The FTSE-100 finished yesterday's session 0.12% higher at 6,673.31, whilst the FTSE AIM All-Share index closed 0.05% higher at 802.03. In continental Europe, markets ended in the red, as a decline in oil prices exerted pressure on energy stocks. In addition, disappointing corporate earnings releases hurt investor sentiment. France’s CAC 40 and Germany’s DAX shed 0.4% and 0.1%, respectively.
Wall Street ended slightly lower in a volatile trading session. Investors remained concerned about weak oil prices and awaited Fed’s policy meeting next week. The S&P 500 fell 0.1%, with the energy sector losing the most.
Equities are trading mixed amid uncertainty over the key central bank policy meetings scheduled next week. The Nikkei 225 fell 1.3% amid concerns that Japan will deepen its negative interest rate policy. The Hang Seng index was trading 0.5% up at 7:00 am.
Yesterday, WTI prices declined 2.9% to US$43.58 per barrel, and Brent oil prices dropped 2.7% to US$45.85 per barrel.
UK’s unemployment rate remains at 4.9% in three months to July
As per the Office for National Statistics, the UK’s unemployment rate remained at 4.9% in the three months to July, its lowest level since 2005 and in line with market expectations. The number of employed people rose by 174,000, taking the employment rate to 74.5%. These numbers show that the Brexit vote has not yet impacted the labour market.
Everyman Media Group (LON:EMAN, 107.50p) - Speculative Buy
Everyman Media has reported its half-year results for the six-month period ended 30 June 2016. Revenue for the half year was up 49% on the comparative six-month period to £12,128,000. During the period the Group opened a new venue in Bristol together with significant maturing revenue growth coming from the six venue openings and two refurbishments in 2015. A temporary one-screen venue opened in July 2016 in Kings Cross, which will remain in place until the permanent venue is completed in late 2017. A five-screen venue opened in Harrogate in September 2016. The Group now operates 19 venues, up from 16 at the beginning of the year. Since the period-end, trading has been in line with expectations following a good overall summer release slate in the cinema market set against a weak comparable period in 2015. For the half year ended 30 June 2016, the Group's box office was up 50% on the previous year, reflecting favourably versus a market movement of +0.5%. This resulted in the Group's market share increasing to 1.46% for the period (30 June 2015: 0.94%) (Source: Rentrak EDI). This above market growth reflects revenue contribution from new sites that opened during the period and through 2015. The growth and performance of these new venues supports the Board's continued confidence in the full Everyman concept and its continued investment in the future pipeline. The Group feel that Everyman is enhancing its position as a well-respected brand in the UK leisure market and is attracting increased interest from developers looking for a cinema/leisure operator that appeals to a more discerning customer within a more intimate environment. The Group has continued to find attractive new site opportunities for future investment. Contracts have now been conditionally exchanged on sites at Horsham (expected to open in 2018), Durham (2019) and Wokingham (2019). These are in addition to those previously announced: Chelmsford (December 2016), Stratford-upon-Avon (2017) and Kings Cross (2017). The Group's underlying operating profit before acquisition costs, pre-opening costs, share-based payment expenses, depreciation and amortisation was £1,348,000 (30 June 2015: £704,000, full year to 31 December 2015: £1,705,000). The Group incurred pre- opening expenses of £281,000 in the period (30 June 2015: £347,000, full year to 31 December 2015: £775,000), which reflects the reduced opening of new venues during the period. Overall, the financial performance of the Group after all expenses and taxation is in line with the Board's expectations. The Group incurred a loss after tax for the period of £670,000 (30 June 2015: a loss of £430,000, full year to 31 December 2015: a loss of £556,000). Cash held at the end of the period was £1,692,000 (30 June 2015: £17,078,000, 31 December 2015: £9,173,000). The cash held will be invested in the continuing development and expansion of the Group's business. During the period the Group entered into a new £8 million three-year revolving loan facility with Barclays plc. The facility provides an additional finance stream, in addition to the Group's existing cash resources, to allow continued expansion of the Group's cinema estate. No drawdown had taken place at 30 June 2016.
Our view: Since the period-end, the Group confirms trading has been in line with expectations, continuing a reasonable overall summer in the cinema market. These results show a marked change in the Group’s position with a 49% increase in revenue. The market share grew similarly to 1.5% (from 0.96%) of the UK box office. We are confident in the managements’ ability to deliver on a ‘new’ cinema experience and we regard the future prospects as worth backing. We reiterate our Speculative Buy rating on the shares.
Galliford Try (LON:GFRD, 1,215.0p) - Buy
Galliford Try (Galliford) declared results for the year ended 30th June 2016 (FY 2016). Revenues including those from joint ventures increased 10% y-o-y to £2,670m, and revenues excluding those from joint ventures rose 6% to £2,495m. Pre-tax profit soared 18% to £135.0m, resulting in EPS of 132.5p, 17% higher than FY 2015. Net debt as at 30th June 2016 stood at £8.7m (FY 2015: £17.3m). Return on assets improved two percentage points to 25.3%. Linden Homes recorded completions (including joint ventures) of 3,078 units (2015: 2,769 units). Linden Homes’ landbank stood at 11,700 plots (FY 2015: 13,550 plots) of the total group landbank of 14,500 (FY 2015: 15,750). The Galliford Try Partnerships held a contracting order book of £865m (FY 2015: £850m), while Construction had an order book of £3.5bn (FY 2015: £3.8bn). Galliford proposed a final dividend of 56p, taking the full-year dividend to 82p, 21% higher than FY 2015. The board also announced Greg Fitzgerald’s exit from the position of Non-Executive Chairman at the AGM on 11th November 2016. He would be succeeded, as planned, by Peter Ventress, currently Non-Executive Deputy Chairman and Senior Independent Director.
Our view: Galliford performed robustly in FY 2016, recording growth across all three businesses. Linden Homes benefited from a strong housing market, supported by supply shortages, the ample availability of low-cost mortgages, and a land market that remained positive. Linden Homes witnessed robust average sales rates, achieving 0.68 per site per week in the second half from increased average outlets of 84. Additionally, 100% of the land required for FY 2017 is in place, and 85% required for FY 2018 has been secured. Partnerships have continued to grow the company’s mixed-tenure revenues, which is the key to achieving the targets it has set for the business, and helped it maintain a strong contracting order book. Construction continues to enjoy an excellent order book; revenues have expanded during the year, and it is earning good margins on new work. Galliford reorganised its management to improve operational excellence in all three businesses and created the right platform for future progress in both volumes and margins. The company increased shareholder value as it increased the dividends payable. We are buoyed by Galliford’s progress in FY 2016 and maintain a Buy rating on the stock.
Parkmead Group (LON:PMG, 54.62p) - Speculative Buy
Parkmead Group (Parkmead) informed it has increased stake in the Perth and Dolphin oil fields in the UK Central North Sea. The Perth and Dolphin fields are located across Blocks 15/21a, b, c and f, & 14/25a in licences P.218, P.588 and P.2154. Parkmead has increased its equity in these licences to 60.05%. The Perth and Dolphin fields, both operated by Parkmead, are at the core of Parkmead's major Perth-Dolphin-Lowlander (PDL) oil hub project.
Our view: Parkmead increasing stake in the Perth and Dolphin oil fields is a positive development. As a result of this step, Parkmead has increased its total proved and probable (2P) reserves by 19% from 23.5 to 27.9 million barrels of oil equivalent. The move has strengthened Parkmead's asset base in the centre of the major PDL oil hub project, one of the largest undeveloped oil projects in the North Sea. Last month, Parkmead acquired additional 50% equity in the Polecat and Marten fields. These fields are valuable to the company as they are located close to PDL and can be developed as part of the Greater PDL Area project. Meanwhile, Parkmead is analyzing opportunities across the UK and Netherlands, and remains focused on strengthening its position in the core areas of the portfolio. In light of these ongoing developments, we maintain a Speculative Buy rating on the stock.
Quadrise Fuels International (LON:QFI, 12.62p) - Speculative Buy
Quadrise Fuels International (Quadrise) extended two contracts with AkzoNobel Group companies (AkzoNobel) for the exclusive purchase and supply of goods and services, and for the continued joint development of emulsion fuels. The company originally signed the deals with AkzoNobel in November 2013. These contracts in turn replaced an original agreement between Quadrise and AkzoNobel in 2004. The contracts would now be extended up to at least November 2018.
Our view: The extension of contracts with AkzoNobel is an important step undertaken by Quadrise. The move strengthens both parties’ commitment towards commercialising the global MSAR® business. Quadrise’s relationship with AkzoNobel continues to reinforce its ability to move towards long-term commercial revenues as the company continues to expand its major projects. Last month, Quadrise informed of the execution of the memorandum of understanding (MOU) for progressing production to combustion trial in the Kingdom of Saudi Arabia. The MOU defines the basis of collaboration between Quadrise and its clients in Saudi Arabia to further production to combustion trials at designated refinery and power plant facilities within the Kingdom. We are encouraged by Quadrise’s initiatives to expand business prospects, and maintain a Speculative Buy rating on the stock.
Sky (LON:SKY, 824.0p) - Buy
Sky, one of the leading European broadcasting and entertainment company, yesterday announced that it has invested US$1m in Drone Racing League Inc. (‘DRL’) and agreed to a distribution deal to its newly launched Sky Sports Mix channel, broadcasts from October. In addition, Sky Sports has completed a distribution partnership with DRL to bring live events and broadcast content to the UK and Ireland. The programme has 10 episodes, one-hour each, covering 5 races including a world championship to identify the best drone pilot. Sky Sports and DRL will also partnering with London & Partners to bring the first professional drone race in the UK, to an ‘iconic’ venue in London. Headquartered in New York, DRL is the global leader of First Person View drone racing. It features ‘elite’ pilots each flying an identical hand built drone, through complex, thematic, 3D racecourses. The DRL media team creates and continues to innovate a custom-designed broadcast and race infrastructure.
Our view: Sky continues to investment in new content and product, with a view to drive innovation and ultimately improve the Sky experience for its customers. Sky Sports Mix, its new sports channel, allows all Sky TV customers to access a mix of live sport as part of their basic subscription packages in the UK and Ireland at no additional cost. Investment in DRL is an opportunistic move given that drone racing, branded as ‘sport of the future’ attracted 11 million online viewers (as at 1 April 2016), for DRL’s first event held in Miami stadium in January 2016, according to Financial Times. Financial Times also mentioned that Stephen Ross, the billionaire owner of the National Football League’s Miami Dolphins has invested US$1m to DRL last year and that Drones have become a booming market with over 1 million consumer units expected to be sold in the US in 2016 alone. There must be some concern that enthusiasm for this new ‘sport’ will fade as quickly as it emerged unless significant marketing and creation of league games receive the long-term investment required to go mainstream. Nevertheless, this demonstrates Sky’s determination to remain at ‘the front of the curve’ when capturing the expanding e-sports market and effort to attract younger/new range of viewers/participants. Beaufort reiterates its Buy rating on the shares.
UK claimant count rate
The claimant-count rate in the UK remained at 2.2% in August, in line with the market expectations.
US MBA mortgage applications
US home mortgage applications, including both refinancing and home purchase, increased 4.2% in the week ended 9th September, after a 0.9% rise in the preceding week, the Mortgage Bankers Association said yesterday.