News & Tips: Halfords, Kier, N Brown & more

IC TIP UPDATES: 

Shares in Halfords (HFD) have risen 6 per cent this morning on the back of a reassuring trading update. Management reiterated its outlook for underlying pre-tax profit of £50-55m in the 2020 financial year - a drop on last year’s £58.8m, but with gross margin improvements across retail and autocentres, as well as 1.1 per cent like-for-like growth in sales, the market is viewing the announcement as reassuring. Sell.

An update from Kier (KIE) indicates trading between 15 November and 31 December has been in line with its expectations. The disposal of Kier Living “continues to progress” although there is no indication as to when a sale might occur. As previously guided, the group expects to reduce its headcount by 1,200 by 30 June but now hopes to deliver annual cost savings of at least £60m by the end of the 2021 financial year, up from £55m. Average month-end net debt for the first half of the year is also said to be as the group anticipated. Half year results will now be released slightly earlier on 5 March. Sell. 

N Brown’s (BWNG) shares have fallen more than a quarter after the group issued a profit warning for the years to March 2020 and 2021. Management echoed Superdry (SDRY) in noting the highly promotional wider market, but also saw reduced sales from its financial services division following changes to its lending practices. Profit for the coming year is now expected to be in the £70-72m range, compared with consensus of £83m. What’s more, the combination of regulatory changes and “reduced scope for bad debt provision” means profits in 2021 will fall at a similar level. Sell.

Ibstock (IBST) expects to report a mid-single digit rise in revenues for 2019, largely thanks to pricing benefits in the clay brick business, volume growth in some concrete product lines and the consolidation of Longley Concrete, which was acquired in July. However, the brick manufacturer said lower levels of residential construction activity during the second half of last year had created a more “subdued” market backdrop as it entered the new year. Buy. 

4imprint (FOUR) saw “encouraging” organic revenue growth during the second half of 2019. Group revenues for the year to 28 December was around $861m, up 17 per cent. Underlying pre-tax profits are expected to be at the upper end of the current market forecast range. The group had net cash at the year-end of around $41m, up from $27.5m. Buy.

KEY STORIES: 

Rank Group (RNK) has upgraded profit guidance for the year to June, saying underlying operating profits will come in at around £105-115m, ahead of analysts’ previous range of £93-103m. The improved performance is down to positive trading in digital, Grosvenor and the group’s international venues business. Shares are up 5 per cent in response.

Vertu Motors (VTU) has acquired the trade and assets of four Volkswagen dealerships, sending the share price up 4 per cent in early trading. The auto retailer expects the total consideration for the sites - which are all in West Yorkshire - to come to around £8.8m. The deal will bring the group’s total number of Volkswagen outlets to nine, and form part of management’s plans to build a scaled franchised dealership network.

Shares in Allied Minds (ALM) are up today, after the intellectual property commercialisation group confirmed the timing of its 12.62p per share special dividend. Shareholders on the register next Thursday (23 January) will receive $40m of the proceeds from the sale of its stake in Hawkeye360 will be returned in cash to shareholders, with the pay date falling on 14 February.

Shares in Pearson (PSON) fell by more than a tenth this morning. The group met its guidance for 2019 with flat underlying revenues and operating profits of around £590m at guidance exchange rates. Underlying revenues in its core business were up 5 per cent, with the growth business up 4 per cent – offset by a 3 per cent decline in North America. To the latter point, US higher education courseware (HEC) was down just under 12 per cent – with print falling close to 30 per cent, partly offset by digital growth. For 2020, Pearson anticipates adjusted operating profits of £500m-580m and expects trends seen in 2019 in the US HEC business to continue, with heavy declines in print. Chief financial officer Coram Williams will also step down later this year, replaced by his deputy Sally Johnson. 

The World Gold Council (WGC) has said central bank policies and buying will combine with global uncertainty to keep gold tracking higher this year. The industry group said negative yielding debt and easing policies would also help prices in 2020. “Gold has historically performed well in the 12- to 24-month period following policy shifts from tightening to “onhold” or “easing”,” the WGC said. Gold hit a seven-year peak in the first week of 2020, after the US killed Iranian general Qasem Soleimani. 

Big Yellow (BYG) reported an acceleration in the decline in its occupancy level during the seasonally weaker fourth quarter, equivalent of 3.5 per cent of maximum lettable space, compared with a rate of 2.7 per cent the same time the prior year. The self-storage specialist reported a 0.4 percentage point decline in like-for-like closing occupancy, although the average rent achieved per sq/ft rose 2.9 per cent.  

Workspace (WKP) reported average enquiries of 1,001 a month during the final three months of 2019, which was ahead of the 907 received the same time the previous year. Lettings were 113, which was also up on 98 during the comparable quarter. It also exchanged contracts to sell Quality Court, off Chancery Lane in Holborn, for £15.8m, at a 3 per cent premium to the 30 September 2019 valuation. 

OTHER COMPANY NEWS: 

The last six months were “positive” for Brooks MacDonald (BRK), according to chief executive Caroline Connellan, though her comment that funds under management remained stable disguises the fact the final quarter saw combined outflows of £478m, thereby offsetting a benchmark-beating investment performance. And while expectations for full-year profits remain unchanged, the group’s shares are down 3 per cent in early trading.

Hays (HAS) has warned that operating profit for the first half of the year will come in at around £100m, down from £124m a year earlier. With like-for-like net fees down 4 per cent in the second quarter, the recruiter came up against strikes in France, a German economic slowdown, Brexit uncertainty and Australian bushfires – together these countries account for 45 per cent of the group’s fees. Growth is said to have slowed “markedly” in December. The macroeconomic environment is expected to remain difficult in the near-term but Hays sees growth opportunities in specialisms like IT. Shares are down 4 per cent.

Clipper Logistics (CLG) has announced that Sun European Partners does not intend to make a takeover offer for the group. Discussions regarding a possible offer took place and a number of independent shareholders were consulted but the two parties were unable to reach agreeable terms. The group also notes that it experienced its busiest Black Friday period ever with volumes up more than 35 per cent year-on-year. 

Headlam’s (HEAD) results for 2019 are due to come in slightly ahead of market expectations (which forecast sales of £705.5m and underlying pre-tax profit of £39.3m). Management reported Continental Europe outperformed the UK, though both regions were positive on a like-for-like basis. In the coming year, the flooring specialist is planning to focus its capital investment on its regional development centre in Ipswich, which is currently under construction.

Shares in Dechra Pharmaceuticals (DPH) are down over 4 per cent this morning after it warned that trading will be more weighted towards the second half of the year than usual. Net revenue for the six months to 31 December increased by 7 per cent at constant currencies, with 13 per cent growth from European pharmaceuticals. North American net revenue declined by 2 per cent, adversely impacted by supply problems. These issues are now said to have been “largely mitigated” with supply chain inventory levels returning to normal. 

Inchcape (INCH) has bought Daimler’s Colombian Mercedes Benz passenger car and private van distribution operation. The deal forms part of its plans to expand its capacity in distribution, as it trims retail sites around the world. The group has made retail disposals around the world from China to the UK, and in the current financial year these will generate around £250m in proceeds. 

Wood Group (WG.) is up 6 per cent after announcing its 2019 operating profit would be around 20 per cent higher than the year before, on a like-for-like basis. The oil and gas services and construction group said its Middle East and Asian business had kept revenue and cash profits growing in the second half despite a “slowing macro environment”.  Net debt will be under $1.5bn (£1.15bn) when the full year results come out in March, compared to $1.77bn on June 30.