Maitland/AMO Morning Monitor – Thursday 16 January 2020

16th January 2020

Market Information

The FTSE is expected to open up today, while the CAC and DAX are both expected to open down.

Asian stocks are relatively flat today, despite "phase 1" of the US-China trade deal pushing Wall Street to record highs.


In the news

  • The US and China sign agreement to pause trade war
  • Hyundai and Kia inject €100m into London-headquartered electric vehicle firm Arrival
  • US toy firm Hasbro's $4bn acquisition of Entertainment One given approved

The political day

  • Labour deputy leader candidate Ian Murray launches his campaign in Edinburgh

Top Financial Announcements

* Maitland Client

Pearson PLC Trading Statement and Directorate Change
  • Underlying revenue in Core was up 5%, Growth up 4% offset by 3% decline in North America.
  • Adjusted earnings per share of 57.5p – 59.0p reflecting one-off tax benefits and a lower finance charge as disclosed in Pearson’s half year trading update.
  • Strong performance in structural growth opportunities, up 8% overall.
  • Expect to deliver 2020 adjusted operating profit of between £500m to £580m including the 25% stake in Penguin Random House.
  • John Fallon, CEO, said: “We have secured flat revenue this year and delivered operating profit within the guidance range, with much weaker sales in US Higher Education Courseware offset by a strong performance in the broader 76% of Pearson. Pearson is now a simpler, more efficient company, with strong financial foundations. This enables us to continue to invest in digital innovation and platform-based products. The future of learning will be increasingly digital and consumer defined. Experience, outcomes and affordability will all matter and while there is still much to do we are well placed to benefit from these trends to achieve future, sustainable growth.”
  • Pearson also announces today that Coram Williams, Group Chief Financial Officer, has informed the Board he will be leaving the company to take on a comparable role at a company based in Continental Europe.
Whitbread PLC Q3 FY20 Trading Update
  • UK total sales growth 0.3% for the third quarter, marginally improving the year-to-date run rate.
  • Further development in Germany with open + committed pipeline extended to almost 50 hotels.
  • Good progress on optimising the UK network, including 19 hotels trialling Premier Plus rooms.
  • Expect to deliver FY20 Results in-line with expectations.
  • Alison Brittain, CEO, said: “Whitbread delivered a robust performance in the third quarter, growing total sales by 1%, despite challenging market conditions in the UK. We now have over 80,000 rooms in the UK & internationally, operating under the Premier Inn brand, with a committed pipeline of over 20,000 additional rooms. We also continue to achieve strong results from our efficiency programme, which is helping to partially offset high industry cost inflation and means we are on track to achieve our full year expectations for FY20. Despite the short-term economic uncertainty, there remains significant long-term opportunities for Premier Inn in both the UK and Germany. We can access these due to our strong financial position, resilient model and ongoing investment to improve our market-leading proposition. Continuing to invest in growth and optimisation through our disciplined approach to capital allocation ensures we can create sustainable value for shareholders over the longer-term.”
Associated British Foods PLC Trading Update
  • The group’s outlook is unchanged, with progress expected, on both a reported and an IFRS 16 adjusted basis, in adjusted earnings per share for the year.
  • Group revenue from continuing operations for the 16 weeks ended 4 January 2020 was 4% ahead of the same period last year at constant currency.
  • Trading at Primark has been good in this first quarter. Sales were 4.5% ahead of last year at constant currency and 3.0% ahead at actual exchange rates.
  • The UK continued to perform well. Sales were 4.0% ahead of last year, driven by a strong contribution from new selling space with a marginal decline in like-for-like sales for the period.
  • As the group expected, operating profit margin in the period decreased, with the effect of purchases contracted at a stronger US dollar exchange rate than last year but partially mitigated by cost reductions in both the cost of goods and overheads.
Ibstock PLC Trading Update
  • The Group delivered a resilient trading performance for the year against a backdrop of political and economic uncertainty and reduced new build housing activity in the second half, and expects to deliver adjusted EBITDA broadly in line with market expectations for 2019.
  • Total revenues were up mid-single digits for the full year compared to 2018, primarily reflecting pricing benefits in our clay brick business, volume growth in some of our key concrete product lines, including roofing, and the consolidation of Longley Concrete, acquired in July 2019.
  • At 31 December 2019, net debt was approximately £84m, after the payment of the supplementary dividend announced at the interim results, the acquisition of Longley Concrete and investment in working capital as brick inventories increased from historically low levels.
  • Looking ahead, the lower levels of residential construction activity in the second half of 2019 have created a more subdued market backdrop as the sector enters  2020. The Group therefore remains well positioned and, with a strong balance sheet, will continue to assess investment options in the UK as the group looks to deliver growth over the medium term.
Hays PLC Second Quarter Trading Update
  • Group fees down 4%, with an exit rate down 6%.
  • UK & Ireland net fees down 4%, with Temp and Perm decreasing by 1% and 7% respectively. Private sector significantly impacted by economic and political uncertainty and fell by 8% in the quarter.
  • Australia & New Zealand net fees down 7%, with a resilient performance in Temp, down 2%. Perm down 15%, impacted by tough private sector markets and, latterly, the catastrophic bushfires.
  • Cash performance has been good.
  • Alistair Cox, CEO, said: “Growth slowed markedly in December, driven by specific events in key markets: general strikes in France, tragic Australian bushfires and the UK election. Each event impacted markets already facing challenging economic conditions and low business confidence. Germany weakened further, with economic uncertainties driving increased client cost controls. The Americas performed well, with the USA a standout, while Asia was flat. Conditions in the UK remained uncertain, particularly before the election, although the result may provide impetus over time. The rebound from these events and our New Year ‘return to work’ are thus particularly important, and we are closely monitoring activity levels. Overall, we expect near-term macro conditions to remain difficult, but see continued opportunities for growth in key specialisms like IT. Our task is to balance such investment opportunities with managing our cost base, while protecting our infrastructure and market leadership. Our highly experienced management teams, combined with our financial strength, gives us confidence in achieving this balance.”
C&C Group PLC Directorate Change and Trading Update
  • The Company announces that, following discussion with the Board, Chief Executive Officer, Stephen Glancey, has informed the Board that he wishes to retire.
  • He will step down as CEO with immediate effect and will be leaving the Company at the end of February. Stephen will, however, continue to be available to assist with effecting a smooth handover.
  • The Board also confirms that trading across the group for the four months to 31 December 2019 has been in line with the Board’s expectations, including through the key Christmas trading period and remains on track to deliver double-digit EPS growth for FY2020.
  • Stewart Gilliland, interim Executive Chairman, said: “The Board would like to thank Stephen for his significant contribution to C&C over many years. The Company is well positioned to continue to implement its established strategy to deliver value for shareholders and Stephen will continue to be available to help facilitate a smooth handover.”
Dechra Pharmaceuticals PLC Trading Update
  • Group net revenue for the Period increased by c.7% at constant exchange rates (c. 7% at actual exchange rates (AER)).
  • European Pharmaceuticals net revenue growth was c.13% at CER in the Period (AER c.12%).
  • North American Pharmaceuticals net revenue declined by c.2% at CER in the Period (AER c.0%).
  • Ian Page, CEO, said: “Overall, our progress in the first half has been satisfactory and demand for our products remains strong. Trading in Europe was good while North American growth, as expected was constrained but should now resume as we return to normal supply chain inventory levels. Our recent acquisitions are integrating well, and we were pleased to reach agreement to acquire Osurnia. We therefore remain confident in our prospects for the second half and for the year as a whole.”
Big Yellow Group PLC Trading Statement
  • In the group’s seasonally weaker third quarter, occupancy decreased by 165,000 sq ft (3.5% of the MLA at 31 December 2019) compared to a loss of 126,000 sq ft in the same quarter last year (2.7% of the MLA at 31 December 2018) and a loss of 170,000 sq ft in 2017 (3.7% of the MLA at 31 December 2017).
  • Like-for-like closing occupancy was 80.7%, a decrease of 0.4 ppts from the same time last year.
  • The Group’s average achieved net rent per sq ft increased by 2.9% compared to the same quarter last year.
  • The Group’s like-for-like revenue increased by 2.9% in the quarter and is up 3.8% year to date.
  • James Gibson, CEO, said: “The economic and political uncertainty that we referred to in our interim results continued during the lead-up to the December election.  Following, the election however, trading in the quarter improved. Despite this uncertainty, the business continued to deliver revenue and rate growth over the quarter. Since the start of the fourth quarter we are seeing a pick-up in demand, as represented by enquiries through our digital channels, and growing net reservations.  Occupancy has also started to grow from its seasonally low point at the end of December. We remain focussed on our objective of 90% occupancy and look forward to delivering growth in occupancy and revenue over the fourth quarter and continuing this into our seasonally stronger spring and summer trading period.”
Workspace Group PLC Third Quarter Business Update
  • Strong customer demand in the third quarter with enquiries averaging 1,001 per month (Q3 2018/19: 907) and lettings of 113 per month (Q3 2018/19: 98).
  • One property exchanged for sale in the quarter for £15.8m, a 3% premium to the September 2019 valuation.
  • Launch of the group’s new 55,000 sq. ft. business centre, Mare Street Studios in Hackney, expected in March 2020.
  • Graham Clemett, CEO, said: “This was a very encouraging third quarter for the Company. Despite the uncertainty around the general election and the usual seasonal impact, enquiries and lettings were strong. Customer demand in the first few weeks of the new year suggest that increased political certainty following the election result has buoyed business confidence. Our completed projects are letting up well with a robust pipeline of project activity. We continue to monitor acquisition opportunities while remaining disciplined in our return criteria.  We look forward to delivering continued progress for the full year in line with expectations.”
Bakkavor Group PLC Trading Statement
  • Group revenue on a reported basis increased by 1.5% and on a like-for-like basis increased by 1.7% compared to the equivalent period in 2018, with encouraging progress made across the Group.
  • Whilst consumer confidence remains weak in the UK and continued to impact underlying volume growth, revenue on a like-for-like basis increased by 0.2% in the UK, primarily as a result of a gain in H2 in its meals business.
  • In the current economic environment, the Board considers this to be a solid performance and expects full-year results to be in line with expectations.
Wood Group (John) PLC Trading Update
  • Revenue of around $10bn, in line with 2018, reflecting generally robust activity.
  • Adjusted EBITDA of $850m to $860m and operating profit before exceptionals of $410m to $420m, in line with current market expectations.
  • Like for like adjusted EBITDA (pre-IFRS 16) up c6% and operating profit before exceptionals (pre-IFRS 16) up c20%; including c$60m of cost synergy delivery.
  • Better than anticipated cash generation in H2 delivering reduction in net debt to below $1.5bn at 31 December 2019 (2018: $1.51bn).
  • The group is well positioned for growth opportunities presented by trends in energy security & transition and sustainable infrastructure development across energy and built environment markets, and expects modest revenue growth in 2020 and growth in adjusted EBITDA to reflect a continued focus on our medium term margin improvement strategy.
Marshalls PLC Trading Statement
  • Group revenue for the year ended 31 December 2019 was up 10 per cent to £542m (2018: £491m). Excluding the impact of Edenhall, which was acquired in December 2018, revenue grew 3 per cent.
  • Sales in the Public Sector and Commercial end market, which represented approximately 69 per cent of Group revenue, were up 15 per cent compared with the prior year period. The performance of Edenhall has been strong and the integration plan is substantially complete.
  • The Board confirms it is confident of meeting its 2019 expectations.
  • Looking ahead, the outcome of the UK General Election in December 2019 has created a more certain political environment and the underlying indicators in the New Build Housing, Road, Rail and Water Management markets remain supportive.
4imprint Group PLC Trading Update
  • The Group delivered further encouraging organic revenue growth during the second half of 2019. Unaudited Group revenue for the year ended 28 December 2019 was approximately $860.8m, an increase of 17% over 2018.
  • Underlying profit before tax for the full year 2019 is expected to be at the upper end of the current market forecast range.
  • The Group retains a strong balance sheet, with an unaudited net cash balance at the 2019 year-end of around $41.0m, (2017: $27.5m).
  • The Board remains committed to its strategy of driving organic revenue growth through investment in marketing, people and the Group’s operational assets.
Halfords Group PLC FY20 40-week trading update
  • Group revenue was up +4.6% and +1.3% LFL in the period on the back of a strong Cycling performance and continued growth in Autocentres and B2B.
  • Retail Cycling sales were up +5.9% LFL in the period, with growth broadly based across the bike categories.
  • Group online sales grew +27% with around 80% of Halfords.com orders collected in store.
  • Sales growth in B2B accelerated in Q3, up +32% year-on-year and now accounts for 16% of Group sales.
  • Graham Stapleton, CEO, said: “I am pleased with our overall performance in Q3, with total revenue growing nearly 5% in the quarter.  Our results reflect the positive actions we have taken across the Group to deliver on our strategy, particularly Motoring Services, which grew strongly. Though pleased with our performance, market conditions remained subdued and we are not anticipating a near-term improvement. We will continue to focus on improving our customer proposition, building our services business and managing our costs and operations tightly. In the context of the current retail market I am pleased to be reporting a positive L4L performance and to reconfirm profit guidance for the full year.”