Shares in London gathered pace this morning with decent gains. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
A revving North American business has helped transport company First Group (FGP) race up the stockmarket this morning with the shares ahead 5 per cent. Each of its US bus businesses - First Student, First Transit and Greyhound - seem to be firing on all cylinders and earnings from this part of the company have the added bonus of translating nicely into the weaker pound. In the UK, the story is more mixed but there’s room for optimism. Christmas trading was mixed for First Bus but like-for-like revenue in the three months to 31 December only dropped 0.6 per cent - a smaller amount than than the first trading half. The focus remains on costs to support margins. In its rail business, major infrastructure works out of Paddington, among others, have lumbered its GWR franchise slightly although like-for-like passenger revenues rose 1.1 per cent. Thankfully its Trans Pennine business is outperforming the industry average. Interestingly, the company said it had teamed up with Trenitalia UK to fight two rail franchise competitions. Readers may remember Trenitalia’s recent move into the UK market with the purchase of the sole rail franchise held by National Express (NEX).
Gaming technology company Playtech (PTEC) has snapped up Australian business Eyecon for £50m. The specialist software supplier has a particular focus on bingo audiences with an established games portfolio of over 70 games and also boasts its own remote gaming server, which allows it to distribute its content to other gambling companies, including in this instance, 888 (888). Almost all of Eyecon’s revenue is UK based, and so is regulated - something Playtech is keen to have a greater proportion of. Playtech will pay an initial £25m and then pay the same again based on earnings targets between now and June 2019. Eyecon’s founder Scott Murray will remain with the company for at least three years. Buy.
It has been a good start to the new financial year at UDG Healthcare (UDG) where acquisitions made in 2016 have propelled operating profits significantly ahead of where they were at the same time last year. With a substantial proportion of revenue now being recognised in the US, the group has decided to report its financial results in dollars from now onwards. On this basis, EPS for the year to September 2017 is expected to be between 13 per cent and 16 per cent ahead of FY2016. Buy
Shares in Mattioli Woods (MTW) received a further 3 per cent bump-up after the wealth manager reported 14 per cent growth in client assets during the six months to the end of November. Gross discretionary assets were up 17 per cent to £1.4bn, helping boost revenue by around a fifth. The group made another acquisition, buying almost half the share capital of investment management company Amati Global Investors. The shares are well up on our tip, but with the business continuing to increase its discretionary funds - buy.
Education group RM (RM.) not only pleased shareholders with financial results ahead of expectations, but news of an acquisitions which is expected to be highly earnings accretive. The share price - which has performed well since the latter part of 2016 - jumped 12 per cent this morning to 12 month highs. Buy.
The two new companies bought by Amino Technologies (AMO) in 2015 had an excellent impact on the group’s performance last year. On an adjusted basis revenue was up 80 per cent, while operating profit doubled. The group’s cash flow remains impressive with 149 per cent of cash profits converted in the year. The result is a 10 per cent dividend hike. The outlook is also strong and broker FinnCap has raised its profit and earnings expectations for the current financial year. Buy
Housebuilder Bellway (BWY) delivered another strong trading performance, with housing completions up 6.5 per cent at 4,462 in the six months to 31 January. And the outlook remains just as impressive, with the forward order book up from a year earlier at £1.12bn. Reservation rates are currently running at 166 per week, up from 156 a year earlier. Buy.
Low maintenance building products supplier Epwin (EPWN) expects to maintain strong cash flow for the year to December 2016, and profits are forecast to be in line with expectations despite some market headwinds. Acquisitions have helped to boost the bottom line, offset to some extent by increased costs as a result of sterling’s weakness. Buy
Additional technical analysis by Hurricane Energy (HUR) suggests that previous estimates for the Lancaster 7 and 7Z wells were “conservative”, and that an upcoming competent persons report on the field “will result in a material uplift in contingent resources” from 300m barrels. We are holding on for drilling results from the Halifax reservoir, which chief executive Dr Robert Trice believes could reveal a single hydrocarbon accumulation along with Lancaster. Buy.
A trading update from Rockhopper Exploration (RKH) contained two important numbers. The first: an adjusted year-end cash balance of $60-65m, is in line with previous guidance. Second: a commitment to spend just $13m on development, exploration and abandonment costs in 2017. Progress at Sea Lion remains on track, and partner Premier Oil’s (PMO) recently announced refinancing plan is seen as supportive of the development. Buy.
KEY STORIES:
BP (BP.) underwhelmed the market this morning with a fourth quarter update that showed a quarter-on-quarter decline in the replacement cost profit from $1.7bn to $72m, higher net debt and additional provisions related to the Gulf of Mexico oil spill.
Rio Tinto (RIO) has taken the unusual step of gifting its Bunder diamond mine in India to the government of Madhya Pradesh. Last summer, the diversified miner said it would not develop the project and would seek to close all project infrastructure, but after the local government signed an order last month, responsibility for the mine will pass into state hands.
One the biggest movers this morning is model maker Hornby (HRN), up 16 per cent despite news of further losses this year. The group is still in the middle of its long-term turnaround plan, which involves closing its concession channel and offloading its site in Margate for more than £2m. But full-year revenues are still expected to fall between 20 and 25 per cent this year, with a 25 per cent drop recorded over the Christmas period.
Plus500 (PLUS) shares jumped 11 per cent after reporting revenue growth of around a third and net profit growth of around a fifth for the 12 months to the end of December.This was a well-needed boost, after its shares recently plunged on news of the FCA review into contracts for difference providers. New customer numbers were up a quarter on the previous year, which fed through to active customers of almost 156,000. Investors were also rewarded with 27.29ȼ special dividend.
Yet another profit warning from parcels and documents courier DX Group (DX.), a company with a potholed history on the public markets, sent the shares down almost two-thirds in morning trading. Management said that full-year profits would be significantly below current forecasts, thanks to price pressure and margin erosion as the courier and freight businesses have performed more weakly than expected.
OTHER COMPANY NEWS:
Support services company DCC (DCC) saw its shares rise 6 per cent after securing operating profit ahead of expectations in the third quarter, to the end of December 2016. The energy and technology divisions performed especially well on the back of organic volume growth and recent acquisitions.
Luxury interior furnishings group Walker Greenbank (WGB) won’t show much impact on paper from the 2015 flood which hit its Standfast & Barracks site in 2015. The company has only in the past few months got the site running to full production again but in terms of financial performance there hasn’t been huge damage thanks to insurance payments. The group has already received £15.3m in payouts and more could be on the way. The Clarke & Clarke business it purchased in October is performing well and in just 18 weeks of ownership it will contribute £7.3m towards group sales of £92.4m.
News of a $1.8m contract to supply marble to India’s second largest marble export house has sent Fox Marble’s (FOX) share price up 17 per cent. From lows of 7p at the end of 2016, the Kosovo based group seems to be finally on track for growth this year, with its share price now crawling back towards double figures.
