Dollar weakness has not helped equities this morning, which dipped in early trading as UK inflation was confirmed to be on the rise. Click here for The Trader Nicole Elliott's latest thoughts.
IC TIP UPDATES:
Mears Group (MER) has been holding off on acquisitions to focus on organic growth, producing a mixed bag of results. Growth was strong for the group, with 7 per cent growth in revenue and 13 per cent growth in continuing profit before tax. However, the working capital demands of growth have reduced EBITDA cash conversion to 70 per cent and pushed net debt to £12.4m, from a net cash position of £0.8m. Buy.
Exceptional items have continued to weigh heavily on Augean (AUG) in its most recent set of results. Underlying profit before tax was up to £6.99m, from £6.03m in 2015, but exceptional items of £5.7m brought the total down 50 per cent on 2015’s figure. We are reviewing our buy recommendation.
Processing volume - the annual amount of money handled - was up at payment company Safecharge (SCH), increasing 17 per cent to $8.09bn. This is due to increase in the coming year, with over $1bn in annualised processing volume from new clients starting in 2017. Revenues and profit were also up. Buy.
Even though it is several months since Berkeley Energia (BKY) signed an offtake agreement to supply Interalloys, investors in the company may have been nervous of wider regulation affecting the mining of nuclear material. Today provided some relief on that count, after the European Union approved the supply contract and welcomed the development of the Salamanca mine. Buy.
IQE (IQE) revealed a slide in full-year profits even though revenues were up in all its key markets. The group, a supplier of wafer products and services to the semiconductor industry, increased gross profits by 13 per cent, but comparative below the line suffered due to increased exceptional charges and asset sales in 2015. Discount the one-off effects and adjusted operating profits were up 17 per cent to £22.1m. Operational efficiencies were reflected in a cash conversion rate of 102 per cent. Buy.
Shares in Faroe Petroleum (FPM) might have nudged up on the publication of full-year results today, but the profit and loss account will have disappointed some investors. Following a February trading update, much was already baked in, but a £61.5m pre-tax loss and a near-halving of operational cash flow were further dampened by higher than expected admin and net interest charges. We remain buyers.
KEY STORIES:
Accesso Technology (ACSO) beat consensus expectations on all key metrics during 2016. The group - which provides ticketing software for leisure and entertainment attractions - grew its revenue 10 per cent, while a higher-margin mix of work helped boost pre-tax profits 40per cent to £10.1m. Following its contract win with Merlin Entertainments (MERL) in 2015, it has also been investing heavily in its technology.
Smart Metering Systems (SMS) have appointed a new chief financial officer. David Harris, former finance director at British Polythene Industries, will succeed Glen Murray. The group grew revenues 25 per cent to £67.2m during 2016, with gross profit up 23 per cent to £36.9m.
888 Holdings (888) is recommending a 5.1¢ final dividend, up from 4¢ the previous year, plus a 10.5¢ special dividend for 2016. Casino revenue was up a fifth to $279m, while sport was up half to $52m. Spain also became the second-largest contributor to group sales, after posting 45 per cent sales growth.
OTHER COMPANY NEWS:
Full-year results for EnQuest (ENQ) were particularly notable for a positive update on Kraken, though there is much to admire in how the company handled a very difficult trading period in 2016. We were also provided with forecasts for the coming year, including average production of 45-51,000 barrels a day, at a cost of $21-25 a barrel. Even with the financial restructuring in place, capital expenditure should be a minimum of $375m.
