London shares have steadied after yesterday's heavy sell off but there has been no rebound to talk of as concerns around the impact of the coronavirus potentially spreading globally remain high. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Sainsbury’s (SBRY) has this morning announced a commitment to invest £1bn over the next 20 years in an effort to become a net-zero polluter. The group will work on initiatives reducing carbon emissions, food waste, plastic packaging and water usage, as well as increasing recycling, biodiversity, and diet health and sustainability. Management said the commitment would not affect its net debt reduction targets. Sell.
With full-year results largely foreshadowed, investors in Crest Nicholson (CRST) were hoping the housebuilder would provide some strategic direction in its preliminary numbers today. Judging by the market’s snap reaction, they’ve got it. Management is targeting operating margins of around 15 per cent, and a return on capital employed of more than 20 per cent, while the dividend will be held at 33p a share in 2020, and rise with inflation from next year. Under review.
KEY STORIES:
Full-year earnings for McCarthy & Stone (MCS) were constricted by exceptional costs linked to undeveloped land, redundancies and consultants' fees, while underlying operating margins were also under pressure. The retirement home builder anticipates a weaker first half through 2020, though it maintains its full-year guidance. Hold.
Shares in Mortgage Advice Bureau (MAB1) are up 13 per cent today, as the advisory network said 2019 revenue increased 16 per cent and that pre-tax profits would meet management expectations. During the 12 months to December, adviser numbers climbed by a fifth to 1,457 and partly contributed to a dip in the average annual revenue per adviser, though the group said productivity picked up in the second half of the year, and should benefit from technology investments in 2020.
Shares in Saga (SAGA) are up 7 per cent this morning on signs of greater stability in the insurance business. More customers are approaching the group directly, 57 per cent compared with 50 per cent in the year to January 31 2019. Retention was also up two percentage points to 75 per cent. Analyst Numis increased profit forecasts in response, and is now expecting adjusted pre-tax profits of £108m for the year, compared with £101m previously.
OTHER COMPANY NEWS:
Just Eat (JE.) has signed a partnership with McDonalds, becoming the fast-food giant’s second delivery partner in the UK, alongside Uber Eats. The two online food delivery platforms will both offer McDonalds through their apps, where previously only Uber Eats could do so. It’s a big win for Just Eat, and follows on from an exclusive partnership with Greggs (GRG).
Anexo (ANX) anticipates adjusted pre-tax profit for the year ending 31 December 2019 will be in line with current market expectations. The number of vehicles in the credit hire division has been kept steady while the number of litigators at Bond Turner has risen, driving increased case settlements and cash collection relative to investment in new cases. The group says monthly cash collections during the second half of the year exceeded the levels achieved during the first half. A new Leeds office is planned for the first quarter of 2020, initially staffed by existing senior employees relocating from Bolton. The group hopes the new regional office will provide further opportunities to recruit staff and expand headcount.
Euromoney (ERM) has said ahead of today’s AGM that trading is in line with management’s expectations. Underlying revenues are flat year-over-year, with growth in the pricing and data and market intelligence segments offset by continuing challenges in asset management. The group’s full-year outlook hasn’t changed.
Virgin Money UK’s (VMUK) net interest margin was flat at 160 basis points in the three months to December, as the lender trimmed its mortgage book and boosted its customer deposit base in its first fiscal quarter. Chief executive David Duffy heralded the group’s performance “in a difficult market”, but counterbalanced a post-election improvement in sentiment with competitive pressures in UK banking and “uncertainty over the final Brexit settlement”. The market appears pleased, pushing the shares up by 2 per cent this morning.
Airtel Africa (AAF) has seen its eight consecutive quarter of double-digit revenue growth and cash-profit margin expansion at constant currencies. For the nine months to December, revenue grew by 9.9 per cent to $2.5bn, while third-quarter revenues rose by 12.8 per cent. Underlying cash profits were $1.1bn for the nine months, up 13.2 per cent. Free cash flow almost doubled to $391m. Net debt to cash profits was 2.2 times, down from 3.2 times in December 2018.
Severn Trent (SVT) says that it has decided to accept Ofwat’s final determination for the next regulatory period, AMP7. This includes a totex allowance of £6.8bn between 2020 and 2025 and “stretching but achievable” customer outperformance delivery incentives (ODIs) such as reducing leakages by 15 per cent. The group intends to grow its dividends across AMP7 at least by the rate of the consumer price index including owner occupiers’ housing costs, also known as CPIH inflation. The dividend for the 2021 financial year is expected to rise from 100.08p to 101.58p. Severn remains on track to deliver at least £25m in customer ODI net outperformance in the last year of AMP6, taking the total amount of deferred AMP7 revenue to at least £177m in nominal prices.
Ofgem has launched an investigation into National Grid (NG.) and Scottish Power over their delivery of a £1.3bn subsea power cable transporting electricity between Scotland, England and Wales. The joint venture was due to be completed in 2015 but only came into service in 2017 after significant delays. The regulator has said it will “review the performance” of the two companies and whether the late delivery breached licence conditions. It is also looking at whether the obligation to “develop and maintain an efficient, co-ordinated and economical system of electricity transmission” has been fulfilled.
Luceco (LUCE) shares rose 4 per cent after the LED lighting business upgraded its year end guidance for the second consecutive year. Full year 2019 earnings are expected to be 3 per cent ahead of previous forecasts while 2020 is now anticipated to be 6-11 per cent above market estimates for adjusted operating earnings. This was despite slower second half growth which reflected “tougher comparatives and more hesitant UK demand caused by political & economic uncertainty”.
