Shares in London have regained much of the ground lost yesterday. Click here for The Trader Nicole Elliott's latest thoughts.
IC TIP UPDATES:
Shares in Provident Financial (PFG) dipped a further 2 per cent after continued disruption to its home credit business caused a 46 per cent drop in pre-tax profits during the first half of the year. The home credit business was forced to take a £40m impairment as a result of a greater number of agent vacancies than expected, as well as reduced agent effectiveness. Vanquis Bank performed better, with customer numbers up 14 per cent and average receivables rising 15 per cent to £1.4bn. However, impairments also crept up. The interim dividend was also kept flat at 43.2p. We place our buy recommendation under review.
Shares in Games Workshop (GAW) jumped 8 per cent this morning on the back of a trading statement this morning. According to bosses there trading has exceeded expectations, meaning sales and profits for the year to date are well ahead of the previous year. Profits for 2017/18 are therefore likely to beat current market expectations. Buy.
Following May’s shock profit warning, shares in Revolution Bars (RBG) have bounced back this morning by 7 per cent. Reporting on the year’s trading the group said like-for-like sales had improved 1.5 per cent, which helped lift total sales by 9.2 per cent. Recent terrorist attacks in Manchester and London have played havoc with customer traffic, the group says, although like-for-like growth has been particularly strong over the last six weeks. No real elaboration on the escalating costs pointed to in the May update, although managers say investors should expect pre-tax profits to report in line with current expectations.
Restore’s (RST) long-suffering toner cartridge business looks to have finally turned a corner. At the last full year update the business was beginning to show progress from the loss it made in 2016. This morning, the group announced it had “traded profitably” in the first half of 2017. The picture was more mixed in the document management business, where net box growth slowed following the departure of major customers from previously acquired businesses. However, management said this was expected and noted cost savings were ahead of expectations. Buy.
Mortgage Advice Bureau (MAB1) reported a 15 per cent rise in sales during the six months to the end of June at £49m. This was driven by an increase in the average number of advisers during the period. However, growth in revenue per adviser was more modest than the same time in 2016, when buy-to-let stamp duty changes led to a rise in business. Buy.
KEY STORIES:
Shares in Acacia Mining (ACA) are off another 12 per cent this morning, after the gold miner announced the receipt of a $190bn historical corporate income tax bill. The Tanzanian government has accused Acacia of failing to properly declare the value of its unrefined gold between 2000 and 2017, though the bill – comprising $50bn in unpaid tax and $140bn in interest – amounts to some four times’ Tanzania’s annual gross domestic product.
The Serious Fraud Office has launched an investigation into Rio Tinto (RIO) into suspected historic corruption by the company, “its employees and others associated with it” in the Republic of Guinea. Last year, Rio reported itself to the fraud agency after discovering emails dating back to 2011, which related “to contractual payments totalling $10.5m made to a consultant" involved in the Simandou iron ore project. An internal investigation by the commodities giant also led to the resignation of Rio's long-serving legal and regulatory group executive Debra Valentine and the suspension of energy and minerals chief executive Alan Davies. Rio Tinto disposed of its stake in Simandou to Chinalco last year.
Venture capital group Draper Esprit (GROW) grew the value of its gross investment portfolio more than a third during the period since its admission to the market in June and the end of March this year. The group has 29 holdings, eight of which account for three-quarters of its portfolio fair value. It reported a £33.8m pre-tax profit at the end of March, up from £26.5m at the end of September.
Following warnings around the rapid rise in consumer credit across the UK, Virgin Money (VM.) reported a modest 7 per cent rise in mortgage balances during the first half of the year to £31.8bn. However, credit card balances increased by 13 per cent to £2.8bn, closing in on management’s target £3bn by the end of the year. The net interest margin dipped very slightly at 1.59 per cent, but the cost-to-income ratio also improved.
Jimmy Choo (CHOO) shares have leapt 17 per cent this morning following news that US group Michael Kors has made a 230p a share offer for the company totalling £896m. That represents a 36.5 per cent premium to the undisturbed share price or a 17 per cent premium to the opening price this morning. However, the shares have soared to 228p apiece, making much of that baked in for now. The deal is expected to close in the fourth quarter of 2017 and existing management structures are expected to remain in place.
OTHER COMPANY NEWS:
Gresham Technologies (GHT), the software and services group, reported total revenue growth of 26 per cent for the first half to £9.8m. Revenues for Gresham’s main solution - Clareti - rose by 53 per cent to £4.8m. The company saw good progress in its North American market. Shares rose 7 per cent following the announcement.
Software provider Servelec (SERV) issued a trading update noting a return to growth in underlying operating profit for the first half. The company hopes to be debt free by the end of FY2017. Within its social care division, the company saw sales behind expectations. However, management are pleased with the progress of Servelec Controls, which has seen order wins from former customers. Shares fell 2 per cent in early trading.
Shares in WANdisco (WAND)rose 8 per cent after the software group reported ‘record’ total bookings for the first half, at $10.2m (up 73 per cent). The firm’s trading update also noted that cash burn reduced to $600,000 from $5.3m as a result of improved bookings and reduced cash overheads. WANdisco won significant contracts during the period including its first contracts in retail and healthcare.
Goals Soccer Centres (GOAL) reported that group sales for the first half increased by 2 per cent (compared to a loss of -0.5 per cent a year earlier), reaching £17.3m in total. In a trading update, the small-cap operator of soccer centres also announced the agreement of a 50:50 joint venture with City Football Group, giving Goals more of a presence in North America. The firm’s shares were up 5 per cent in early trading.
Andes Energia (AEN) yesterday provided the market with details of its reverse takeover of the Argentine production and exploration assets owned by Mercuria Energy. Once the deal completes, Mercuria will own around 78 per of the combined group, which will be re-named Phoenix Global Resources. Sir Michael Rake, chairman of BT and Worldpay, and a current non-executive director at Andes, will join as chairman, while Anuj Sharma will be made board chief executive.
