After a downbeat start to the day, shares in London has recouped most of their losses and are only trading marginally down.
IC TIP UPDATES:
As we flagged earlier in the year, Cairn Energy (CNE) used its half-year results to upgrade the gross contingent (2C) resource estimate for the SNE field offshore Senegal by 23 per cent, to 473 million barrels. So-called ‘associated 2C oil in place’ now stands at more than 2.7bn barrels. Though this was well below estimates made by Woodside and ConocoPhillips, Cairn said the imminent re-commencement of a drilling programme at the field could lead to further appraisals. With net cash down to $414m by the end of June, we retain our buy recommendation.
Rockhopper Exploration (RKH) has completed the acquisition of North African explorer Beach Egypt for a total cash consideration of $11.9m. The average working interest production across Beach’s Abu Sennan and El Qa’a Plain concessions was 1,100 barrels of oil equivalent a day in the 12 months to 30 June, while reserves at the two sites translates to a transaction multiple of just $2.4 per barrel for Rockhopper. With the cash position likely to hold steady by the year end, we keep our buy call.
Shares in Amino Technologies (AMO) climbed 2 per cent after the video-streaming technology specialist signed a contract with PCCW, a leading multimedia group in Hong Kong. Buy.
Cross-border payments group Earthport (EPO) dipped 1 per cent after management pegged full-year sales at £22.7m - up 18 per cent - and gross profit at £16.2m. It also revealed a 73 per cent rise in payment volumes to over $11bn (£8.5bn). Buy.
Second quarter gas sales at Wentworth Resources (WRL) was slightly up on the first three months of the year, but management will have been hoping for more than sales of 51mmcfd. Sales, which are nonetheless are boosting cash flows and helping Wentworth to reduce its debts, could be further reported by the return of the Symbion power plant, which is currently offline. Our recommendation is under review.
Building products group Polypipe (PLP) has reported a record first-half performance, following on from strong results for the first quarter of the year, with underlying operating profits up 47 per cent to £37.7m. Buy.
The rising gold price has done wonders for pawnbroker H&T Group (HAT), which boosted its pre-tax profits by 42 per cent during the first half of the year. The recently-launched personal loans business also went from strength to strength, growing its net loan book by 85 per cent to £6.3m. The shares are 40 per cent up on our buy tip, which we’re sticking by.
Bank of Georgia (BGEO) posted a 2.5 per cent increase in banking net interest income as its loan book grew 18 per cent. However, excess levels of liquidity dampened the bank’s net interest margin by 10 basis points to 7.5 per cent. Its corporate investment banking business also performed less well, with its net loan book declining 6 per cent. However, the shares are significantly up on our sell tip, which we place under review.
KEY STORIES:
Shares in John Menzies (MNZS) climbed 2 per cent after the logistics group posted a 1 per cent rise in underlying operating profits in the first half of 2016. Aviation sales rose 7 per cent, and the group also secured a three-year national distribution services contract with WH Smith.
Mears (MER) grew turnover by 8 per cent in the first half of 2016, but adjusted pre-tax profit fell 5 per cent to £18.2m. Organic sales rose 6 per cent in the housing business, but exclude acquisitions and revenue was flat in the care division.
Oil services engineer Wood Group (WG.) has suffered a steep drop in profits in the first half of this year, but new contract wins, including a $700m deal on the Tengiz Field in Kazakhstan, suggest that opportunities might be returning to its troubled core markets.
Unit cash costs may have declined across the board, but full-year results for BHP Billiton (BLT) make for difficult reading. Underlying attributable profit declined a whopping 81 per cent in the period, vindicating the diversified miner’s decision to slash the full-year dividend by 76 per cent to 30¢ per share. And while there was no increase in net debt, the slump in commodities prices, the Samarco disaster and a bad bet on shale conspired to bring the pre-tax loss for the year to $7.26bn.
Chilean copper miner Antofagasta (ANTO) posted a stronger-than-expected reduction in second quarter unit costs, despite the inclusion of production from the higher-cost Antucoya mine. Though production was towards the lower end of expectations, excellent performances from the Los Pelambres and Zaldivar mines helped to push shares up by nearly 3 per cent in early trading.
Though it is difficult to quantify the financial prospects for Sirius Minerals’ (SXX) Yorkshire polyhalite project, half-year results for the group underscore the operational progress made this year to date. Not only has the mine seen an upgrade to its “probable” reserves, but take-or-pay offtake agreement has been signed with a Chinese industrial, a definitive feasibility study has been completed, contractors have been selected and capital requirements have been earmarked at $2.9bn.
A 31 per cent increase in silver production and a near-tripling in gold mined was always going to be good news for Hochschild Mining (HOC), but a sharp swing to pre-tax profits of $60.3m was still well ahead of expectations. This was in part thanks to a 27 per cent drop in all-in sustaining costs per silver equivalent ounce. Shareholders were rewarded with a 1.38¢ per share interim dividend.
Castings’ (CGS) chairman, Brian Cooke, will reveal at the West Midlands-based iron castings and machining group’s AGM that management has seen “a softening in demand” from the group’s main customers since the statement in the chairman's report in June. Shares marched back on early trading as a consequence.
OTHER COMPANY NEWS:
Pharma giant AstraZeneca (AZN) has signed a new licensing agreement with dermatology group LEO Pharma for tralokinumab which is used for patients with atopic dermatitis, an inflammatory disease resulting in itchy, red, swollen and cracked skin. Under the deal terms, LEO Pharma made a payment to AstraZeneca of $115m for the exclusive, global rights to tralokinumab in atopic dermatitis as well as any future additional dermatology conditions it may be appropriate for.
