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News & Tips: Imperial Brands, McBride, Atalaya Mining & more

Equity markets have regained a little of their poise this morning.
September 7, 2017

Equity markets have regained a little of their poise this morning. Click here for The Trader Nicole Elliott's latest views on the markets. 

IC TIP UPDATES:

Tobacco group Imperial Brands (IMB) has announced plans to sell a further 10 per cent stake in its Spanish logistics business Logista on the Madrid stock exchange. The placing of 13.3m shares has raised gross proceeds of £231m, and leaves Imperial with a 60 per cent holding in the group. It previously sold down its stake in Logista in 2014, raising £395m during July of that year. As per regulatory customs, Imperial has agreed not to sell any further shares in the group for at least 90 days. Buy.

McBride’s (MCB) results are ahead of analysts’ expectations. Costs are falling, margins are growing and acquisitions are back on the agenda. Earlier this week the group announced its £10.8m Danlind deal, although it’s worth noting that net debt for the reported period is significantly lower year-on-year despite a £6m currency-driven dent. Sales in constant currency may look subdued as McBride still tackles volume falls and deflation in some markets, but analysts seem buoyed by strong profit growth. Buy.

Unit costs ticked up at Spanish copper producer Atalaya Mining (ATYM) in the first half of 2017, though revenue of €79m was comfortably above analyst expectations. Outgoings are expected to decline in the second half of the year, which with any luck should help to improve the net cash position, which tightened to €1.6m by the end of June. With the copper price at three-year highs, we are reviewing our successful buy call.

Those familiar with Rockhopper Exploration (RKH) will appreciate that its financial results aren’t currently the most important driver of share price momentum. The possibility of Sea Lion’s sanction is. Front-end engineering design on the project is now largely complete, while funding discussions with the UK’s export credit agency, and contractors have started in earnest. We remain buyers.

With an approach to punctuality that can most charitably be described as ‘casual’, San Leon Energy (SLE) has filed its full-year accounts for 2016. The Nigeria-focused oil producer, apparently subject to several takeover bids and currently suspended from trading, noted material uncertainties of its ability to recover the full value of its loan note and equity investment in Midwestern Leon Petroleum. Debt facilities are therefore sorely needed, and according to management should be obtained in October and November. Our recommendation is under review.

OTHER COMPANY NEWS:

Blancco Technology’s (BLTG) board announced that Rob Woodward has agreed to continue in his role as Chairman of the company. He had previously planned to step down around the time of the company’s October 2017 results. This comes after the board announced on Monday that it had decided to reverse £2.9m of revenues represented in two contracts booked during the year ended 30 June 2017, leading to them revising down guidance for revenues and adjusted earnings for the period. Chief executive Pat Clawson also decided to step down, replaced on an interim basis by interim chief financial officer Simon Herrick.

Shares in Go-Ahead (GOG) fell 8 per cent in early trading, as the company reported a 3.6 per cent revenue increase to £3.48bn, but a 7.4 per cent decline in operating profit. Bus and rail operating profit fell to £90.7m and £59.9m, down from £91.2m and £71.4m respectively. Meanwhile, the group is working towards a target for international operations to comprise 15-20 per cent of its profit within 5 years. It commenced a bus contract in Singapore, secured its third German rail contract and won a bus contract in Dublin. A final dividend has been proposed of 102.08p, up 6.5 per cent.

CentralNic (CNIC), the website domain business, announced 19 per cent revenue growth in the first half to £10.6m and a narrowing of pre-tax losses to -£780,000, from -£910,000 a year earlier. The net cash position improved, reaching £7.73 (up from £6.04m). The group recently agreed to acquire the business and assets of SK-NIC, the manager of Slovakia’s top-level domain ‘.sk’. The initial consideration for this is being funded by an £18m term loan and overdraft facility of £3m from Silicon Valley Bank.

Brady (BRY), a provider of trading, risk management and settlement software, reported an 11 per cent drop in revenue in the first half to £13.2m, but a 1 per cent rise in recurring revenue to £9.0m (68 per cent of the top line). The company signed four new licence deals “on a recurring revenue basis” in the first half, which will bring in £3.2m over the life of the contracts. Pre-tax losses widened to -£3.5m from -£122,000 in the first six months of 2016, due to higher operating costs relating to currency movements, exceptional items, higher amortisation costs and higher staff costs.  Management expect full-year results to be “in line with market expectations”.

Shares in Filta (FLTA) rose 6 per cent in early trading, as the small-cap provider of fryer management and other commercial kitchen services reported a 39 per cent revenue increase to £6.6m. Pre-tax profits rose to £957,620 from a pre-tax loss of -£210,548 a year earlier. An interim dividend of 0.65p per share will be paid.  

Half-year results for EnQuest (ENQ) did not provide much beyond what we learned in August’s painful trading update. Production averaged 37,015 barrels a day in the six months to June, and should stay within 10 per cent of that rate between now and January. And while another $100m (£77m) saving has been identified in Kraken’s full cycle capital expenditure, lower oil price expectations has forced a further $79.7m impairment of the balance sheet, which accounts for the statutory loss.