Equities began the day in a downbeat mood. Click here to find out what The Trader Nicole Elliott thinks of the markets.
IC TIP UPDATES:
It seems to be bon appétit for catering giant Compass Group (CPG) which has seen strong underlying revenue growth of 5.8 per cent to £17.8bn. The group saw a particularly strong performance out of its largest market, the US, while Europe and Japan showed more signs of life thanks to a combination of self-help measure and better economic conditions. Buy.
The investor audience is giving a mixed review this morning to Cineworld (CINE) in spite of pro forma box office revenues rising by 10.8 per cent and admissions growth in all its territories except Slovakia. Shares are down 2 per cent in spite of management stating it remained confident of “delivering a performance for the year as a whole in line with current market expectations” given the strong slate of films lined up for the end of 2015. We keep our buy recommendation.
Investors sent shares in Creston (CRE) down 17 per cent after the marketing communications group posted only 1 per cent growth in like-for-like revenues in the six months to 30 September. That reflected the weaker Euro and tighter client budgets, leading management to guide that full-year results would be slightly behind expectations. Under review.
Rockhopper Exploration (RKH) is to go ahead with a recommended all-share takeover of Falkland Oil and Gas (FOGL). Shareholders in FOGL are to receive 0.2993 of a Rockhopper share for every share held in the target company. That equates to an 11 per cent premium for FOGL shareholders based on the valuation of Rockhopper at the end of Monday's trading. The current shareholders of Rockhopper will own around 65 per cent of the combined group's issued share capital with FOGL shareholders owning the remainder. Rockhopper executives will take charge of the enlarged group, with Tim Bushell, the chief executive of FOGL, and John Martin, its chairman, becoming non-executive directors. Buy.
A respectable set of full-year results from buy-to-let lender Paragon (PAG) sustained its share price in a falling market. Underlying pre-tax profits of £135m for the year to the end of September were up just over a tenth on the 2014 financial year. This was encouraged by new BTL business doubling to £1.3bn. We will review our buy stance in the deeper analysis of today’s figures.
Our buy tip Lloyds Banking Group (LLOY) has made an effort to improve its capital base by offering to exchange certain debt securities. The first offer is to swap fixed rate tier two notes, due in 2020, for subordinated debt securities due in 2025. The second is to swap subordinated notes due in 2033 for longer-dated, lower-yielding securities due in 2045. We maintain our buy stance.
Shares in drug developer and allergy specialist Circassia (CIR) rose nearly 5 per cent in early trading after the group received EU regulatory approval for a new inhaler - a product it says is equivalent to drugs giant GSK’s (GSK) Flixotide asthma inhaler. The regulatory thumbs-up is said to represent a positive endorsement of Circassia’s particle-engineering platform which was crucial in the product’s development. We remain buyers.
Banknote printer De La Rue’s (DLAR) first-half results were slightly ahead of expectations, but the group still reported a fall in underlying pre-tax profit of a third. This was driven by pricing pressure in the currency market. Sell.
Shares in outsourcing giant Babcock (BAB) jumped 5 per cent after the group grew pre-tax profits by 7 per cent and increased its order book by £1.5bn to £2bn. The group’s support services and marine and technology businesses put in a solid performance. However, following the completion of the group’s regional prime contracts in January, revenue for the defence business fell 3 per cent. We place our rating under review.
Shares in our buy tip of the year Hill & Smith (HILS) climbed 3 per cent after the infrastructure products and galvanising services group reported robust trading in the second half of 2015. Buy.
Laird (LRD) has splashed out $55m (£36m) on the acquisition of wireless product design company LS Research, in a deal that gives the technology company exposure to the enterprise internet of things space. Buy.
The market might have been expecting a worse set of half-year results for industrial solutions group Solid State (SOLI), which has seen a precipitous fall in its share price in recent months thanks to a delay in a major contract with the Ministry of Justice. Instead, the company hung onto its dividend and boosted earnings per share. Not wanting to crystallise a loss, we are staying with our buy tip.
With uncertainty over monetary policy divergence continuing to reign over markets, demand for Record’s (REC) currency strategies remains high. This didn’t translate into profit growth in the company’s interim results, however, thanks to a decision to increase staff salaries in the period. We remain buyers.
A 43 per cent gain in pre-tax profit for the 2015 financial year was enough to send shares in our long-standing tip Cambria Automobiles (CAMB) up by 2 per cent. The franchised car retailer has also renewed and extended its banking facilities, to allow for further business and property purchases. Our rating is under review.
KEY STORIES:
Cape (CIU) has delivered a neutral trading update for the period 6 July 2015 to 1 November 2015. Trading has been broadly in line with the management’s expectations, despite challenging market conditions. A relatively strong performance from the onshore UK and Australian businesses, together with lower than expected central costs, were off-set by weakness in the offshore UK business and lower margins in the MENA region.
Amara Mining (AMA) announced that the total mineral resource at its Yaoure gold project in Côte d'Ivoire increased by 491,000 ounces to 7.3m ounces at 1.50g/tonne - a 7 per cent increase in ounces at a 20 per cent increase in grade compared to previous estimates.
A weak performance in France as well as Russia and Spain have put a hole in the wall of DIY group Kingfisher’s (KGF) numbers. The group’s UK business - made up of B&Q and Screwfix - saw profits rise 14 per cent on a constant currency basis while profits in France fell by 7.5 per cent on the same basis. Management said adverse foreign exchange movements and roughly £5m of additional store development in France and Poland held back the numbers.
Pub chain Mitchells & Butlers (MAB) new chief executive has had the enviable job of restoring the group’s dividend. Since joining in January Phil Urban, who was the chief operating officer, has identified ways he thinks the business can improve. And it will need to in order for it to start paying down its £1.87bn of net debt - which represents 4.3 times annualised adjusted cash profits.
If you build it they will come - or eat in the case of convenience food group Greencore (GNC). The company said it had reported a like-for-like rise in revenues of 5.4 per cent to £1.34bn thanks in part to the completed extension of its Northampton facility. The group said the second phase at the location was underway and the newly-extended plant in Jacksonville in the US had a new product range rolled out. Not only that, but a new build in Rhode Island has begun as has work on a new facility in Seattle.
Shares in Renew (RNWH) rose 3 per cent after the engineering services group revealed earnings per share were up by a quarter. This was driven by a strong performance across its infrastructure, environmental and energy markets, in particular nuclear.
Shares in John Menzies (MNZS) fell 4 per cent after management revealed full-year earnings will be £2m below the board’s expectations. This is primarily because the company will need to invest £6m in operational upgrades at Gatwick to mitigate service disruption.
Warren East has told disgruntled shareholders that he will simplify and cut costs in a “major restructuring” designed to help Rolls-Royce (RR.) turn a corner after five profit warnings.
Shares in Severfield (SFR) soared 11 per cent after the structural steel group revealed that revenues rose a fifth to £117m in the six months to September.
Sepura (SEPU), which provides radios and terminals used by transport, utility and public safety professionals, posted record turnover of €93m in the six months to 2 October. That reflected organic sales growth of 34 per cent and €20min revenue from Teltronic, the communications infrastructure group it acquired in May.
Sales leapt 11 per cent at Telecom Plus (TEP) in the six months to 30 September, driving adjusted pre-tax profits up a tenth to £22.5m. The utility provider added nearly 13,600 customers to reach a total of over 595,000.
OTHER COMPANY NEWS:
Sofa specialist DFS (DFS) has made its way into the FTSE 250 index. The shares have risen an impressive 35 per cent since the company made its London debut back in March, and chief executive Ian Filby said the move was “pleasing recognition” that the group was “fulfilling its commitments” to shareholders.
Clinigen (CLIN) has announced an extension to its exclusive contract with Accord Healthcare, a subsidiary of Indian group Intas Pharmaceuticals. Clinigen has held an exclusive EU clinical trial distribution agreement with Accord since 2012 but will continue the contract for a further two years and cover another four products under the new terms.
Oxford Instruments (OXIG) has sold its loss-making Austin Scientific business, sending shares in the technology tools and systems company up 1 per cent.
Zotefoams (ZTF) has announced that Gary McGrath will take over as finance director following the retirement of Clifford Hurst.
Fellow chemicals specialist Scapa (SCPA) saw adjusted pre-tax profit rise 18 per cent to £10m in the six months to September. Investors responded by sending shares up a further 2 per cent.
