PMI: service sector growth slows as Brexit chaos continues
Service sector growth slowed in August amid the prevailing Brexit chaos, new data revealed on Wednesday.
Confidence regarding activity during the next 12 months hit its lowest level since July 2016. The report said that this primarily reflects concerns surrounding domestic political uncertainty and its impacts on client decision making.
As the Brexit deadline looms closer, the only certainty for the nation at this point is additional uncertainty.
The IHS Markit/CIPS UK Services PMI Business Activity Index dropped to 50.6 in August, down from July’s 51.4 reading. The report said that this signals “marginal expansion” of service sector output.
The survey also shows slower increases in new work and staffing levels, which was linked to “sluggish underlying economic conditions”.
The Brexit Halloween extended deadline is fast approaching. Just last week, Boris Johnson asked the Queen to suspend parliament, preventing MPs from blocking a no-deal departure from the European Union.
Boris Johnson has said that if Labour and rebel Conservative party members succeed in blocking a no-deal Brexit, he will call for a general election on 15 October.
The GBP/USD rallies towards 1.22 as the chances of a hard Brexit begin to fade.
“Business activity in the service sector almost stalled in August as Brexit-related worries escalated, curbing spending by both businesses and consumers,” Chris Williamson, Chief Business Economist at IHS Markit, which compiles the survey, commented on the data.
“So far this year the services economy has reported its worst performance since 2008, with worrying weakness seen across sectors such as transport, financial services, hotels and restaurants, and business-to-business services,” Chris Williamson continued.
“While the current downturn remains only mild overall, the summer’s malaise could intensify as we move into autumn. Companies have grown increasingly gloomy about the outlook due to the political situation and uncertainty surrounding Brexit, adding to downside risks in coming months.”
“With the exception of the slump in sentiment after the 2016 referendum, August saw service sector firms at their gloomiest since the height of the global financial crisis in early 2009.”
GCP Student Living expands its Scape sites, shareholders’ returns increase
Real estate investment trust company GCP Student Living plc (LON: DIGS) increases its portfolio value and improves its shareholders’ returns.
The Company’s property portfolio value increased during the full year, from £784.4 million at the end of FY18, to £921.6 million at the end of FY19. While its rate of student rental growth narrowed on-year, it still increased 3.5% during the full year.
GCP Student Living shareholders enjoyed similar progress, with EPRA NAV per share increasing from 149.12p, to 165.52p at the end of FY19. During the same period, the Group paid a dividend of 6.15p per share, up from 5.95p for the year before.
The Company added that it completed the refurbishment of its Scape Bloomsbury site for the academic year 2018/19, its 555 bed Scape Brighton site commenced construction and is expected to be completed by the beginning of the academic year 2019/20. The Group now has a high value portfolio of 11 high value assets, largely based in London, totalling 4,116 beds.GCP Student Living comments
Robert Peto, Chairman, responded to the results,
“I am pleased to report on a sixth consecutive year of robust results for the Company.”
“The Company’s focus on student residential accommodation assets in locations which benefit from supply and demand imbalances, including its core London market, has delivered total shareholders returns of 14.8% for the year. On a relative basis, the Company has substantially outperformed the FTSE EPRA NAREIT index of UK REITs, which declined by 6.0% over the same period. The Company’s annualised total shareholder return since IPO1 is 12.9%, exceeding the 8-10% target set at launch and more than double the return of the FTSE All-Share index over that period.”
“The Company’s performance has been underpinned by strong operational drivers including full occupancy across the portfolio and year-on‑year rental growth in excess of both inflation and the national average for student accommodation. This has enabled the Company to increase its annual dividend to 6.15 pence per share from 5.95 pence per share in the prior year. In addition, the Company’s investments continue to benefit from yield compression arising from competitive market demand for student accommodation assets. This has been reflected in the upward valuation of the Company’s portfolio and a concomitant rise in its NAV during the year.”
Investor notes
The Company’s shares dipped slightly, by 0.068p or 0.11p to 162.29p a share 04/09/19 14:31 BST. The Group’s p/e ratio is 40.50, their dividend yield is 3.79%. Elsewhere in property development and estate agency news, there have been updates from; Barratt Development Plc (LON: BDEV), Belvoir Group PLC (LON: BLV), Tritax Big Box REIT PLC (LON: BBOX), Intu Properties plc (LON: INTU), LSL Property Services plc (LON: LSL) and Countryside Properties PLC (LON: CSP).Frontier Developments shares dip despite roaring 593% profit growth
British video game developer Frontier Developments PLC (LON: FDEV) booked impressive fundamentals for full year 19.
The Company’s revenue jumped 162% on a year-on-year comparison, from £34.2 million to £89.7 million. This drove operating profit growth of 593%, up from £2.8 million to £19.4 million, and EBITDA growth of 209%, up from £9.4 million to £29.0 million. Frontier Developments added that their basic EPS rose 373%, from 9.6p to 45.4p.
The Company attributed much of its progress to its biggest release to-date. Jurassic World Evolution was released in June 2018 to compliment the release of the Jurassic World: Fallen Kingdom film. The game sold a million copies in the first five weeks, and two million within seven months. Planet Coaster, Elite Dangerous and Planet Zoo – released in November 2016, December 2014 and November 2019 respectively – all progress as the Company’s major releases.
Frontier Developments comments
David Braben, Chief Executive, said,“I am delighted to report a record level of financial performance, which reflects the skill and hard work of our talented team and the support of our players around the world. We continue to nurture and enhance all three of our existing titles (Elite Dangerous, Planet Coaster and Jurassic World Evolution), and I look forward to the release of our fourth highly anticipated game, Planet Zoo, later this year.”
“Earlier in 2019 we celebrated our 25th anniversary as a company, and while I am very proud of all of our achievements to date, it feels like we are at the start of our journey. The opportunities we have now are better than ever. I am more excited about our future, our next 25 years, as a result, as we continue to expand our horizons and grow our portfolio, our team, and our partnerships.”
Investor notes
After a slight recovery, the Company’s shares are down 6.28% or 70.00p to 1,044.00p a share 04/09/19 13:59 BST. Peel Hunt and Shore Capital analysts reiterated their ‘Buy’ stance on Frontier Developments stock. The Group’s p/e ratio is 116.04, their dividend yield is unavailable. Elsewhere in the tech sector, there were updates from; Gamma Communications PLC (LON: GAMA), Maintel Holdings plc (LON: MAI), Bigblu Broadbend PLC (LON: BBB), Avanti Communications Group PLC(LON: AVN), Maestrano Group (AIM: MNO), Vitec Group plc (LON: VTC) and TT Electronics (LON: TTG).Barratt Developments profits and dividends increase on-year
Residential property development company Barratt Development Plc (LON: BDEV) saw their share price dip on decreased revenues, though their profits and dividends both increased on a year-on-year comparison.
While the Company’s revenues contracted 2.3% to £4.763 billion, their profit before tax jumped 8.9% on-year, to £909.8 million. Their profits from operations also rose 4.5% to £901.1 million.
Barratt Developments shareholders enjoyed similar success, with basic EPS bouncing 10.1% to 73.2p, and total dividends increasing 5.9% to 46.4p per share.
The Group added that their annual home completions went up 1.6% to 17,856, and that they maintained their high standard of customer care through the year.
Barratt Developments
Speaking on the results, Chief Executive David Thomas stated, “It has been another outstanding year delivering a strong operational and financial performance. The Group’s long term investment in quality and operational excellence continues to drive margin improvements, alongside our highest number of completions for 11 years. As the only major housebuilder to be awarded a 5 Star rating for customer satisfaction for ten years in a row, we continue to lead the industry in quality and customer service.” “Whilst there is increased economic and political uncertainty, we begin the new financial year with a strong forward order book, balance sheet and cash position which we believe provides us with the resilience and flexibility to react to potential changes in the operating environment in FY20 and beyond. We maintain our focus on the delivery of operational improvements across our business, and our commitment to deliver the highest quality homes across the country.”Investor notes
After making a slight recovery, the Company’s share price dipped 4.12% or 25.60p to 596.40p a share 04/09/19 13:08 BST. Peel Hunt analysts downgraded their stance to Hold, which concurred with the stance of Liberum analysts, Shore Capital reiterated their ‘Sell’ rating. The Group’s p/e ratio is 9.35, their dividend yield stands at 4.43%. Elsewhere in property development and estate agency news, there have been updates from; Belvoir Group PLC (LON: BLV), Tritax Big Box REIT PLC (LON: BBOX), Intu Properties plc (LON: INTU), LSL Property Services plc (LON: LSL), Countryside Properties PLC (LON: CSP) and Ashley House Plc (LON: ASH).RBS expects to fork out up to £900 million on PPI claims
The Royal Bank of Scotland issued a warning on Wednesday saying that it expects a hit of up to £900 million after a rise in PPI claims.
Shares in RBS (LON:RBS) were trading 1.44% higher during early trading on Wednesday.
The deadline for customers to claim mis-sold payment protection insurance (PPI) was 29 August. RBS said that the volume of claims received during August were “significantly higher” than it had anticipated, spiking even further in the final days leading up to the deadline.
“RBS therefore now expects to make an incremental charge for PPI claims, in addition to the provisions recorded to 30 June 2019, in the range of £600 million to £900 million in its Q3 2019 results,” RBS said in a company update on the matter.
RBS has been handling complaints about the mis-selling of PPI since 2011, as made necessary under the FCA’s policy statement, which outlined the 29 August 2019 deadline.
As it stands, £36 billion has already been paid out by British banks in order to compensate consumers. Of the figure, £2 billion was paid out between 1 January and 30 June 2019. Once administration costs are included, total costs have amounted to £48.5 billion.
The Financial Conduct Authority (FCA) delivered a nationwide communications campaign in order to raise awareness of this deadline to consumers who may have been mis-sold PPI.
Consumers who are successful with their PPI claim will be paid back via bank transfer or cheque as quickly as possible, the FCA said.
According to the FCA, the average payment is roughly £1,700 – but this can vary from customer to customer.
Shares in Royal Bank of Scotland Group plc (LON:RBS) were up 1.47% as of 09:48 BST Wednesday.
Brexit delay vote and another round of US tariffs – a muted day for markets
The title says it all. Brexit caused a minor bump to the pound and confirmation of US tariffs on Chinese goods saw the Dow Jones wistfully shed points. While not a catastrophic day, market indices in the UK and across the world reflected leaders’ inability to resolve the divisions that riddle modern day society. With only flickers of salvation – or at the very least respite – on the horizon, we can only hope for some semblance of ‘business as usual’, which isn’t describing the unshakeable political uncertainty, which has weighed down fundamentals thus far in 2019.
Talking on market movements during the day, Spreadex Financial Analyst Connor Campbell said,
“Though there is no doubt plenty of pain on the horizon, sterling managed to shake off the excesses of its Tuesday’s slide as the session went on.”
“At points striking a sub-$1.20 price last seen in 1985, cable now finds itself down just 0.1%, aided by an apparent reduction in panic-levels and a notably bad ISM manufacturing reading from the US. Against the euro sterling saw a similar reversal, erasing its early losses to sit effectively unchanged at €1.0995.”
“Things are far from over, however, and with the Commons vote on a Brexit-delay set to take place at 10pm tonight, Wednesday could see another nasty bout of volatility.”
“Beyond the pound, the markets weren’t very happy this Tuesday. The implementation of the latest round of tariffs on Chinese goods by the US has seemingly acted as a reminder that the situation remains ugly between the two superpowers. Ditto an ISM manufacturing PMI that unexpectedly fell into contraction territory for the first time in almost exactly 3 years.”
“This caused the Dow Jones to shed 170 points, sinking back under 26050 as it undid a chunk of the rebound seen at August’s close. The DAX and CAC, which have been in a mood all day, dropped 0.5% and 0.7% respectively; meanwhile after losing most of its weak-pound-boost, the FTSE fell back to 7250 as it lost more than 30 points.”
Sino-US tensions continue to weigh on market sentiment and the UK is still game to continue its political soap opera. While the pound didn’t suffer too badly today, the symptoms of tonight’s Brexit vote will no doubt come into effect as the market opens on Wednesday morning. Other news and macro financial updates have come from; Parliament being prorogued, No-Deal Brexit preparations, UK GDP during the second quarter, the London Stock Exchange Group (LON: LSE), the US-China currency manipulation debacle, and analysts’ outlook for markets and currencies.STV revenues narrow while operating profits surge 686%
Scottish broadcasting and media company STV Group Plc (LON: STVG) saw increased profits across indexes, despite revenues contracting as a result of the closure of loss-making STV 2.
The Company boasted strong headline fundamentals, with operating profits surging 686% to £11.0 million and profits spiking 312% to £9.1 million.
These figures are somewhat misleading, given that H1 profits during 2018 were heavily weighed down by their financial lame duck, STV 2. Despite this, STV still posted strong adjusted profits before tax, up 7.4% to £10.1 million during the first half. Also, their adjusted operating profit hiked 10% to £11.0 million and its adjusted EBITDA rose 17.5% to £13.4 million.
Their shareholders enjoyed similar progress, with adjusted basic EPS up 9.0% to 21.8p, and an interim dividend per share of 6.3%, up 5.0% on-year.
However, and owing to spending on operations and strategic changes, the Company’s revenue contracted 4.9% to £54.9 million, while the net debt widened 11.1% to £42.0 million.
STV comments
Simon Pitts, Chief Executive Officer, said,
“An operating profit increase of 10% when national advertising revenues are down supports the decisions we took to reposition the Group for profitable growth, focusing on STV’s regional strengths and the exciting growth potential offered by our digital and production businesses. In the first half of 2019 we have enjoyed the best all time viewing share on STV since 2009 and our total advertising revenue has outperformed the wider TV market, driven by continued growth in digital and regional advertising and by the increasing success of the STV Growth Fund which has attracted over 100 new Scottish advertisers to television since launch. These factors have contributed to a strong first half performance, with a significant improvement in operating margin.”
“We continue to make good progress with our strategic growth plan and have laid solid foundations for the future. Although current political uncertainty around Brexit will continue to impact total national advertising revenue in the second half, we expect further growth in digital and regional revenue and an improved performance from STV Productions, including a new quiz format, The Cash Machine, the first commissions from newly acquired Primal Media, and a new drama for BBC1, Elizabeth is Missing.”
“We also have an exciting programming line-up to look forward to on STV in the second half of the year, with exclusive coverage of the 2019 Rugby World Cup, new dramas like A Confession and Sanditon, and entertainment juggernauts like Britain’s Got Talent The Champions and I’m a Celebrity helping to drive viewing on screen and online.”
Investor notes
The Company’s share price last closed at 355.00p a share 03/09/19 12:02 BST. Peel Hunt and Shore Capital analysts reiterated their respective ‘Buy’ stances on STV Group stock. The Group’s p/e ratio is 8.64 and their dividend yield is attractive at 5.63%. Elsewhere in media and broadcast news, there have been updates from; ITV (LON: ITV), Netflix Inc (NASDAQ: NFLX) and the BBC.Highland Gold profits boosted by increased sales volumes
Gold miner and trader Highland Gold Mining Ltd (LON: HGM) posted positive first half results led by sales of increased gold volumes.
The Company stated that its gold volume sold increased from 121,174oz for H1 2018, to 142,609oz for H1 2019. This led an increase in revenue on-year, from US$146.9 million to US$174.7 million.
Correspondingly, Highland Gold Mining operating profit rose from $50.67 million to $57.38 million, and their net profit spiked from $28.64 million to $45.69 million. The outlook was equally positive for shareholders, with their EPS rising from $0.088 to $0.125 in a comparison of the same periods.
Operationally, the Company noted that it owed its success to a 23.3% production increase at its Mnogovershinnoye mine, with a JORC-compliant reserve report extending its lifespan to 2029, up by seven years. Its Kekura and Klen ventures continued operations throughout H1 2019, with both being granted residency in the Chukotka special economic zone.
However, the Group did report that its Belaya Gora and Novoshirokinskoye prospects both suffered declines due to ‘operational issues’ and lower grades.
Highland Gold Mining comments
Denis Alexandrov, CEO, said,
“Highland Gold achieved solid half-year financial performance, buoyed by stable gold prices and a weaker rouble, despite higher maintenance capex for replacing older equipment due to the extension of life of mine at our key production assets, and higher costs at our newest mine, Valunisty, which we are now focusing on bringing in line with our other operating assets.”
“From an operational standpoint, the Company met its internal targets and increased production over the first half of last year with the aid of Valunisty and a particularly strong performance from MNV. Novo made progress in rectifying some of the issues with metals grades that constrained its output over the past twelve months. Belaya Gora had a difficult half-year, but still managed to minimize the impact of its operational challenges on total production.”
“We expect higher production levels and stronger operating cash flow in the second half, as well as continued progress on construction at our key development project, Kekura, and on our ongoing projects to improve operations at each of our existing mines.”
Investor notes
Following the update, the Company’s shares have rallied 0.34% or 0.80p to 233.40p a share 03/09/19 14:20 BST. The Group has a p/e ratio of 18.22 and an inviting dividend yield of 4.71%. Elsewhere in the mining and minerals sector, recent updates have come from; Kavango Resources PLC (LON: KAV), URU Metals Ltd (LON: URU), Resolute Mining Limited (LON: RSG), Bisichi Mining PLC (LON: BISI), Polymetal International Plc (LON: POLY) Cora Gold Ltd (LON: CORA) and Glencore PLC (LON: GLEN).Gamma Communications rallies on improved fundamentals
Tech-based communications provider Gamma Communications PLC (LON: GAMA) posted impressive financial results for the first half of full year 2019, alongside expansion of its user base.
The Group’s revenue grew 15% on a year-on-year comparison for the first half, up to £158.2 million. This led growth across profit indexes. Its profit before tax jumped 40% to £21.7 million, its adjusted EDBITDA spiked 39% to £30.4 million and its gross profit bounced 25% to £78.1 million.
This growth was reflected in improved fundamentals for its shareholders, with adjusted EPS spiking 43% on-year to 19.2p and its dividend per share rising 13% between the two periods, to 3.5p.
Gamma Communications added that the number of Horizon (Cloud PBX) users increased 10% from 435,000 to 478,000, its Unified Communications upgrade to Horizon already has 4,000 users (from March) and the number of installed SIP Trunks increased to 938,000, up 10% from 31 December 2018.
Gamma Communications comments
Andrew Taylor, Chief Executive Officer, stated,
“We have delivered a strong business performance and an excellent set of financial results during the first six months of 2019, with both our UK Indirect and UK Direct businesses continuing to grow well. Despite an increasingly competitive market, our product performance was positive, and during the period we continued to invest in developing and launching new products and service capabilities. This included our new Collaborate product which has been well received across the market. The development and execution of our Gamma 2023 strategy is progressing well, and looking forward we will continue to focus our efforts on strengthening our competitive position and ensuring that we further enable both our customers and our channel partners to be successful in the marketplace”
Investor notes
The Company’s shares have enjoyed an impressive rally of 10.45% or 109.70p to 1,159.70p a share 03/09/19 13:33 BST. Peel Hunt analysts reiterated their ‘Add’ stance on Gamma Communications stock. The Group’s p/e ratio is 34.65, their dividend yield is modest at 0.81%. Elsewhere in the tech sector, there were updates from; Maintel Holdings plc (LON: MAI), Bigblu Broadbend PLC (LON: BBB), Avanti Communications Group PLC(LON: AVN), Maestrano Group (AIM: MNO), Vitec Group plc (LON: VTC), TT Electronics (LON: TTG) and Seeing Machines (LON: SEE).Belvoir posts 48% on-year revenue jump during the first half
The UK’s largest property franchise Belvoir Group PLC (LON: BLV) posted bumper fundamentals for the first half of 2019, with increased input from its financial services branch.
The Group’s revenue jumped 48% on a year-on-year comparison during the first half, up to £9.047 million. This drove an 18% increase in gross profit and 23% bounce in adjusted profit before tax, to £6.198 million and £2.999 million respectively.
Revenue growth was helped by a spike from the Company’s financial services division, which saw its revenues hike from £1.311 million to £3.969 million on-year. This came from the acquisition of MAB Gloucester Ltd. Belvoir said MAB Glos and the underlying business each contributed around 50% of the increase to each profit index.
Its shareholders shared a limited extent of that success. While adjusted EPS grew 21% to 6.9p, basic EPS dropped from 6.9p to 6.1p per share and the Company maintained its 3.4p per share interim dividend.
The Company is now home to 100 financial services advisors, up by 87 from H1 2018 and owing to the acquisition of MAB Gloucester. Financial services contributed 19% of total profits, while lettings made up 66%.
Belvoir comments
Dorian Gonsalves, Chief Executive Officer, responded to the results,
“I am delighted to report another half year of further strategic and trading progress for the Group, with our diversification into financial services building on the growth of the underlying business. Trading across lettings, sales and financial services continues to outperform their respective markets and deliver strong results for the Group.”
“The further take-up of property sales, financial services and franchisee-led acquisitions demonstrates the entrepreneurial spirit of our franchisees in the face of even more challenging market conditions.”
“I am pleased to further report that Belvoir has achieved a promising start to the second half, and as such the Company is on track to meet management expectations for the full year.”