Edison Investment Research

Common sense in UK defence?

The UK MOD is to buy its new fleet of Apaches directly from Boeing

In my blog last week I highlighted the calamitous processes, and often illogical decisions that characterise defence procurement. However, the announcement during the Farnborough Air Show that the MOD will buy 50 AH-64E Apache Guardian helicopters from Boeing may well be turn out to be one of the Ministry of Defence’s (MOD) most sensible decisions yet.

Market Commentary - Housing, Infrastructure, Construction and Services

The market should like SIG’s numbers today with an 11% rise in revenue at the half year and a 20% rise in underlying operating profit; L4L sales at CER were up 0.7%, 2.3% UK and Ireland and down 1.2% in Euroland. Brexit watch: SIG said sales were flat in June and July although there was an improvement towards the end of July. Savills indicates that the timing of the Referendum along with the traditionally quieter summer months means it cannot easily determine the impact, if any, as yet. So, still too early and/or there are other distorting factors, to which we can add the BoE action on interest rates last week.

Market Commentary - Housing, Infrastructure, Construction and Services

Interserve and WYG have experienced substantial share price pressure recently and this morning both announce contract wins. Scheduled news this week, according to The Times, is provided by SIG tomorrow with its interims (Amec and Savills also report providing useful read across) and G4S and Interserve report on the first six months of their financial years on Wednesday.

Market Commentary - Housing, Infrastructrue, Construction and Services

Bellway and Ibstock have issued statements this morning, the former an update on its progress in the year to end July and the latter its half year results to end June 2016. The evidence from both companies is that trading in July was quite strong so the triggers that caused the governor of the Bank of England and the MPC to halve the base rate yesterday must be more forward looking than we are now seeing. Serco was the leader of the pack yesterday with an 11.8% rise to 132.7p. The gyrations in sentiment on the Brexit impact and now the first substantial measure to mitigate the short-term economic effects probably triggered the lack of support yesterday for Mears which was the only loser in our 22 bellwether HICS stocks.

Have you heard of GKN?

Making things work for more than a quarter of a millennium

Watching a BBC documentary of a behind the scenes look at the opening ceremony of the 2012 Olympic games reminded me of how the industrial revolution was a centre piece of the performance, creating the illusion of the Olympic rings being forged from steel. Had it happened back in the latter part of the 18th century as new processes changed Britain for ever, those rings may well have been forged in iron by one of the UK’s greatest global brands. GKN’s forebears have been making things happen for over 250 years and the company Guest, Keen & Nettlefolds was formed via merger in 1902. The company is one of our leading global manufacturers, and yet it is hardly a household name.

Market Commentary - Housing, Infrastructure, Construction and Services

Serco is the only HICS sector stock to provide news today. The company has delivered half year numbers in line with earlier statements about performance first indicated on 25th May. Morgan Sindall topped the HICS league table again yesterday with a 4.5% rise to 638p. G4S had a bad day, falling 2.4% to 179.9p as a large broker produced a sell note having a good swing at the FX rate impact of recent changes, margin potential, scope for a dividend hack and high net debt.

BOE: All priced in and nowhere to go?

Investors hoping for another “get out jail free” card from the Bank of England tomorrow are likely to be disappointed. Expectations for a cut in interest rates are close to 100% and the collapse in gilt yields since the UK’s referendum highlights the belief that UK rates are now set to remain low for much of the next decade.

Market Commentary - Housing, Infrastructure, Construction and Services

There is no directly relevant news this morning from our core HICS stocks. We attended the result meetings for Morgan Sindall and Travis Perkins yesterday and report below along with a comment on Lakehouse, which issued a further profit warning yesterday

Lockheed Martin names and shames the US DoD

Funding for the F-35 is "insufficient"

Lockheed Martin depends on the US Department of Defense (DoD) for c.80% of its revenues. Therefore for Lockheed Martin’s CEO Marillyn Hewson to name and shame the DoD as having overdue bills at Q2 results last week is not a decision she would have taken lightly. It caused me to wonder, what was Hewson trying to achieve?

Market Commentary - Housing, Infrastructure, Construction and Services

Morgan Sindall and Travis Perkins have provided half year numbers today and Atkins a formal update on trading.