Menzies finding it difficult to take off

Andrew Hore
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Menzies finding it difficult to take off

John Menzies (LSE: MZNS) is focused on aviation services since it sold its distribution business. However, the remaining business has its problems and a trading statement last month led to downgrades ahead of its interims on 13 August.
Cargo traffic has been hit by worries about global trade. EMEA appears to be weak, while North America is holding up better. The interims will provide further information about trading in the different geographic regions.
Some airlines have had their financial problems and Boeing is not in a good place following plane crashes. That could hamper any improvemen...

How boohoo has overtaken ASOS

Andrew Hore
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How boohoo has overtaken ASOS

Online fashion retailer boohoo (LON: BOO) has not always been an investor favourite, but in little more than five years it has leapfrogged rival ASOS (LON: ASC) in market capitalisation terms.
The acquisition of the online assets of Karen Millen and Coast for £18.2m has broadened the range of brands owned by boohoo, which is on course to increase pre-tax profit from £76.3m to £93.9m in the year to February 2020.
boohoo is valued at £2.74bn, which compares with £2.03bn for ASOS, which is not much more than one-third of its market capitalisation when boohoo joined AIM. At that time, ASOS was t...

Hidden attractions of nmcn

Andrew Hore
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0
Hidden attractions of nmcn

Even when it was called North Midland Construction, nmcn (LON: NMCN) was not a well know fully listed company yet it has probably been listed for longer than most of the other companies on the premium list.
Management is starting to raise the profile of the Nottinghamshire-based business and the company should start to attract the attention of investors that the much-increased dividend and the share price performance in the past three years warrants.
Employing Progressive Research to write analyst reports on the company broadens the information available to investors.
Some people turn their...

UK GDP contracts 0.2% during Q2 in its first dip since 2012

Jamie Gordon
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UK GDP contracts 0.2% during Q2 in its first dip since 2012
Source: Richards, C. (2019), Office for National Statistics With discussion of a looming recession gaining traction with weakness in growth indicators, fundamentals and bond market inverted yield curves, today’s announcement from the Office of National Statistics has if anything compounded already tentative market sentiment. UK GDP (‘economy’) contracted by 0.2% against analysts’ predictions, making it the UK economy’s equal worst performance – with Q4 2012 – since the financial crash. Consecutive economic contractions signify a recession, and there are three reasons this contraction is significant. First, there was surprising growth in the first quarter; second, growth in the second quarter was expected to be stagnant rather than negative; third, the political climate makes the next quarter’s prospects dubious at best.

ONS and Analysts’ thoughts

Head of GDP at the ONS, Rob Kent-Smith, said both the manufacturing and construction sectors weakened. “Manufacturing output fell back after a strong start to the year, with production brought forward ahead of the UK’s original departure date from the EU,” He added, “the often-dominant service sector delivered virtually no growth at all”. The ONS then said, “The path of GDP and some of its components has been particularly volatile through the year so far, largely reflecting changes in timing of activity related to the UK’s original planned exit date from the European Union in late March.” BBC Economic Editor, Faisal Islam, stated, “The economy has contracted over a quarter for the first time since 2012, raising the risk that the UK might be in a technical recession.” “This figure though is set to be the worst in the G7. The UK should avoid a recession if expectations of growth in this quarter are fulfilled, but that is not guaranteed. It is not the welcoming present that a new chancellor and PM would have wanted.”

UK GDP Outlook

Today’s data do contain factors such as stockpiling and premature shutdowns, which flatter the first quarter and reflect badly on the second. However, macro scale forces such as poor global growth and mediocre volumes of investment, will weigh on wider market sentiment and are outside of the UK’s control. Alpesh Paleja, CBI Lead Economist, summed it up best, “Growth has been pushed down by an unwind of stockpiling and car manufacturers shifting their seasonal shutdowns.” “Nonetheless, it’s clear from our business surveys that underlying momentum remains lukewarm, choked by a combination of slower global growth and Brexit uncertainty.”
“As a result, business sentiment is dire.”
The CBI said today’s news was “concerning”. The problem is we’re not sure how seriously the UK is taking this news. That may sound like a ludicrous suggestion but realistically; political tit-for-tat has not halted as it normally does during a time of real economic turmoil, the news may be blamed on the reactionary behaviour of companies who feel unstable due to Brexit, and put bluntly, those who would support the uncertainty of a no-deal scenario are not opposed to a degree of economic turmoil (recession is bad for the general populace but provides an exciting investment opportunity – some Conservative members have already shorted failures in British companies). Other market and macro financial news has come from; the FTSE and Sterling, the London Stock Exchange Group (LON: LSE), the US-China currency manipulation debacle, and analysts’ outlook for markets and currencies.  

FTSE muted as Brexit warnings weigh on Sterling

Jamie Gordon
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1
FTSE muted as Brexit warnings weigh on Sterling
With suggestions of a potential resistance being mounted against Boris Johnson’s likely no-deal Brexit trajectory, Sterling gained slightly yesterday morning. Unfortunately, this gain perhaps dampened FTSE prospects of joining in yesterday’s rally (until later in the afternoon), at least to the same extent as other European indices. Speaking on market opening movements and his predictions for the morning, Spreadex financial analyst Connor Campbell stated,

“Europe was pretty tame after the bell on Friday, with the UK markets bracing themselves for what could be a rather depressing data dump.”

“Though still above 7250, the FTSE slipped 0.2% as trading got underway, roughly in line with the performances of the DAX and CAC. It could have been worse; the UK index’s mining and banking stocks are all down around 1%, losses that were somewhat compensated for by a 7% rise from WPP, which insisted its turnaround is on track despite a 43.5% slide in full year pre-tax profit.”

“Sterling was similarly muted. Against the dollar it was flat at $1.2135, while against the euro it dipped under €1.084 following a 0.1% decline. The pound is likely saving its energy for the data workout it is set to undergo this morning. The UK’s Q2 GDP is expecting to have flat-lined, a sharp drop-off from Q1’s 0.5% increase; the monthly figure, meanwhile, is forecast to drop from 0.3% to 0.1%.”

“On top of this, the currency is facing a big about face from the manufacturing sector, with production for June estimated at -0.1% against May’s 1.4% increase. Though the pound has been politically-focused of late, it’s hard to see this selection of pre-Brexit warning signs allowing sterling a happy end to the week.”

Since then, sterling has dropped against the euro and dollar, following news that the British economy shrank during the second quarter. This was driven by car makers pulling forward their scheduled shutdown periods, which drove manufacturing growth to its biggest rolling three-month fall since the financial crash. Further losses should not be ruled out, with the FTSE set for a tasking morning with two GDP readings. Other market and macro financial news has come from; the London Stock Exchange Group (LON: LSE), the US-China currency manipulation debacle, and analysts’ outlook for markets and currencies.

Vitec retains full-year guidance despite 2.2% drop in revenue

Jamie Gordon
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Vitec retains full-year guidance despite 2.2% drop in revenue
Image capture product manufacturer Vitec Group plc (LON: VTC) booked weak fundamentals during the first half ended 30 June 2019. The Company’s revenue dipped 2.2% on a constant currency year-on-year basis, to £184.2 million. While adjusted operating profit rose 0.5% to £25.8 million; adjusted profit before tax dipped 4.0% to £23.5 million, statutory operating profit dropped 8.7% to £18.9 million and statutory profit before tax dived 15.7% to £16.6 million. Vitec Group also presented a somewhat mixed set of results on its shareholder yields. Adjusted basic earnings rose 1.0% to 39.9p per share and the Group declared an interim dividend for the first half of 12.3p a share, up 7.0% on-year. Conversely, statutory basic EPS collapsed 29.3% to 27.0p. The Company said the integration of Amimon is complete and the launch of wireless video products into the broadcast sports market is set for 2020. The Group also said it was on track to take advantage of the growing e-commerce channel, with a restructuring of its Imaging Solutions sector.

Vitec Group comments

Commenting on the results, Stephen Bird, Group Chief Executive, said,

“I am pleased with Vitec’s half year performance, where we delivered results in line with expectations despite some challenges. The integration of Amimon is complete and I am excited about the opportunity to grow our wireless video capabilities, particularly in the broadcast sports market. Imaging Solutions continued to outperform a disrupted market through expanding into adjacent market segments, and is transitioning to an e-commerce business model to support future growth.”

“Over the last three years, the Group has continued to make progress executing its strategy to drive organic growth, improve margins and make value adding acquisitions. Our resources and investment are prioritised on developing new products for our faster growing brands and market segments, and our cost base is tightly managed. We also continue to look for further opportunities to add to our product portfolio.”

“Vitec is in good shape and is increasingly exposed to more growth segments of the “image capture and content creation” market. We are pleased to confirm that our outlook for the current year is unchanged, whilst we remain mindful of geopolitical challenges and FX movements. Notwithstanding these uncertainties, we continue to expect a strong 2020, benefitting from the summer Olympics, US Presidential elections and the targeted growth initiatives already underway.”

Investor notes

Following the announcement, the Company’s share price dipped 3.59% or 40.00p to 1,075.00p a share 08/08/19 16:27 BST. Peel Hunt analysts reiterated their ‘Buy’ stance on Vitec stock. The Group’s p/e ratio stands at 11.96, their dividend yield is 3.39%. Elsewhere in the tech sector, there were updates from; TT Electronics (LON: TTG), SDL plc (LON: SDL), Dialight Plc (LON: DIA), Seeing Machines (LON: SEE) and Bidstack Group PLC (AIM: BIDS).

Coca-Cola European Partners profits and EPS spike during H1

Jamie Gordon
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2
Coca-Cola European Partners profits and EPS spike during H1
Coca-Cola European Partners, subsidiary of manufacturer of non-alcoholic beverages manufacturer The Coca-Cola Co (NYSE: KO) booked an impressive sheet of fundamentals during the first half of 2019. The Group’s profit before tax jumped 22.0% on a year-on-year comparison against H1 2018, up to €508 million. Their operating profit also spiked 20.0% to €726 million, pushed by revenue growth of 7.0% on-year, to €5.8 billion. Unit case volumes rose 2.0% to 1.2 billion. Coca-Cola European Partners also presented an appealing offering to shareholders, with H1 diluted EPS jumping 25.5% and the Group declaring an interim dividend payment of 0.62p a share, up 19.0% on-year.

Coca-Cola European Partners

Company Chief Executive Officer, Damian Gammell, offered the following insights,

“We are taking the decisions today to invest in the capabilities that we know we will need to win tomorrow. All underpinned by an aligned relationship with The Coca-Cola Company and a strong sustainability agenda, particularly around packaging, where we are taking action and leading innovation.”

“We have delivered a good first-half performance, reflecting our continued focus on driving profitable revenue growth through price and mix realisation and solid in market execution, alongside the successful closure of our merger commitments. We remain focused on building this momentum, albeit following a strong third quarter last year, including scaling up on some of our exciting innovations like Coke Energy and the recently launched Costa ready-to-drink coffee in Great Britain.”

“We are today reaffirming our full-year guidance for 2019. We remain confident in our annual growth objectives over the mid-term, which make for an attractive investment story underpinned by a strong and flexible balance sheet. This, alongside healthy dividend growth and the continuation of our share buyback programme, collectively demonstrate our focus on delivering sustainable value for our shareholders.”

Investor notes

Its parent Company’s shares have rallied 0.038% or 0.02p to 53.20p a share 08/08/19 10:37 GMT. The Group’s dividend yield is 2.36%, its market cap is $25.77 billion. Elsewhere, there have been updates from other food and drink retailers; Devro plc (LON: DVO), Greencore Group plc(LON: GNC), NWF Group plc (LON: NWF), Cranswick plc (LON: CWK), Nestle SA (SWX: NESN) and Fuller, Smith and Turner plc (LON: FSTA).

Hargreaves Lansdown rallies as full-year revenues and AUA rise

Jamie Gordon
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1
Hargreaves Lansdown rallies as full-year revenues and AUA rise
Financial services company Hargreaves Lansdown PLC (LON: HL) have seen their share price rally after posting a set of largely impressive fundamentals for the full-year. The Company published an 8% on-year rise in Assets Under Administration,, up to £99.3 billion. Similarly, revenues were up 7% to £480.5 million and profit before tax grew 5% to £305.8 million. However, Hargreaves Lansdown did note that new business inflows were down 4% on a year-on-year comparison, down to £7.3 billion. Its shareholders enjoyed similar success; its diluted EPS grew 5% to 52.0p a share, and its ordinary dividend per share and total dividend per share both rose 5% to 33.70p and 42.0p respectively.

Hargreaves Lansdown comments

Chris Hill, Chief Executive Officer, stated,

“We are pleased with the underlying strength and resilience of our business and our increase in market share. We continue to focus on our clients’ evolving needs and where we see opportunities for growth. We now have a record 1,224,000 clients and Assets Under Administration (AUA) of £100 billion.”

“The second half of the financial year was particularly strong, supported by our best ever tax year end with clients continuing to use their ISA and SIPP allowances. Our Active Savings launched with a full tranche of term deposits and through considerable momentum, now has over £1bn AUA. Our HL Select Global Growth Shares fund now has over £350 million Assets Under Management and is our most successful Select fund launch to date.”

“I have apologised to all clients who have been impacted by the recent problems around the Woodford Equity Income Fund, because we all share their disappointment and frustration. In these difficult times we recognise the financial and personal impact the gating of the fund has had on them. Our priority is to support them, keep them informed and ensure that the fund reopens as soon as is practicable.”

“We recognise that there are industry headwinds, but we continue to execute our strategy and remain on track. We are confident that we are well placed to help our clients prosper, whilst continuing to deliver strong and sustainable returns for shareholders.”

Investor notes

Following the announcement, the Company’s shares rallied 9.05% or 165.93p to 1,998.93p per share 08/08/19 14:53 BST. Peel Hunt upgraded its rating from ‘Hold’ to ‘Add’, while Shore Capital analysts reiterated their ‘Hold’ stance on Hargreaves Lansdown stock. The Group’s p/e ratio stands at 36.88 and their dividend yield is 1.61%. Elsewhere in large financial player and investment trust news, there have been updates from; London Stock Exchange Group (LON: LSE), RIT Capital Partners plc (LON: RCP), F&C Investment Trust PLC (LON: FCIT), River and Mercantile Group PLC (LON: RIV) and Hansard Global plc (LON: HSD).

Savills revenue growth offset by falling sales volumes

Jamie Gordon
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1
Savills revenue growth offset by falling sales volumes
Global real estate services provider Savills plc (LON: SVS) saw its profits dip during the first half of 2019, despite seeing Group revenue jump on a year-on-year basis. The Company reported a 16% growth in first half group revenue, up 16% to £847.0 million. Despite this, its underlying profit for the period dipped 12% on constant currency, down £4 million to £38.4 million (£1.6 million relating to implementation of IFRS 16). Group profits before tax dipped 7% to £24.7 million.

Though ahead of market trends, UK Residential sales volumes were down 1.5%, however Letting revenues grew 26%. Further, Savills Investment Management revenue rose by 20% and Facilities Management revenue jumped 27%.

Savills comments

Commenting on the results, Mark Ridley, Group Chief Executive, said,

“Given the lag effect of significant investment in recruitment in the preceding period and facing some challenging transactional market conditions, we had anticipated a slight decline in profits for the first half of 2019. The Group has delivered a resilient first half performance reflecting both the robustness and geographic diversity of our market positions generally, and the strength of our less transactional businesses.”

“In many markets, particularly the UK and Hong Kong, political and economic uncertainty has considerably reduced the volume of real estate trading activity in recent months, although occupier demand remains robust. Underlying demand for the secure income qualities of real estate remains high, but these macro uncertainties weigh on investor sentiment and make predictions in respect of near term market activity difficult to determine with accuracy. Continued investor demand, restricted supply and expectations of continued low interest rates suggest that, if political clarity emerges, the medium and long term dynamics of the real estate markets in which we operate remain positive.”

“Despite this environment, we have a robust pipeline of activity for the second half, and we currently continue to anticipate that our performance for the full year will be in line with the Board’s expectations.”

Investor notes

The Company’s shares are down 1.90% or 18.00p to 929.50p 08/08/19 13:31 BST. Peel Hunt reiterated their ‘Hold’ stance on Savills stock. The Group’s p/e ratio stands at 12.18, their dividend yield is 1.68%. Elsewhere in property development and estate agency news, there have been updates from; Bellway plc (LON: BWY), Tritax Big Box REIT PLC (LON: BBOX), Belvoir Group PLC (AIM: BLV), Intu Properties plc (LON: INTU) and LSL Property Services plc (LON: LSL).

Bellway revenues expected to rise, attempt to cut affordable homes rejected

Jamie Gordon
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1
Bellway revenues expected to rise, attempt to cut affordable homes rejected
UK residential property developer Bellway plc (LON: BWY) issued its update for the full-year today, and it is expected that both revenue and profits will rise on a year-on-year basis. The Company said that its growth strategy for FY19 had yielded strong results, with full-year revenue expected to rise 8% on-year to £3.2 billion, and profits expected grow in line with market estimates. Bellway also noted volume growth, with completions rising 5.7% to a record level of 10,892. It said its margin continued to moderate towards a ‘more normalised’ level. The Company boasted a strong order book of 4,878 homes and in turn potential to deliver further volume growth. They also stressed their commitment to build quality and customer care, despite having attempted – and failed – to reduce the proportion of affordable homes by 10% at the Shepherds Walk development

Bellway comments

Jason Honeyman, Chief Executive, commented, “Bellway has concluded another successful year, further increasing the supply of much needed new homes and delivering a record number of housing completions. Quality and customer care remain a priority for the business and this has helped the Group achieve recognition as a five-star homebuilder2 for the third year in succession. Trading conditions remain stable and customer confidence is resilient. This, together with a strong forward order book and a healthy balance sheet, ensures that Bellway is well placed to continue its long term growth strategy.”

Investor notes

After a slight recovery, the Company’s shares are down 2.91% or 84.00p to 2,798.00p 08/08/19 12:53 BST. Peel Hunt analysts retained their ‘Add’ stance, while Liberum Capital analysts reiterated their ‘Buy’ rating on Bellway stock. The Group’s p/e ratio stands at 6.81 and their dividend yield is 5.11%. Elsewhere in property development and estate agency news, there have been updates from; Tritax Big Box REIT PLC (LON: BBOX), Belvoir Group PLC (AIM: BLV), Intu Properties plc (LON: INTU), LSL Property Services plc (LON: LSL) and Countryside Properties PLC (LON: CSP).
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