With mining stocks rallying in London, the FTSE 100 outperformed this morning. Here's the latest on the markets from The Trader Nicole Elliott.
IC TIP UPDATES:
Hutchison China Meditech (HCM) has reported a 21 per cent improvement in interim revenues this morning, leaving the group on track to meet analysts’ expectations for the full-year. Most of that net income is still being poured into research and development, where costs moved up by $1.5m (£1.14m) to $37.5m at the halfway stage. Impressively, however, the group remains cash-rich, reporting balances of $193m as at 30 June 2017. Buy.
Trinity Mirror (TNI) saw a muted market reaction to its half-year results, which saw revenues fall sharply to £320m from £374m but the firm’s operating margin rise to 15 per cent from 14 per cent a year earlier. This was against the backdrop of a “difficult trading environment” and one week less of trading compared to 2016. Print publishing revenue declined by 17 per cent, but there was some growth in digital publishing revenue. Management has raised its cost cutting target, is simplifying the digital portfolio and anticipates seeing “improving revenue momentum” in the second half. Buy.
Shares in HSBC (HSBA) were up 3 per cent during early morning trading after management announced a $2bn share buyback. Its tier one capital ratio improved to 14.7 per cent, from 13.6 per cent at the end of December. The banking giant reported a 5 per cent increase in pre-tax profits during the six months to June, with loan impairments significantly reduced to $0.6bn, from $2.4bn the same time the previous year. Coupled with a robust dividend, the shares still look like a buy to us. Buy.
Veterinary services provider CVS Group (CVSG) saw its share price fall 4 per cent on the back of its full-year trading update for the 12 months to end-June. Revenue and adjusted cash profits are expected to be in line with expectations, but after a spate of acquisitions the company had to increase its total borrowing facilities shortly after the year end, from £115m to £153m. Analysts at N+1 Singer held their EPS forecasts for the year, but pushed through upgrades of 7 per cent and 8 per cent respectively for the 2018 and 2019 financial years. Buy.
With a tailwind of improving copper prices, Atalaya Mining (ATYM) only really has to hit its production targets for its market value to steadily pick up. This morning, the Aim-listed group said output increased by 3 per cent in the second quarter of the year, and expects full-year all-in sustaining costs to sit in the range of $1.90 to $2.10 per pound. With copper prices now 10 per cent up on the average sales price for the quarter, the shares remain a buy.
Investors buy Anglo Pacific Group (APF) for its yield, so it was encouraging to see a sharp jump in free cash flow for the half-year to June, from £4.7m to at least £18.5m. Most of this has come from Anglo’s royalty from Rio Tinto’s (RIO) Kestrel mine, though the Denison financing contributed up to £3.4m. Our buy call is under review ahead of the company’s interim results in three weeks’ time. Buy.
Senior (SNR) delivered half-year sales in line with market expectations with revenue up 3 per cent on a constant currency (CC) basis to £510m, while CC profit before tax was down 35 per cent to £24m. The group revealed a strengthening cash performance, while management continues to believe that Flexonics performance will be marginally lower in 2017 compared to 2016. A work in progress. Buy.
Begbies Traynor (BEG) quarterly red flag alert report, which monitors the financial health of UK companies, recorded its largest annual increase in financial distress since 2014. The insolvency practitioner, which would in theory benefit from an uptick in corporate bankruptcies, is up 2 per cent this morning, and 18 per cent in the last month. We remain buyers.
KEY STORIES:
It’s been a tough morning for energy consultant Utilitywise (UTW). The share price fell 39 per cent after the group announced it would miss revenue expectations by £4-4.5m for the year to July 31 2017. The shortfall comes primarily from same-supplier renewal contracts. The bad news doesn’t end there though, The group also announced it would be adopting IFRS 15, an accounting standard requiring it to recognise revenues from same-supplier renewals when a contract commences, rather than when it is signed. This and other changes under IFRS15 are expected to leave the group with negative retained earnings and post tax losses for FY17. As a result, it will not declare a final dividend this year.
River and Mercantile (RIV) reported £0.4bn in net inflows during the three months to the end of June, taking assets under management to £31bn. The majority of new business came via its derivative solutions division, which gained £260bn in inflows. So far this year the asset manager and advisory group has gained £3.8bn in net new business and £1.7bn in investment returns.
Coats (COA) delivered a decent half-year result with a 14 per cent rise in constant currency profits and improved cash generation. The industrial thread manufacturer reached agreement to make an initial $340m (£260m) upfront payment to its three pension schemes ahead of next year’s triennial funding valuation, but doubts could gather over how future funding requirements will be met.
OTHER COMPANY NEWS:
In its first set of results since its IPO in February 2017, Arix Bioscience (ARIX) reported that it had increased its portfolio to include 10 businesses, and achieved various investment rounds for these businesses as well as a NASDAQ listing for Verona Pharma - a UK-based portfolio company. Arix, which brings life science VCl opportunities to public investors, saw its share price rise 5 per cent in early trading. It anticipates a pipeline of “high quality opportunities” going forwards.
Shares in FDM (FDM) rose 10 per cent following a 35 per cent boost to the IT company’s top-line and a 33 per cent rise in pre-tax profit. EPS correspondingly rose 30 per cent. The firm saw geographic expansion during the first half with improved revenue for its North America ‘Mountie’ (business consultants) operations. The interim dividend increased by 12p from 9.3p a year earlier.
GlobalData (DATA) reported top-line growth of 23 per cent for the first half, with pre-tax profit growth of £8,000 after a £1.3m loss a year earlier. The group has broadened its offering with a health care acquisition and has raised its dividend from 2.5p to 3p. Shares were up 6 per cent in early trading.
Fidessa (FDSA) reported double-digit growth in revenues and pre-tax profits for the first half, with the latter rising 14 per cent to £25.4m. The firm’s interim dividend was given a 7 per cent boost to 15.3p from 14.3p. Fidessa, which specialises in providing software solutions to the financial services community, cited five new derivatives deals signed.
