Proactive Investors -
- FTSE 100 up 19 points
- Mining giants weigh after China stimulus disappointment
- Rentokil maintains outlook after recent profit warning
'Patriotic millionaires' call for higher capital gains taxes
Among the pre-Budget lobbying in the papers in recent days is an interesting report today.
A group of “patriotic millionaires” has urged the chancellor to increase capital gains tax as they say this would not damage investment and entrepreneurship.
Patriotic Millionaires UK, a campaign group of rich people calling for higher taxes on the rich, have contributed to a report by the Institute for Public Policy Research (IPPR) that is urging Rachel Reeves to increase CGT (top rate of 28%) to the same rate as income tax (top band is 45%).
The group includes Mark Campbell, co-founder of piemaker Higgidy, who says: “The UK needs a fairer tax system to invest in its future, and those of us who’ve benefited the most should contribute more so that we have a healthy society and economy for future entrepreneurs to operate within.”
Pranesh Narayanan, research fellow at IPPR, says: “The recent fear mongering from some that increasing capital gains tax will take the economy back to the stone ages is pure hyperbole."
Rentokil 'above downgraded expecations' say analysts
On Rentokil Initial PLC (LON:RTO), analyst Sam Dindol at Stifel says the main thing is that full-year profit guidance was unchanged, following the September profit warning.
Stifel has a 'hold' rating on the pest controller, which the analyst says is "given near-term trading trends are likely to remain subdued following the September profit warning. The key upside risk comes from PE interest and the actions of activist investor Trian, which may look to accelerate change."
At UBS, Nicole Manion notes that Rentokil reports North America organic growth "marginally above downgraded expectations" at 1.4%, versus consensus at 0.9%.
She notes more detail in the release about integration actions underway at Terminix, with ‘minimal’ disruption at locations where systems migration has taken place, plus changes in the North American leadership team, with a new chief marketing officer and chief operating officer, as well as the group looking for a new CFO for the region.
She notes that with the delay to synergies in the US, the consensus currently forecast of adjusted PBT rising to circa £765 million, "may see 1-2% downgrades".
Entain, Rank get analyst approval
Gambling sector analyst Greg Johnson at Shore Capital on Entain PLC (LON:ENT) , says the third-quarter update "confirmed the improving revenue trends", with pro-forma digital net gaming revenue (NGR) up 9%, "and importantly the return to growth in the key UK market, ahead of initial expectations and stronger than anticipated".
Full-year EBITDA for the Coral and Sportingbet owner is now expected to be at the top-end of the £1.04-1.09 billion guidance range.
"With digital growth now back at the long-term trend rate and market share having stabilised, the current valuation remains wrong, although budget concerns will likely weigh near term," Johnson says.
On Rank Group PLC (LSE:LON:RNK), Johnson says it was "a highly encouraging Q1 update" and "a further positive milestone on this journey".
Momentum from the end of its last financial year seems to have continued into the Mecca Bingo and Grosvenor casino owner's new financial year, with NGR up 12%, "comfortably ahead of our full year assumptions of 5%".
He is keeping his full-year estimates unchanged at this stage, given the uncertainty around the budget, but "see upside to forecasts were current trends to continue".
Deliveroo and Mecca bingo
Shares in Deliveroo PLC (LON:ROO) pedalled up 4% as it reported 6% growth in transactions in the third quarter.
Orders climbed 2% to result in gross transaction value in the UK and Ireland jumping 7%.
Elsewhere, Grosvenor casinos and Mecca Bingo operator Rank Group PLC shares are now down 1.25%, having risen 6% in early trades.
It posted an update showing net gaming revenue grew by 12% in the first quarter, with digital growth of 15% outstripping the 10% for physical venues, and Rank saying it expects operating profit for the full year to be in line with expectations.
Mid-caps down
The FTSE 100 is back just above flat now at 8,330, while the FTSE 250 is down slightly, nine points lower at 20,970.
Movers among the mid-caps include Tate & Lyle PLC, down 3% in what looks like some mild profit-taking after reports yesterday that the food ingredients group is a takeover target.
Advent International is apparently preparing a potential takeover bid, the Financial Times revealed late yesterday, though no formal offer has been made.
AJ Bell (LON:AJBA) shares are down 2% (from recent all-time highs) after a year-end update shows net flows ahead of expectations for the past quarter, with inflows of £1.5 billion in the fourth quarter.
The company mentions an increase in customers taking tax free cash from the platform ahead of the budget, but also strong inflows from customers looking to take advantage of the tax relief prior to potential tax changes, so overall not a huge impact on flows.
FTSE fighting for direction
The FTSE 100 has opened like a ping-pong ball, bouncing higher and lower in the first few minutes of trading as buyers and sellers rush to complete trades, largely cancelling out big movements for the index.
An initial 5-point gain has shifted to a 5-point deficit at 8,323.73.
Rentokil Initial PLC, up 7.6%, is top of the leaderboard after its third-quarter results were not as bad as feared, and it maintained full-year guidance, but trimmed expectations for next year.
Second is Ladbrokes owner Entain PLC, up 3% after upping full year guidance.
Miners are a big drag, with Antofagasta (LON:ANTO) PLC, Rio Tinto (LON:RIO) and Glencore (LON:GLEN) down between 2.2% and 1.5%, as metals prices fall on China disappointment (see below).
Top of the fallers is paper and packaging maker Mondi PLC (LON:MNDI) as it reported lower earnings for the past quarter due to a big fall in sales amidst planned maintenance, softer seasonal demand and higher input costs.
Mixed update from Rentokil
Rentokil Initial PLC has kept its full-year guidance unchanged but said the difficult integration of its Terminix acquisition in North America will see 'synergies' deleted by at two to three months.
The pest controller said the integration "continues to go well" but that as it will be piloting new pay plans and satellite branches, "there will be a review early in the New Year to assess elements of the programme, delaying the timing of synergy delivery".
For the third quarter, the FTSE 100 group reported flat revenues year on year, up 3.8% at constant exchange rates, with organic growth of 2.6%, softening from the 2.8% in the first half.
Pest control, which accounted for 80% of revenue last year, grew organically by 2.2%, the same in the first half, with North America bouncing back to 1.4% in the third quarter from the 1.0% in the second quarter. Management had given guidance for the second half of circa 1%.