London equities have resumed their slide after yesterday’s rally on the back of Chinese attempts at economic stimulus. Click here to find out what The Trader Nicole Elliott makes of the latest market moves.
IC TIP UPDATES:
All bets are off at sell recommendation Betfair (BET) after it announced the terms of a proposed merger with Paddy Power (PAP). The deal, which will result in a business with gaming revenues of more than £1bn, is likely to result in Paddy Power shareholders owning 52 per cent of the enlarged company and Betfair shareholders 48 per cent with Paddy Power shareholders also being offered a sweetener of a special dividend worth €80m. Our recommendation on Betfair is under review.
Advertising giant WPP (WPP) has reported a strong first half to its financial year with reported billings rising 5 per cent to £23.16bn and profit before tax up 44.5 per cent to £710m in constant currencies, although this was boosted by exceptional gains. Management is continuing with share buy backs, spending £405m in the first half, and says it is on course to reach its targeted dividend payout ration of 50 per cent by 2016. Buy.
Amec Foster Wheeler’s (AMFW) joint venture with Fluor has won a position on the US Air Force’s Contract Augmentation Program IV, which starts in October and will allow the joint venture to bid for business worth up to $5bn across the six years of the contract period. We maintain our buy recommendation.
Half year figures from Carillion (CLLN) reflected an exceptional period last year for contract wins, many of which began to mobilise. Revenues shot up 21 per cent to £2.26bn with underlying pre-tax profits 11 per cent higher at £84.5m. Orders in the first half of this year were hampered by a pre-election hiatus but have begun to pick up again but total secure orders plus probable orders are at £17.1bn, down from £18.6bn at the end of last year. Revenue visibility for 2015 is good at 96 per cent while the pipeline of contract opportunities is huge at £40.5bn. We keep our buy.
‘Challenger’ bank OneSavingsBank (OSB) grew first half profits by 60 per cent to £47.6m while loans and advances grew by 17 per cent to £4.6bn through organic origination and the acquisition of a portfolio of second charge mortgages. We keep our buy rating.
Drug development specialist Skyepharma (SKP) enjoyed a 19 per cent rise in revenues in the first half of 2015, driven primarily by product sales rather than milestone payments. Operating profit excluding milestones more than doubled to £12.4m and profit after tax was £9.1m, compared with a loss of £17.7m a year ago. With trading going well, management now expect the full year to exceed expectations. We maintain our buy rating.
Property investment specialist Palace Capital (PCA) reports that it has negotiated a lease surrender from Gala Casinos for the Sol Central site in Northampton which will see Gala pay Palace £3m plus £805,000 for legal fees and delapidations. This now allows Palace to move on with plans to redevelop the site which it bought for £20.7m in June. Buy.
KEY STORIES:
Tool hire specialist HSS (HSS) has accompanied down beat half year results with a second profit warning since its float earlier this year after softer trading during August. Half year revenues rose 12.1 per cent but cash earnings shrank after increased costs associated with new branch start ups and its float. HSS shares slumped by a third on the news.
Further mid cap woe from APR Energy (APR), the temporary power supplier which has run into serious trouble with a contract in Libya among other issues. Its half year revenues halved to $122.2m and adjusted earnings fell by almost two thirds as problems in Libya and Yemen weren’t mitigated by a decent showing in new contract wins and renewals elsewhere.
Energy and oil and gas support services specialist Cape (CIU) has performed creditably despite the weak oil price environment. Its interim results showed revenue growth of 13.2 per cent with adjusted profits up 5 per cent to £21.1m, with the Middle East and North Africa region proving to be the stand out. Order intake rose by 26 per cent to £399m and the order book was £800m at the year end, up from £746m at the turn of the year.
Transport group Stagecoach (SGC) is performing in line with expectations in the UK, where all its operations are showing positive revenue growth with the Virgin Rail group the standout after 7.5 per cent like for like revenue growth. The US Bus division is struggling through with the oil price slump affecting revenues along with some legacy low margin contracts which are being worked through.
Electronic payments specialist Optimal Payments (OPAY) enjoyed a strong first half in which revenues rose by 40.2 per cent to $223m and adjusted profits by 18.7 per cent to $37.3m.
OTHER COMPANY NEWS:
International Greetings (IGR) says that trading is in line with expectations and that it is well positioned as it heads towards its key peak trading season.
Efficient laundry technology developer Xeros (XSG) has expanded its footprint outside of the US with channel partner deals which will take it into Canada, the Caribbean and Latin America.
