Shares in London are down marginally as traders struggle for direction with HSBC grabbing headlines for its profits slump. Click here for The Trader Nicole Elliott's latest thoughts.
IC TIP UPDATES:
If Vernalis (VER) investors will keep fixating on cough and cold medicine Tuzistra, they’re bound to be repeatedly disappointed. Once again the medicine, which was launched in the US in 2015, failed to reach its sales expectations. Vernalis shares are down 11 per cent in early trading as a result. But we are keeping the faith. Vernalis is more than just Tuzistra and its new cough and cold medicines are progressing fast through the pipeline. Buy.
Shares in Intercontinental Hotels (IHG) are riding at an all-time high following annual results this morning, which contained news of another special dividend, this time worth $400m. Operating profits of $707m beat brokerage Numis’ expectations and were 2 per cent ahead of company consensus forecasts. The stock has found good momentum following the US election last year, as investors suspect the group will benefit from President Trump’s infrastructure plans. Our recommendation is under review.
Shares in Bacanora Minerals (BCN) edged up 6 per cent today after the prospective lithium miner announced the acquisition of a 50 per cent stake in the Zinnwald lithium project in southern Saxony, Germany. The stake, which also covers joint operational control, is being bought from SolarWorld, Europe’s largest solar panel producer, and will be paid for through the completion of a feasibility study on the project, which could take up to two years. Our buy call is under review.
Shares in Capita (CPI) dropped sharply before recovering today after the support services company wrote down £90m of assets following a comprehensive review of major contracts. The assets in question date back as far as 2009, but the bulk are from between 2012-2014. £50m will be written off as a non-underlying charge, and a further £40m will be written down as a charge to underlying results. Sell.
KEY STORIES:
Vodafone (VOD) is finally letting go of the 20th century. The sale of its pager business to services group Capita (CPI) sees it become the last telco to exit the pager market after O2, Motorola and Orange all sold their pager businesses in the early 2000s. Surprisingly, in the age of the smart phone, pagers are still in demand - albeit not high demand. Just 1,000 customers from Vodafone will be transferred to Capita’s pager business in the sale.
Like its iron ore peer Rio Tinto, BHP Billiton (BLT) has rewarded shareholders with a bonus 10¢ a share pay-out following a very profitable second half of 2016. The special dividend, which comes on top of the 30¢ basic interim return, was helped by a quadrupling in earnings before interest and tax, to which higher sales prices and lower costs in each of BHP’s four key commodities were big contributors.
In perhaps the final sign of its huge turnaround, Anglo American (AAL) has also pledged to return to the dividend list by the end of 2017, after reducing net debt by 34 per cent last year to $8.5bn. As preliminary results demonstrate, that was achieved without much in the way of disposal proceeds. And though the company stated it would be exiting both coal and nickel this time last year, Moranbah, Grosvenor and its nickel assets will now be kept and run for cash, “while being allocated capital to both protect and enhance value”.
HSBC (HSBA) suffered a 62 per cent fall in its pre-tax profits, behind market expectations. Revenue in commercial and retail banking was weaker than expected, plus the group suffered losses via its newly-formed commercial centre. Management announced a further £1bn share buyback, in addition to the £2.5bn in shares last year. The dividend was held at 51¢.
OTHER COMPANY NEWS:
Mediclinic’s (MDC) Middle East business continues to struggle. The division - which was bought in early 2016 - is now expected to see revenues decline faster than previously expected and cash profit margins narrowed. The share price fell 6 per cent in early trading.
