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News & Tips: Carillion, WPP, AstraZeneca & more

Equities are having an off day
August 24, 2016

Equity markets remain in a rather directionless summer lull with a small downward movement today. Click here for The Trader Nicole Elliott's latest thoughts.

IC TIP UPDATES:

Support services led the way for Carillion (CLLN) during the first half of the year, boosting pre-tax profits by a quarter. Thanks to lower contract mobilisation costs the underlying operating margins for this business - which accounted for 60 per cent of overall sales - also grew a percentage point to 5.7 per cent. Sales for construction work in the Middle East were lower as low oil prices continued to drag on sentiment in the region. Group finance director Richard Adam will also retire in December, to be replaced by group finance controller Zafar Khan. More to follow in our full results write up.

Pharma giant AstraZeneca (AZN) has agreed to sell its late-stage antibiotics business to acquisition hungry Pfizer. The US group will pay Astra up to $1.5bn for its portfolio which consists of three already approved antibiotics and two currently undergoing clinical trials. According to management at Astra this will allow the group to focus more on its three main therapy areas, while allowing Pfizer - a world leader in infectious diseases - to bring its antibiotics to market effectively. The deal is not expected to impact current year forecasts and we still rate Astra a buy.

Shares in WPP (WPP) climbed 6 per cent after the global advertising group grew comparable sales by 4 per cent in the first half of 2016, driving underlying pre-tax profits up 12 per cent. Constant-currency revenues rose across the company’s regions and divisions, and the trend continued in July. Management also hiked the dividend by 23 per cent. Under review.

Pawnbroker H&T (HAT) has signed a brokerage deal with Cash Converter and their franchisees to provide its personal loan product via its 150 branches and website. There will be a small amount of start-up losses in 2016 as management establishes the product with Cash Converter, but this should provide a good boost for sales in the coming years. Buy.

KEY STORIES:

Mega-miner Glencore (GLEN) can’t rely much on commodity prices to strengthen its balance sheet at the moment, so it has turned its attention to two areas: costs and asset sales. Half-year results again show that good progress has been made on the latter, with $3.9bn in disposals so far in 2016 just shy of the full-year target, while further efficiencies in each of the company’s four key resources have further entrenched the remaining assets in the lowest quartile of the global cost curve.

Interserve (IRV) has won a £17m contract to design and build a three-storey complex at the University of York’s Campus East. Work on site has begun, with project completion due in November 2017. Interserve hopes to achieve a Building Research Establishment Environmental Assessment Method (BREEAM) 'Very Good' rating for the project.

Many betting companies have bemoaned a recent set of sporting results which have gone against them but there doesn’t seem to be much of an impact over at gaming goliath Paddy Power Betfair (PPB). Revenues rose nearly a fifth thanks to growth in each of its four divisions. The integration of the two businesses which make up the combined group is ahead of schedule, according to chief Breon Corcoran, who added £65m of cost synergies would be achieved in FY2017 - a year earlier than expected. Underlying operating profits rose by 40 per cent to £123m and would have been £5m higher had it not been for £5m of Irish point of consumption tax.

Pools betting operator Sportech (SPO) has said it is still in discussions about whether to sell its UK-based football pools business - which is the oldest football gaming business in the world. Revenue in the division fell marginally - as it did in its other two divisions - racing and digital and venues. The good news though is that it has swung to a net cash position thanks to the fact it has won its £97m VAT claim against HM Revenue & Customs - a significant chunk of change given the group’s £132m market cap. The government, however, isn’t letting go without a fight and will find out the outcome of its appeal in the autumn.

Shares in OneSavings Bank (OSB) received a much-needed boost of 9 per cent after increasing its net interest margin ahead of full-year guidance to 3.07 per cent and growing new loans by a quarter. OSB is reducing its standard variable rate from September in order to pass on the recent 0.25 basis point cut in the base rate, however management says this will have no significant impact on its net interest margin due to reductions in administered savings.