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News & Tips: Mitchells & Butlers, Hurricane Energy, WYG & more

Equities are on the rise
September 22, 2016

London's equities have enjoyed a surge in morning trading after the Fed sat on its hands yesterday. Click here for The Trader Nicole Elliott's latest take on the markets.

IC TIP UPDATES:

Restructuring costs in the UK dragged operating profits in that country down 10 per cent for advertising group M&C Saatchi (SAA) but performance elsewhere was robust. Management spent £660,000 on rejigging its advertising agency unit in the UK but without these costs, operating profit actually grew 2 per cent. Europe performed strongly with like-for-like revenue up 12 per cent while there was an even more impressive growth rate in the Middle East and Africa division with turnover up 19 per cent. Buy.

Cost pressures will mean margins are down at pub group Mitchells & Butlers (MAB) judging by its trading update this morning. Management had flagged the prospect earlier in the year with the key drivers being investment in its estate and the national living wage - the latter being a pressure on all of its rivals too. The company has converted or remodelled 244 sites this financial year but the payback is yet to emerge. Total revenue for the 51 weeks to 17 September fell 0.8 per cent, with food the biggest drag as sales in this segment dipped 1.4 per cent. Sell.

Shares in WYG (WYG) rose 6 per cent after the engineering consultancy reported it expects sales and pre-tax profits for the six months to the end of September to be significantly ahead of last year, while the order book is 35 per cent ahead. Despite experiencing some delays in UK projects around the time of the referendum, management says activity has started to pick up and the group has won new projects with the Ministry of Defence and Hertfordshire County Council most recently. Buy.

Chief financial officer at International Personal Finance (IPF) Adrian Gardner has resigned to pursue another role outside the company. Head of finance Justin Lockwood has stepped in while a replacement is searched for. Meanwhile management also announced trading is in line with expectations, while its troubled Mexico business is showing signs of progress. We see no reason to upgrade our sell rating yet though.

Newly-appointed chairwoman of Park Group (PKG) Laura Carstensen has announced billings and pre-tax profits since the end of March are ahead of the same time the previous year, building on gains made in the year to March. Cash balances are around £18m ahead of last year at £200m, while the order book for its consumer business is 4 per cent ahead. The group has also been developing its corporate benefits business, launching Evolve in June, an online platform offering instant rewards to customers. Buy.

Hurricane Energy (HUR) today released financial results for the half-year to June, but the real news came earlier this month with the successful drilling of the pilot well at the Lancaster field. Now, with the reservoir significantly de-risked and the group carried, drilling at the horizontal sidetrack well is now under way. Our recommendation is under review.

Ric Traynor, chairman of insolvency specialists Begbies Traynor (BEG), will tell shareholders at today’s AGM that trading in the first quarter of the current financial year has been “satisfactory” and “in line with expectations, despite the continuing challenging levels of market activity”. According to government insolvency statistics, there was a 2 per cent decline in the number of corporate insolvency appointments in the first six months of 2016. We keep our speculative buy call.

Having attracted a considerable number of new clients in the period, sentiment is riding high at Mission Marketing (TMMG) and the share price leapt 12 per cent following these interim results. Revenue up a tenth is partly due to those new clients, but also benefits of acquisitions made in 2015. Buy.

KEY STORIES:

AP Moller-Maersk (Den: MAERSK-B) is to split in two, in a huge shake up of the Danish conglomerate. The largest container shipping group in the world will separate its transport divisions from Maersk Oil, which has stakes in several big North Sea oilfields in Denmark, Norway and the UK, as well as oil tanker and rig operator businesses.

Shares in Countrywide (CWD) dipped despite news that the company has banked £29.2m from the sale of its remaining 9.2m shares in Zoopla Property Group (ZPLA). The shares have been sold off in the market over the last few weeks at an average price of 317p a share.

OTHER COMPANY NEWS:

Shares in Chinese mobile technology provider DJI Holdings (DJI) have been shaken this morning on the back of news it will aim to list on Nasdaq after it has rebranded. The stock is down more than 7 per cent on the announcement, which also includes an update suggesting the company will now likely have access to the payment processing industry in China through a deal involving its technology provider NewNet and joint venture partner Xinhuatong. DJI, which has proposed rebranding to BNN Technology, also said in a separate announcement it was pursuing other contracts in China and is planning on strengthening its board but was unable to confirm rumours which have been circulating on the internet about which companies such deals might be with and who might be appointed.

The completion of a clinical trial into one of the groups flu products saw hVivo (HVO) receive a whopper of a milestone payment in the period, and revenue almost tripled. But costs of the day to day running of the business have inflated which came at the expense of research and development efforts. Hold.