self-storage specialist was 6 per cent higher than the prior year and the average store rate rose 0.7 per cent. The group also established a strategic partnership with private equity group Carlyle to invest in Dutch self-storage company M3 and entered the Spanish market by acquiring OMB Self Storage.
OTHER COMPANY NEWS:
888 Holdings (888) has said it expects to meet cash profit expectations for the year to December 31. In a brief trading update, management noted it ended the year with an all-time monthly record for revenue in December. The gambling group has succeeded in growing the proportion of revenue it generates from regulated markets, and the Orbit casino platform underpinned growth. However, the poker market has remained challenging, which 888 is attempting to combat with the introduction of Poker 8, a new platform being trialled this year.
A trading update from Carr’s (CARR) indicates sales volumes in its agriculture division have fallen behind expectations in the 18 weeks to 4 January. Amid pressure on farm incomes, Brexit uncertainty and mild and dry weather, farmers have spent less on feed and animal supplements in the UK. Demand in the US has been adversely impacted by reduced cattle prices and a delayed start to winter feeding. Meanwhile, after a slow start to the year, the engineering segment is expected to perform slightly ahead of full year expectations. Seasonal working capital movements mean net debt (excluding lease liabilities) had risen to £29.7m as at 30 November. Shares are down over 3 per cent.
Zegona Communications (ZEG) is to buy back £10m worth of shares, with a view to increasing the underlying asset value per share for shareholders who retain their holdings. The buyback starts today and share repurchases may be undertaken until either 31 March 2020 or until Zegona has fully used its allocated £10m. The buyback is being funded by existing capital resources. At the start of December, Zegona announced that its stake in Euskaltel and net cash position had a value of £1.41 per Zegona share, which was 46 per cent higher than its share price – and that its management wanted to “take actions to close this differential”.
