The growing concerns of the coronavirus spiralling into a global pandemic continue to dominate with the UK equity markets deep in the red this morning as the FTSE100 drops through the 7,000 level. Click here for the latest thoughts of The Trader Nicole Elliott on global markets.
IC TIP UPDATES:
Walt Disney’s (US:DIS) chief executive Bob Iger (pictured) is stepping down as chief executive of the media giant after a 15-year stint at the top. He moves into the role of executive chairman, and will stay with Disney until the end of 2021. Most recently, Mr Iger oversaw the successful launch of Disney’s ‘Disney+’ streaming service. Bob Chapek replaces Mr Iger as CEO. The group noted that Mr Chapek brings 27 years of leadership experience across Disney’s parks, consumer products and studio businesses. While the shares dipped in US pre-market trading, we remain positive. Buy.
After a terrible year, newly-installed Metro Bank (MTRO) chief executive Dan Frumkin has wasted no time laying out a new strategy for the struggling lender. Targeting a statutory return on tangible equity above 8.5 per cent from 2024, the bank plans to improve the cost-efficiency of its new stores, sell some of its loan book, and increase its focus on lending to the specialist mortgage, SME and unsecured markets. On another down day for markets, investors appear to have found another excuse to cash out. Sell.
Losses deepened at William Hill (WMH) as the impact of the £2 stake limit on fixed-odds betting terminals hit home. Adjusted operating profits fell 37 per cent to £147m, while exceptional charges and adjustments relating to shop closures and redundancies came in at £134m. Thankfully, the group’s position in the US is strengthening, with net revenues up 38 per cent in the year and the group now holding almost a quarter of the nationwide market. We are reviewing our buy recommendation.
The Restaurant Group (RTN), which owns Wagamama and Frankie & Benny’s, said that it has suspended its dividend and aims to close up to 90 sites by the end of 2021.Chief executive Andy Hornby said in a statement that he was “acutely aware of the challenges” facing the leisure business and the wider casual dining sector. Like-for-like sales in its leisure division declined by 2.8 per cent. Sell.
KEY STORIES:
Taylor Wimpey (TW.) reported a 5 per increase in completions last year and was around 49 per cent forward sold for private completions for 2020. However, flat sales prices and build cost inflation offset a rise in volumes and pushed down the operating margin to 19.6 per cent, from 21.6 per cent the prior year. In Spain, the housebuilder completed 323 homes, slightly down on the prior year, at an average selling price of €429k, compared with €344k.
Weir (WEIR) looks set to dispose of its ailing oil and gas division, after a £546m impairment of its North American oil & gas division pushed the engineering group into a £372m pre-tax loss, with Weir recognising “uncertainty and volatility” in the space and stating its intention to “maximise value from the oil & gas division at the right time”. Weir said that a shift in focus from North American exploration and production operators from growth towards cash generation had led to a second-half downturn. The division completed a £35m annualised cost savings programme, which included a cut to headcount by around 600 people.
Having paid HMRC’s estimate of £40.4m in underpaid landfill taxes in full, Augean (AUG) swung from a statutory pre-tax profit of £10.6m to a loss of £15.3m in 2019. The group maintains it has paid the appropriate amount of landfill tax and intends to challenge HMRC’s assessment at a tax tribunal later this year. Stripping out this charge, adjusted operating profit surged by almost two-thirds to £19.9m. The ‘treatment and disposal’ division saw profit increase from £10.9m to £18.1m on the back of higher sales, improved margins and cost savings. Paying the outstanding assessment has removed the overhanging uncertainty and the underlying business is continuing to grow. Buy.
Capital and Counties (CAPC) announced plans to return £100m by buying back shares following the sale of its Earls Court interests. The commercial property landlord swung to a £63.3m pre-tax loss last year after suffering a £43.3m loss on the revaluation of investment and development properties. Ninety-two new leases and renewals were completed at 1.3 per cent above estimated rental values at the end of December 2018.
Shares in Eddie Stobart (ESL) have plunged more than 90 per cent after being reinstated on AIM alongside the release of the half-year results. The group recognised £169m in impairment charges for the six months to May, while the statutory pre-tax loss grew to £200m, from £15.1m in the prior period. Management is expecting a small operating loss for the full year, although it added the loss “could be greater and [management’s outlook] is subject to audit by the Group’s auditors, which may give rise to adjustments.
Ted Baker (TED) has unveiled an update to its strategy. The group’s shares plummeted late last year as it announced a profit warning alongside the departure of its chief executive and chairman. Now the group has carried out a review and plans to cut 102 roles, alongside a further 58 which are currently vacant. Cost reduction initiatives will cost £2.7m upfront, but are expected to strip out £5m in the current financial year, and £7m on an annualised basis.
OTHER COMPANY NEWS:
Avast’s (AVST) results were in line with management’s expectations for 2019 – with adjusted revenues up by 5.6 per cent to $873m and adjusted billings up by 5.7 per cent to $911m. The main driver of growth was consumer direct desktop, for which adjusted revenues rose by 9 per cent to $633m. The group said that customer retention rates for this division rose by more than two-thirds, helped by lower churn. At the end of January, after being criticised for its sale of user data through its analytics subsidiary Jumpshot, the group announced that it would wind Jumpshot down with immediate effect. It will also return the investments made by Ascential (ASCL) into the business. For 2020, Avast expects mid-single digit organic revenue growth and a stable cash-profit margin.
Unite (UTG) underlying full-year profits grew 24 per cent to £305.3m, excluding the effects of its £1.4bn Liberty Living acquisition, which pushed the student accommodation group into a statutory pre-tax loss of £101.2m. Unite’s progress on integrating Liberty has pushed up 2020 cost synergies by £5m-£6m, which will rise to £15m in 2021. Overall, Unite achieved rental growth of 3.4 per cent last year, up from 3.2 per cent in 2018 and remains on course to meet its 2021 target of between 3-3.5 per cent.
Serco (SRP) has seen revenue growth for the first time since 2013, with sales rising by 13 per cent at constant currencies to £3.25bn in 2019. Organic revenue growth accelerated from 4 per cent in the first six months of the year to 12 per cent in the second half, propelled by the start of the £1.9bn UK asylum accommodation and support services contract. Excluding a £23m fine from the electronic tagging scandal, underlying trading profit jumped by a quarter at constant currencies to £120m, benefitting from an £8.6m contribution from the Naval Systems Business Unit (NSBU) acquisition. With free cash flow surging from £16m to £62m, the group has announced a 1p dividend, the first payout since 2014.
Despite posting an 8 per cent decline in customer numbers, high-cost credit provider International Personal Finance (IPF) saw its cost-to-income ratio narrow and its statutory pre-tax profit rise 4.3 per cent to £114m in 2019. Chief executive Gerard Ryan put this down to “strong operational execution” in the European home credit division, as well as IPF’s digital business – the latter of which posted a maiden profit for the year.
