Equities have bounced back in London this morning ahead of a Federal Reserve policy announcement later as UK manufacturing data impresses despite inflation sneaking. Click here for The Trader Nicole Elliott's latest take on the markets.
IC TIP UPDATES:
Sir Charles Dunstone is hanging up on his position as chairman of Dixons Carphone (DC.) to move into a senior advisory role with company. He hands the reins over to former BT boss Lord Livingstone, who has been deputy chairman at Dixons Carphone since joining the board in 2015. He previously he spent more than a decade at Dixons Group – prior to its merger with Carphone Warehouse three years ago – including six years as chief financial officer. Buy.
But Sir Charles will not be out of a job; in May he will take up the executive chairman role at TalkTalk (TALK). Shareholders seem relieved that the Dixons founder will be stepping into TalkTalk, or perhaps this morning's 7 per cent share price rise is a reaction to news that the group’s chief executive Dido Harding will be leaving. Ms Harding has not been a popular leader at TalkTalk, criticised for her handling of cyber security breaches.
There’s little talk of some of the pressures of cost price inflation at drinks maker A G Barr (BAG) this morning but this doesn’t mean it isn’t having to cut its cloth. The group is heavily UK-focused and so is only marginally impacted by the fall in sterling versus other major trading currencies. But in the final quarter of its trading year, which ended on 28 January, the group said a company-wide reorganisation had taken place to help reduce its overheads. This means the operating margin remains in line with expectations. The business has weathered a tough market and saw like-for-like sales rise 1.5 per cent to £257m. Developments such as Irn Bru XTRA and Rubicon Spring helped maintain growth while £10m will be invested in upgrading its Milton Keynes site. Sell.
Anglo Pacific Group (APF) is to raise £13.7m in an equity placing, to fund a C$43.5m (£26.4m) loan and royalty stream deal with Toronto-listed Denison Mines. Under the terms of the agreement, Anglo will receive 22.5 per cent of the proceeds of the McClean Lake uranium mill owed to Denison, and 10 per cent annual interest on a C$40.8m loan. As the deal is expected to be “immediately accretive to adjusted EPS and dividend cover”, we re-iterate our buy call.
Centamin (CEY) this morning showed why it can pay to buy into a strong gold market. Following a strong boost in earnings and cash, the Egypt-based miner announced a 13.5¢ final dividend for 2016, immediately pushing the stock onto a 7.5 per cent yield. Whether or not that is sustainable beyond 2017, we continue to rate the shares a buy.
Allergy Therapeutics’ (AGY) foray into the world of food allergies has got off to a flying start. The group’s peanut allergy vaccine - Polyvac Peanut - has reported excellent efficacy and safety data in pre-clinical trials meaning the group will now progress the product into human trials. The total addressable market for peanut allergies is estimated at around $8bn per year so investors could well be right in getting excited about this development (Allergy’s shares rose 8 per cent in early trading). Buy
Primary care centre operator Assura (AGR) has increased the number of care centres it owns to 385, generating an annualised rent roll of £72.7m, the company revealed in a third quarter trading update for the last three months of 2016. Rental rates rose by 1.72 per cent and the quarterly paid dividend has been increased to 0.6p a share. Buy.
Telford Homes (TEF) has paid £30.2m for a 0.94 acre development site, once used by the London Electricity Board in Cambridge Heath, east London. Situated close to underground and Crossrail stations, the expected gross development value of the site is around £95m, and subject to planning consent, work will begin on the site in 2018. We retain our buy recommendation.
The house is winning over at online gaming operator 32Red (TTR) thanks to a steep 28 per cent jump in net gaming revenue to a record £62.3m. Casino net gaming revenue - the bulk of group turnover - rose by a quarter to to £58.5m while other products saw this metric rise to £3.8m to £2.4m for the year ended 31 December. Another positive for the group was its burgeoning Italian business moving into profitability. Buy.
KEY STORIES:
The shares in eastern European-focused airline Wizz Air (WIZZ) are flying in the wrong direction this morning with the stock down nearly 8 per cent at the time of writing. The main issue appears to be a profit warning caused by the recent tough trading conditions. The group saw a 9.4 per cent fall in unit revenue to €3.31 - which is a measure of how much the airline is making per available seat kilometre (ASK) and points to how competitive prices are across the industry right now. This was made worse by the fact total unit costs fell by a smaller percentage - 7 per cent - to €3.16 per ASK. And costs excluding fuel remained flat at €2.29 per ASK, with the drop being much steeper if fuel is included. All this and severe weather conditions impacting central and eastern Europe in its third trading quarter means, chief executive József Váradi said, “it is prudent to trim the company's guidance for net profit for the full year from the existing range of between €245-€255m to a range of between €225-€235m”. The full year outlook suggests revenue per ASK will drop by high single digits. On the upside, new larger and more efficient planes are being added to the fleet this year and next.
Most gold miners were up this morning on an improved price for the yellow metal, but two deaths at Hochschild Mining’s (HOC) Inmaculada mine in southern Peru wiped three per cent off the company’s stock. Operations at the plant have been suspended until an investigation has been completed, and “all relevant authorities have been informed”.
Investors in Premier Oil (PMO) should have clarity on the long overdue refinancing “within the next few days”, the energy group confirmed this morning alongside an announcement that the financial covenant test for January has been deferred by another month. The shares are up 5 per cent this morning.
OTHER COMPANY NEWS:
Finally, some good news for any Fox Marble (FOX) shareholder patient enough to hold on this long. The group has this morning announced three orders worth roughly €300,000 which includes the prestigious Audley Square development in Mayfair. Shares rose 8 per cent in early trading.
Fourth quarter earnings disappointments from Pfizer (US:PFE) and Eli Lilly (US:LLY) have sparked the start of what is expected to be a difficult reporting season for global big pharma. Within the next two weeks we’ll have numbers from GlaxoSmithKline (GSK), AstraZeneca (AZN) and Shire (SHP) and it will be interesting to see how Britain’s three pharma giants weathered the ‘patent cliff’ experienced by the industry last year. But despite disappointing numbers from a couple of the biggest pharma groups in the US, the industry was trading well yesterday after President Donald Trump appeared to relax his stance on branded drugs pricing. Instead it may be well generics specialists will be the companies to feel the full wrath of a pricing clamp down.
Acquisition hungry Victoria (VCP) the floor covering experts, have completed their purchase of Dunlop Flooring, the Australian underlay and hard wood flooring manufacturer and distributor. The acquisition was funded from Victoria's cash and existing debt facilities.
