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News & Tips: GlaxoSmithKline, Senior, Thorntons & more

Equities are on form
March 2, 2015

Equities are sticking around at record highs after news of further Chinese stimulus overnight. Click here to find out the Trader Nicole Elliott’s latest thoughts on the markets.

IC TIP UPDATES:

GlasxoSmithKline (GSK) has completed its three-part transaction with Novartis which means the company can now proceed with a $4bn return of capital to investors through a B share issue. We maintain our buy rating.

Sell recommendation Hiscox (HSX) has posted solid full year results showing insurance premium growth of 8.8 per cent and record profits in Hiscox UK and Europe. More than half of the company’s business is now in retail insurance. Our recommendation is under review.

Engineer Senior (SNR) enjoyed ‘healthy’ growth in 2014 with revenues rising by 6 per cent to 820.8m and adjusted profits up 5 per cent at £102.6m although currency movements depressed reported figures. The outlook remains positive and management has rewarded investors with a 10 per cent dividend uplift. Buy.

Specialist materials business Alent (ALNT) saw adjusted profits rise by 4 per cent to £91.5m at reported exchange rates in the year to December with profits at constant exchange rates up 11.3 per cent. Management, led by new chief executive Andrew Heath, expects market conditions to remain broadly the same in 2015. We maintain our buy rating.

Development Securities (DSC) has agreed a deal with Transport for London for a joint venture development of land around and above Southwark underground station which will see it build a 225,000 square foot residential-led mixed use development. Meanwhile, Development Securities has also sold off an office building in Sevenoaks which has permitted development rights to convert into residential. Buy.

British Land(BLND) has agreed to acquire the Surrey Quays Leisure Park in Canada Water, London, for £135m from Aviva. This adds to British Land’s portfolio at Surrey Quays, where it already owns a shopping centre and Harmsworth Quays. The company is working with Southwark Council on a regeneration project for the area. Buy.

Industrial cable management specialist HellermanTyton (HTY) enjoyed 10.9 per cent growth in revenues at actual exchange rates to €596.9m in 2014 with underlying profits rising 9 per cent to €90.4m. We keep our buy rating.

Hotels group PPHE (PPH) posted a 10.5 per cent uplift in revenues to €270.4m in the 12 months to December with its UK portfolio, which accounts for almost two thirds of the business, performing strongly. Normalised profits grew by 50 per cent to €32.9m, bolstered by foreign currency gains of €1.7m. The company has started development on three new hotels in London and one in Nuremburg. We maintain our buy recommendation.

Sell recommendation Amlin (AML) saw its profits dip from £325.7m to £258.7m in 2014 as its combined ratio, a measure of profitability, narrowed. The company is operating in tougher markets with renewal rates in catastrophe insurance down by an average of 8.3 per cent. The company has declared a special dividend of 15p a share.

KEY STORIES:

Thorntons (THT) suffered well documented issues in its fast moving consumer goods business in the six months to December which contributed to a dip in overall revenues from £139.7m to £128.2m and pre-tax profits down from £7.2m to £6.5m. UK commercial sales fell by more than 12 per cent after issues in two key grocery client accounts. Retail sales improved, with like for like sales up by 2.2 per cent as management continues to rationalise its store portfolio.

Troubled oil and gas explorer Afren (AFR) has managed to eke some concessions out of its lenders which has given it a little breathing space in terms of its interest payments as it seeks ways to recapitalise the company.

Balfour Beatty (BBY) has signed a development agreement for an eight year long construction project with the London Olympic Legacy Development Corporation for up to 1,500 homes at Hackney Wick and Sweetwater adjacent to the Olympic Park. Balfour will invest £35m of equity over the eight years and deliver all the construction work, which is expected to generate revenue of £400m.

Ultra Electronics (ULE) has posted results ‘broadly in line’ with the previous year with revenues excluding its cancelled Oman contract coming in flat at £702m and underlying operating profits also flat at £118m. The company saw order intake rise by 21 per cent to £760m during 2014.

Trinity Mirror (TNI) has returned to the dividend list for the first time since 2008 with a 3p per share payout for the year to December. The company has continued to make progress in its digital business and this is outweighing continued tough conditions in print. Overall revenues dipped but adjusted profits rose by 1 per cent to £102.3m.

Construction and ground engineering specialist Keller (KLR) posted record revenues of £1.6bn for 2014, up 11 per cent on the previous year. Profits rose from £74.1m to £85.1m.

LED lighting specialist Dialight (DIA) enjoyed a 22 per cent uplift in revenues and a 25 per cent rise in underlying profits for 2014 as its lighting segment continued to perform strongly and its obstruction business also performed well.

Testing specialist Intertek (ITRK) boosted constant currency revenues by 2.2 per cent in 2014, to which acquisitions contributed a 2.9 per cent gain. Profits fell by more than 10 per cent, exacerbated by currency movements, but cash generation was good and the final dividend is increased by almost 7 per cent to 49.1p a share.