The Morning Call - Wizz Air profits take off - Collins Sarri Statham Investments

Highlights of the Day

Asian Markets

Asian shares were mostly higher after a mixed finish on Wall Street. Investors were turning their focus to policy meetings by central bank boards in Japan and the EU.

U.S. Markets

U.S. shares were mixed having been weighed down by concerns over President Donald Trump’s ability to push through his pro-growth economic policies.

Today's News

BP is considering spinning off certain US pipeline assets in the US Gulf and Midwest in an initial public offering. Citing a statement from the company, said the potential IPO would structure the assets as a master-limited partnership, a frequently used corporate structure for pipeline companies. The plan, first considered about five years ago, was shelved when oil prices declined sharply in 2014, according to one person familiar with the earlier talks. Both BP and its underwriters have retained advisors to explore the sale, the person said.

BHP Billiton reported that its total iron ore production for the fourth-quarter was 60.1m tonnes, up 8% from 55.63m tonnes in the previous year. BHP expects to record exceptional items of $546m in the second half of the 2017 financial year. These items relate to idle capacity and other strike-related costs incurred as a result of the Escondida industrial action in the March 2017 quarter and Chilean withholding tax on a one-off dividend paid while a concessional tax rate was available. Total iron ore production for the 2017 financial year to the end of June increased by 4% to 231m tonnes. Western Australia Iron Ore, or WAIO, production is expected to increase to between 239m and 243m tonnes in the 2018 financial year.

London University Imperial College said it has submitted a non-binding letter of intent to IP Group , supporting the intellectual property commercialisation company’s £490m takeover of Touchstone Innovations. Initially Touchstone, the technology commercialisation company had rejected the offer in June, believing that the £466m offer undervalued the company. IP Group increased its offer to £490m, valuing Imperial’s 15% stake in Touchstone at £75m. “We are supportive of the strategic rationale of this transaction and appreciate the increased value for Touchstone’s shareholders implied by the new exchange ratio,” said Imperial’s endowment board in a statement.

Severn Trent made a good start towards delivering its target net reward for 2017/18 customer ODI outperformance of around £23m. In the trading update for the period to 19th July 2017, the company continued to work towards delivering totex efficiencies of £770m in AMP63. The company made good progress on our business plan for AMP74, which will be submitted to Ofwat in September 2018. On 11th July 2017, Ofwat published its draft methodology consultation for PR195. As expected, PR19 looks set to be a challenging review.

Evraz’s consolidated crude steel output fell by 9.5% quarter-on-quarter to 3.3m tonnes in Q2. The group said this was primarily due to planned capital repairs at EVRAZ ZSMK’s oxygen steelmaking converter no. 5 and blast furnace no. 2, as well as planned capital repairs at EVRAZ DMZ’s oxygen-converter plant. Production of steel products, net of re-rolled volumes, decreased by 8.0% quarter-on-quarter to 3m tonnes as a result of reduced output of semi-finished products amid planned capital repairs at EVRAZ ZSMK. The share of finished steel products in consolidated volumes rose to 63.8% in Q2 2017, up from 55.6% in Q1 2017, due to lower output of semi-finished products in Russia and Ukraine.

Reckitt Benckiser has agreed to sell its food business for $4.2bn to Schwartz spices owner McCormick. In April Reckitt’s chief executive Rakesh Kapoor kicked off a “strategic review” of its non-core food business, with analysts expecting a price nearer £2.2bn for a business that contains French’s mustard and Frank’s Red Hot brands. With McCorick having confirmed the deal overnight, Kapoor said: “Our French’s Food business is a true reflection of RB’s strengths – a portfolio of great brands driven through a culture of innovation by passionate people to deliver consistent outperformance.”

TalkTalk said it added 20,000 broadband customers on its network in its first quarter while churn fell to 1.2%, helped by take-up of its fixed low price plans. The company, under the new leadership team of executive chairman Charles Dunstone and chief executive Tristia Harrison, is returning to its roots as a low-cost challenger to BT, Sky and Virgin Media. It said it was sticking to its outlook for full-year earnings of £270m – £300m, a range it cut in May.

RPC Group said first quarter revenue was “well ahead” of last year helped by acquisitions and favourable currency movements. RPC, which generates about 70% of its revenue from outside Britain, said revenue for the quarter ending 30th June totalled about £960m. It did not provide detail on how large a benefit currency movements delivered. RPC has been positioning itself to benefit from a weak sterling since the United Kingdom voted to leave the EU in June 2016.

Wizz Air has reported a double-digit boost to profit and revenues, as strong Easter sales and continued expansion of its route network helped Central Europe’s largest airline to record results. Total revenue increased 29% to €469.3m, while pre-tax profits rose 16% to €60.5m in the three months to 30th June. The airline said it now expects full year profits to be towards the upper end of its projected range of €250m-€270m. Total passenger numbers rose by more than a quarter to 7.2m, as the company added 10 new routes, including to new airports in Russia, Kazakhstan and Morocco.

Drax reported a half-year pretax loss after a one-off hit on foreign exchange hedging. Drax, which raised its dividend payments last month, reported a loss of £83m versus a £184m profit a year earlier. It took a £65m hit on unfavourable currency movements and said its coal-fired power assets were depreciating in value more quickly than expected.

Oil prices fell after a rise in U.S. crude inventories and ongoing high output from OPEC producers revived concerns of a fuel supply overhang.

Gold held steady, not far from the over two-week highs hit in the previous session, as the dollar crept up from multi-month lows even as fading prospects of a U.S. monetary tightening continued to pressure the greenback.

Companies Reporting this week

Day	Companies
Today:	British Land * BHP Billiton
Tomorrow:	Severn Trent * TalkTalk Telecom Group * Wizz Air
Thursday:	Unilever * Moneysupermarket.com * Anglo American * easyJet * Premier Foods * SSE Sports Direct
Friday:	Vodafone Group * Acacia Mining * Euromoney Institutional Investor

Early Market Movements

Market	Index	Change	% Change
UK 100	7,381.8	-8.4	-0.1%
UK 250	19,601.7	-11.7	-0.1%
GER 30	12,471.1	+40.7	+0.3%
FRA 40	5,189.7	+16.5	+0.3%
U.S. 30	21,574.73	-54.99	-0.3%
U.S. 500	2,460.6	+1.5	+0.1%
OIL (BRENT)	48.76	-0.08	-0.2%
GOLD	1,240.11	-2.36	-0.2%

UK Risers & Fallers (8:15am)

Company	Price	Change	% Change
RPC	899.25	+56.75	+6.7%
Taylor Wimpey	184.5	+2.5	+1.4%
Reckitt Benckiser	7916	+104	+1.3%
Drax	318.85	-26.65	-7.7%
Royal Mail Group	404.1	-7.0	-1.7%
Randgold Resources	6910	-85	-1.2%

Latest Broker Views

Company	Broker	Recommendation	Price	Target
Aviva	Panmure Gordon	Buy	528.25	635
Royal Mail Group	Goldman	Neutral	404.3	510
BHP Billiton	S&P Global	Buy	1313.5	1400
Galliford Try	Liberum	Buy	1298	1460