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News & Tips: AO World, Close Brothers, Paysafe & more

Equities are up marginally
July 21, 2017

Shares in London are just holding their own this morning. Click here for The Trader Nicole Elliott's latest thoughts. 

IC TIP UPDATES:

White goods retailer AO World (AO.) admits that the trading environment remains challenging this morning, although full-year results are still expected to fall within the range of current market expectations. Overall, UK revenue growth in the first quarter was 2.5 per cent reflecting an expected reduction in third party website wales and third party logistics sales year-on-year. The embryonic European operation fared better, reporting a 57 per cent improvement in revenues, although this is still from a smaller base. No word on margins either. Sell.

Close Brothers (CBG) reported a 6 per cent increase in the loan book of its banking division during the 11 months to the end of June and strong growth in property finance loans. However, while retail finance benefited from a rise in premium finance business, it instead prioritised margins and credit quality in motor finance. Commercial finance growth was also modest, in line with the point in the economic cycle. Buy.  

Shares in small-cap recruiter Empresaria (EMR) are up 5.5 per cent this morning following a trading update. The group saw a 26 per cent increase in net fee income, with growth stemming from the UK, continental Europe and Asia Pacific. The group is on track to meet expectations for the full year. We are staying on buy.

KEY STORIES:

Shares in Homeserve  (HSV) are down 2.9 per cent this morning after it released a trading update. The group is trading in line with expectations, although trading for the 2018 financial year is expected to be heavily weighted towards the second half. The home repairs group added 2.5m new households in North America, bringing the total to 53m. Business in the UK, France, Spain and Italy is on track. 

Interim results today laid bare a hellish period for Acacia Mining (ACA), following March’s surprise decision by the Tanzanian government to ban the export of gold concentrates. By the company’s estimation, the ban has held back $175m of revenues and resulted in a $51m VAT outflow, leading to a 45 per cent drop in the cash balance to $176m. Despite this, Acacia hit a production record for the period, though additional costs incurred by the concentrate ban added $93 to all-in sustaining costs per ounce. The shares, unsurprisingly, are down a further 10 per cent this morning.

Based on its share price trajectory, Acacia’s market capitalisation could soon be leapfrogged by peer SolGold (SOLG), which this morning applied to move its shares from Aim to the main market. SolGold, which owns the Cascabel copper-gold exploration tenement in Ecuador, said a main market listing would offer a “more appropriate platform” for its size and growth, and would both raise its global profile and improve trading liquidity.

Paysafe (PAYS) has a received a preliminary, conditional takeover offer from a consortium of funds managed by Blackstone and CVC Capital Partners, the terms of which would grant each Paysafe shareholder 590p per share. Old Mutual - Paysafe’s largest shareholder - has given its support to the possible acquisition. Shares in Paysafe rose 8 per cent in early trading. Paysafe also announced its acquisition of Merchants’ Choice Payment Solutions for $470m, another payment solutions provider based in Texas.

Shares in Learning Technologies (LTG) rose 7 per cent following a trading update from the e-learning provider, noting record revenues for the first half to end of June 2017. The company expects to see revenues of more than £20.8m - up 62.5 per cent from a year earlier. Recurring revenues have continued to grow and the recently-acquired NetDimensions business has been integrated on time.

British American Tobacco (BATS) has appointed three new non-executive directors as part of its takeover of Reynolds. Lionel Nowell was lead independent director of the board of Reynolds, while Holly Keller Koeppel and Luc Jobin were independent directors. Shares were up nearly one per cent in early trading.