The Morning Call - Market flat before polls, but Berendsen produces exciting news

Highlights of the Day

Asian Markets

Asian shares were fairly steady as investors parsed economic data and awaited market-moving events in Europe, including Britain’s general election and a European Central Bank meeting.

U.S. Markets

U.S. shares closed higher and Treasury yields rose on Wednesday after the release of written testimony from ex-FBI chief James Comey, with investors looking ahead to his U.S. Senate appearance on Thursday, the same day as a British parliamentary vote and a European Central Bank meeting.

Today's News

The house price balance in the UK was down in May, the latest survey from the Royal Institution of Chartered Surveyors showed on Thursday. The house price balance declined to +17 in May from +22 in April. It was expected to fall to +20. Moreover, British house prices grew at their weakest rate since August 2016. Price growth appears to have lost momentum in the latest report and expectations suggest a further cooling is likely in the near term, RICS said.

Royal Dutch Shell said its business is not experiencing any operational disruptions in Qatar in the wake of a decision by several Gulf countries to sever ties. “Currently we are focused on running our Qatar business as usual and are not experiencing any operational disruption as a result of the current situation,” the Anglo-Dutch company said in a statement.

WPP has reported a 7.8% increase in billings, to £17.5bn, for the first four months of 2017. In the first four months of 2017, reported revenue was up 15.9% at £4.846bn. Revenue in constant currency was up 3.4%, continuing to reflect the weakness of sterling against the US dollar, the euro and other major currencies. On a like-for-like basis, excluding the impact of acquisitions and currency fluctuations, revenue was up 0.7%, compared with the same period last year, an improvement over the first quarter growth of 0.2%. Reported net sales were up 16.7% at £4.168bn, up 4.0% in constant currency and up 0.7% like-for-like, almost the same as first quarter growth of 0.8%.

Pre-tax profits at CMC Markets fell by 9% to £48.5m in the year to the end of March. Net operating income was 5% lower at £160.8m and earnings per share fell to 13.7p from 15.1p. The company has maintained the divided at 8.9p per share. Chief executive Peter Cruddas said: “Our first full year as a listed company has been one of progress as we have worked hard to position the group for future growth. Chief executive Peter Cruddas said: “Our first full year as a listed company has been one of progress as we have worked hard to position the group for future growth. Results were far better than market expectations.

Auto Trader’s revenues rose by 9% to £311.4m and underlying operating profit increased by 19% to £207.2m in the year to the end of March. Operating profit rose by 18% to £203.1m and profit before tax increased by 23% to £193.4m. Chief executive Trevor Mather said: “We have delivered another year of strong growth. With consumers spending more than double the time researching their next car online than they do offline”

Sports Direct International announced it has increased its stakes in two US clothing companies. The company now owns 7.6 million shares, or a 13% interest in Iconix Brand Group Inc and 7.6 million shares, or a 19% stake in Finish Line Inc. In May, Sports Direct had a 12% stake in Iconix and 9.2% interest in Finish Line. Sports Direct said the acquisitions were part of its strategy of taking strategic stakes it holds in indirect interests through contracts for difference with broker Monecor Ltd.

Berendsen has finally agreed to a takeover offer from French peer Elis SA after repeating its rejection on several occasions previously, recommending an offer that is priced at a 45% premium to value Berendsen at £2.20bn. The laundry company previously rejected an approach from Elis that valued the company at £2.05bn, but now that a deal has been agreed the pair will look to create a pan-European textile and facility services giant. The agreement represents a turnaround for Berendsen, which rejected the initial proposals Elis and said it did not see the basis for “any further discussions” with Elis, despite representing a massive premium to Berendsen’s value at the time.

Workspace Group confirmed it was in talks to buy London’s Salisbury House at 28-31 Finsbury Circus, EC2 but warned there could be “no certainty” a deal would take place. The company was responding to media speculation that it was about to buy the property for £158m.

Flybe plunged into the red in the year to the end of March despite a 13.4% increase in revenues to £707.4m. Flybe had warned in March that it expected a small underlying loss before tax for the year, before IT write-downs of around £5-10m. The group today posted an adjusted loss before tax of £(6.7)m, after IT write-downs of £4.8m. It said this write-down was at the low end of its previous range, but it anticipated further IT costs of around £6m in 2017-18 relating to cancellation penalties on existing contracts.

Oil prices edged up in early Asian trading following heavy losses in the previous session after official data showed that U.S. inventories rose for the first time in 10 weeks, reawakening concerns of a supply glut.

Gold edged lower early after a written testimony by former FBI director James Comey ahead of his Congressional appearance was seen containing few fireworks, as investors also braced up for the UK national elections and a policy meeting of the European Central Bank later in the day.

Companies Reporting this week

Day	Companies
Today:	Auto Trader Group * CMC Markets * First Property Group * Flybe Group * Volex

Early Market Movements

Market	Index	Change	% Change
UK 100	7,480.7	+2.1	+0.0%
UK 250	19,661.0	-35.0	-0.2%
GER 30	12,688.6	+16.1	+0.1%
FRA 40	5,263.1	-2.5	-0.1%
U.S. 30	21,173.69	+37.46	+0.2%
U.S. 500	2,433.1	+3.8	+0.2%
OIL (BRENT)	48.44	+0.38	+0.79%
GOLD	1,287.33	+0.18	+0.01%

UK Risers & Fallers (8:15am)

Company	Price	Change	% Change
Berendsen	1198	+91	+8.22%
Astrazeneca	5335	+33	+0.62%
CMC Markets	136	+8.25	+6.46%
Electra Private Equity	1845	-920	-33.27%
Johnson Matthey	2924	-55	-1.85%
Wolseley	4871	-45	-0.92%

Latest Broker Views

Company	Broker	Recommendation	Price	Target
AO World	Jefferies International	Hold	126.75	140.00
BHP Billiton	Jefferies International	Hold	1,170.50	1,250.00
National Grid	Deutsche Bank	Sell	1,021.25	950.00
Vedanta Resources	Jefferies International	Underperform	595.00	500.00

Forthcoming Economic Data

Time/Date	Previous	Forecast	Outcome
11:45am: European Minimum Bid Rate	0.00%	0.00%	–
12:30pm: U.S. Unemployment Claims	248K	241K	–
12:30pm: ECB Press Conference	–	–	–