The UK market remains in recovery mode after last week's war of words between Washington and Pyongyang eased. Here's the latest from The Trader's desk this morning.
IC TIP UPDATES:
Shire (SHP) has filed and received validation from the European drugs regulatory body for its novel dry eye treatment, lifitegrast, taking the group another step closer to being the first pharmaceutical company to bring a new class of drug to the market. Positive news flow from the pipeline is likely to be the main catalyst for a recovery in the share price – which has dwindled in the last six months. Buy.
Merck’s (MRK) chief executive Ken Frazier has stepped down from Donald Trump’s manufacturing advisory council after the President failed to condemn the hate fuelled attacks in Charlottesville over the weekend. The move drew ire from the President who tweeted that because of his resignation Frazier “will have more time to lower ripoff drugs prices”. This failed to spook investors in the pharmaceutical giant who sent the group’s share price up 1 per cent, it’s biggest one-day move in the last month. Buy.
Mattioli Woods (MTW) has decided to streamline its board, reducing it from eight to six members. Chief operating officer Mark Smith and employee benefits managing director Alan Fergusson have stepped-down with immediate effect. Buy.
Fears about a possible car market bubble were swiftly dealt with via a good set of results from motor retailer Marshall Motor Holdings (MMH). Revenues during the first half of the financial year grew by 44 per cent (6.7 per cent on a like-for-like basis) and, despite a 29 basis point contraction in gross margins from 11.9 per cent to 11.6 per cent, underlying pre-tax profits still rose by a third. As for new cars - where most of the industry’s concern lies - sales there were pretty much flat on a like-for-like basis, which marked a significant outperformance against the wider market, which contracted by 4.8 per cent over the same period. We remain buyers.
Production from Russia-based oiler Exillon Energy (EXI) picked up in July, reversing this year’s downward monthly trend. The combined output from Timan-Pechora and West Siberia averaged 10,353 barrels a day last month, an increase of 3.2 per cent on Jun, but well off last year’s daily average of 14,807 barrels. Our buy call is under review.
When we tipped Restore (RST) at the end of June, we flagged the potential for further acquisitions on the horizon. This morning the group announced the acquisition of Baxter Confidential, a secure shredding and archiving company. The company generated revenues of £0.8m from shredding and archiving in the 12 months to April 2017. In addition, Restore has appointed Martin Towers non-executive director, effective from 1 September this year. Buy.
A day after reporting the breakdown of talks with DX Group (DX) over buying its distribution division, John Menzies (MNZS) has reported a 36 per cent increase in underlying pre tax profits. Despite the potential deal with DX evaporating, the group has announced it will split its defined benefit pension scheme into two sections, with one supported by the covenant of the Menzies distribution division. We are reviewing our buy recommendation.
Shares in Mears (MER) fell 8.7 per cent this morning after the group slashed forecasts for 2017 housing revenues to £800m from £830m after concerns stoked by the Grenfell Tower tragedy led to clients taking time to ensure their properties are safe and compliant. Pre tax profit for the period was flat, while diluted EPS contracted slightly to 9.86 per cent. Buy.
KEY STORIES:
H&T (HAT) grew pre-tax profits almost two-thirds during the first six months of the year to £6m. It benefited from an 87 per cent rise in the personal loan book to almost £12m, as well as an 11 per cent increase in the pawnbroking gross pledge book. However, gold purchasing margins declined to 22.1 per cent from over 26 per cent the previous year, as the gold price stabilised.
As expected Hargreaves Lansdown (HL.) did not announce any special dividend for the 12 months to June 2017, however it did increase its ordinary dividend by a fifth to 29p a share. There were no real surprises in its full-year results, net new business inflows were up 15 per cent to £6.9bn, taking assets under management up to £79bn. This helped push up pre-tax profits more than a fifth.
Revolution Bars (RBG) has turned down a takeover proposal from private entertainment company Deltic Group. Management did not give details of the offer but expressed concerns over the “value and deliverability” of the combination and do not see a point in progressing any further. The board did note that Revolution Bars is still in talks with Stonegate Pub Company over the possible offer of 200p per share that was announced on 31 July. This would value the company at £100m, or a 60 per cent premium to the closing share price on the day the offer was announced, but at a 15 per cent discount to Revolution Bar’s 12 month high share price. Shares were up nearly five per cent in early trading.
In the first set of results as a London-listed company Jackpotjoy (JPJ) reported a 16 per cent like-for-like increase in revenue at constant currency to £147m with adjusted cash profits up by a third. More users are turning to the online bingo site with average active users up by 13 per cent year-on-year to 243,896. They’re also betting more as the average real money gaming revenue per month up by 16 per cent to £21.8m. Management anticipate more costs in the second half once the UK’s point of consumption tax comes into effect, and marketing spending tends to be weighted towards the latter half of the year. Shares were up nearly 3 per cent in early trading.
OTHER COMPANY NEWS:
Walker Greenbank (WGB) is looking to recruit a new executive director after Fiona Holmes resigned from the board with immediate effect to pursue other interests. Shares fell just over one per cent in early trading.
Earlier this week, the Competition and Markets Authority (CMA) placed a big question mark over the merger between Wood Group (WG.) and Amec Foster Wheeler (AMFW) when it suggested that tie-up could reduce competition for oil and gas services in the UK North Sea. This morning, Wood Group said its proposed remedy – the sale of Amec’s upstream oil and gas business – has been accepted “in principle”, pending a final decision from the CMA by 12 October.
Support services group Marlowe (MRL) has announced another acquisition, this time of fire protection company Philton Group. The company is being bought for £0.2m. In the 12 months to April 2016, it generated revenues of £1.2m and pre tax profit of £0.1m.
