Hopes of No-Deal Brexit dodge allows pound to lead index rebound

Jamie Gordon
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Hopes of No-Deal Brexit dodge allows pound to lead index rebound
Last night’s vote saw Commons vote 328 in favour of seizing control of the Parliamentary agenda, in order to block a No-Deal Brexit. On the same day, Boris Johnson decisively lost his majority in the House, and the pound and Remainers alike celebrated the outcome of last night’s proceedings. The pound led the the rebound today, followed by market indices such as the Dow Jones. Sterling’s boisterousness was perhaps premature, or will at least be short-lived, with Boris now calling for an election. Far from preventing a No-Deal Brexit, last night’s verdict likely pushed forward a snap election which has Boris winning a majority pinned as the most likely outcome. In short – and as stated by Tony Blair on Monday – the Labour-led Remain coalition will come to rue, not relish, an election. Speaking on today’s movements, Spreadex Financial Analysts Connor Campbell said,

“In quite the reversal from Tuesday’s 34-year lows – and brushing off a poor services PMI – Parliament’s attempts to avert a no-deal Brexit have put a spring in the step of the pound.”

“Admittedly it couldn’t quite maintain its lunchtime giddiness, where it found itself trading above $1.22. However, it was still up 0.8% against the dollar, and 0.3% against the euro, its weaker performance against the latter due to a decent morning for Eurozone PMIs.”

“That this comes despite the still present threat of a general election shows just how desperate the currency is to avoid Britain crashing out of the EU without an agreement in place – some uncertainties, after all, are more palatable than others.”

“Though the FTSE remained in the green, it did eventually succumb somewhat to the strength of the pound. In other words, it clung onto a half a percent increase, but slipped from its 7330-crossing one-month highs.”

“Elsewhere the rest of the markets continued to ride high off a combination of a temporarily reassuring Chinese services PMI, and the calming of the political situation in Italy. The DAX and CAC rose 0.8% and 1.2% respectively to hit 12000 and 5520, while the Dow Jones climbed 175 as it eyed 26300.”

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.  

Somero Enterprises second warning of the summer and profits slide 23%

Jamie Gordon
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Somero Enterprises second warning of the summer and profits slide 23%
Florida focused building technology and concrete levelling specialist Somero Enterprises Inc (LON: SOM) will have to have its darling status on the stock market called into question, with its earnings dropping for the first time since 2010. The Company’s performance has been hampered by unexpected rainfall in the US, with shares diving 40% since June. H1 revenues dropped 13% on a year-on-year comparison, down to $39.0 million. This drove down adjusted EBITDA and profits before tax by 22.8%, down to $11.2 million and $10.5 million respectively. Somero Enterprises added that their cash flow from operations dipped 64.2% to $4.4 million. The Group’s shareholders had a mixed first half, with their diluted adjusted net income per share down 22.2% from $0.18 to $0.14. However, their interim dividend per share rose 4.5% to $0.0575.

Somero Enterprises comments

Jack Cooney, CEO, said,

“As announced in June, our first six months of 2019 fell short of our full year expectations at the beginning of the year, primarily due to extraordinarily heavy rainfall during H1 2019 in the US that depressed sales in our largest market. The US non-residential construction market remains very healthy, and we are pleased to note that as the weather improves, we expect to see improvement in H2.”

“Whilst towards the end of the period, trading in Europe and the Middle East fell below the prior year in part due to the timing of certain contracts, we remain confident to deliver improved H2 2019 results, broadly in line with guidance for the full year, notwithstanding the wider macro pressures in Europe, particularly Germany, the Middle East and Australia. Pleasingly, a number of our other markets delivered growth, alongside growth from new products.”

“Despite our disappointment with H1 2019 trading, we do not see a fundamental change in our end-markets and maintain a positive outlook for the remainder of 2019 particularly as our customers in the US return to more typical levels of productivity. Our confidence is based on our close customer contacts through which we can assess customer workloads, backlogs and business outlook.”

“We continued to make long-term investments and to add key talent to the organization, striking the right balance of leveraging our flexible operating model to control costs and protect profits with making strategically important investments to grow the business over the long-term. With this operating flexibility and confident outlook in hand, we remain committed to continued sales execution in our core markets, progressing on our new product initiatives, and making sound strategic investments for medium to long-term growth, to deliver strong profits and healthy cash flows to our shareholders.”

Investor notes

After a slight recovery, the Company’s shares have dipped 21.61% or 60.50p a share, to 219.50p a share 04/09/19 15:26 BST. Analysts from finnCap reiterated their ‘Corporate’ stance on Somero Enterprises stock. The Group’s p/e ratio is 8.91; their dividend yield is extremely inviting at 6.65%. Elsewhere in building and development news, there have been updates from; Barratt Developments Plc (LON: BDEV), Wincanton plc (LON: WIN) and Travis Perkins Plc (LON: TPK).

Highlands Natural Resources to drive CBD strategy with management change

UK Investor Magazine
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Highlands Natural Resources to drive CBD strategy with management change
Highlands Natural Resources (LON:HNR) today announced that Nick Tulloch has been appointed CEO of the company having served as CFO since early 2019. Nick Tulloch will be replacing Robert Price who will be leaving the company to make way for Mr Tulloch to pursue Highlands’ CBD business. Nick Tulloch, new Chief Executive Officer of Highlands, said: “I have known Robert for over four years and, during that time, he has become a good friend and a supportive colleague. As the founder and leader of the Company since IPO, he has been instrumental in bringing the Company to where it is today and he leaves the Company with the opportunity to become a leading player in the rapidly developing CBD industry. “ UK Investor Magazine met with Nick Tulloch before the announcement of his appointment as CEO, to discuss the groups push into the CBD industry. The group has transitioned from a pure oil and gas company to one who now seeks growth predominantly in the CBD and cannabis sector. Highlands have targeted the CBD business with a premium brand, Zoetic, which having launched just three months ago is now selling in the both the UK and US. Having identified differing consumer tastes in the United States and UK, branding for Zoetic has been adapted for each market. Not only has Highlands created different Zoetic branding for the two markets, it is also employing varied distribution models. In the United States Zoetics is sold primarily in Colorado through a distribution partner that operates convenience stores typically attached petrol stations. This approach is very different to the current approach in the UK which has initially been channelled through social media and digital means. Mr Tulloch says this may develop to wholesale operations in the future but he is conscious of preserving the premium appeal of the brand and said he would be very reluctant to employ one of the major UK supplement stores as a distribution channel due to their overuse of sales and discounting. While the wholesaling Zoetic branded is not yet currently underway, Highlands have secured a two-year agreement to provide CBD to Cellulac plc for conversion to medical grade CBD. Cellulac is 9.35% owned by Integumen plc. When commenting on the CBD and cannabis product regulatory environment in the UK, Tulloch says in looks forwards to greater regulation and standardisation through the industry as this will help boost the Zoetic brand and remove some of the more questionable suppliers currently operating. Tulloch highlighted Highlands have intentionally forged an over-compliant approach to the market in preparation for greater regulations and touched on the organic nature of the Zoetic products. Highlands have recently raised £354,000 from high net worth investors by way of a placing which Tulloch says will be allocated to the marketing of the brand. Despite the focus on CBD and Zoetic, CEO Tulloch does say the legacy oil and gas business could become potentially very valuable should oil prices spike significantly, however today’s announcement said they would seek to close the oil business failing the opportunity for an orderly sale of the business.

PMI: service sector growth slows as Brexit chaos continues

Dina Caruso
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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

Jamie Gordon
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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

Jamie Gordon
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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

Jamie Gordon
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6
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

Dina Caruso
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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

Jamie Gordon
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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%

Jamie Gordon
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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.
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