London shares started the day brightly with another gain. Click here for The Trader Nicole Elliott's latest take on the markets.
IC TIP UPDATES:
The cyber-attacks from earlier this year and a weak third quarter have pushed Reckitt Benckiser (RB.) to expect flat like-for-like full year sales, and somewhere between a 2 per cent contraction to flat revenue in the Mead Johnson business, the acquisition of which has closed earlier than expected. Analysts still see opportunity for further consolidation in the consumer health sector, which could benefit Reckitt. Shares were flat in early trading. Buy.
Rio Tinto (RIO) has shelled out £27.4m ($36.4m) to settle a Financial Conduct Authority investigation into the diversified miner’s impairment of its disastrous Mozambique coal venture at the start of the decade. The FCA determined that the impairment should have been reviewed earlier and disclosed six months before it was ultimately made, in 2012 full-year results. More concerning for investors and the company, US prosecutors believe they can go one further, and have filed fraud charges against Rio, former chief executive Tom Albanese and former chief financial officer Guy Elliott, accusing the group of inflating the value of the coal assets in the first place. The development is a painful reminder of a period of profligacy at the top of the commodities cycle, though Rio shares are unmoved on the miner’s bullish comments that it believes it will defeat the civil complaint if the matter progresses to court. Income buy.
Shares in Softcat (SCT) rose 5 per cent this morning, after the IT infrastructure group reported 23.8 per cent revenue growth to £832.5m, with a double-digit boost to gross and operating profits in the year to 31 July. The final dividend was also lifted, and a special dividend will be paid in keeping with FY2016. Management noted that the security and services businesses “were perhaps the two stand-out performers”, with the former benefitting from companies preparing themselves for General Data Protection Regulation (GDPR) compliance to be enforced in 2018. Buy.
Eckoh (ECK), a global provider of secure payment products, issued a trading update for the six months to 30 September. UK trading “continues to be solid” with revenue performance in keeping with the first half of 2017. In the US, the company has won seven new secure payments contracts valued at $5.1m overall. This compares to three US client wins valued at $2.7m a year earlier. The net cash position looks encouraging, at £1.7m (up from a net debt position of £2.1m). At 51p, shares are up 8 per cent on our tip. Buy.
Micro Focus (MCRO) has appointed Lawton Wehle Fitt as a non-executive director. He will be a member of the Audit and Nomination Committees. Buy.
Intellectual property and patent translation business RWS Holdings (RWS) announced this morning it was looking to acquire language services company Moravia for $320m (£243m). The company is looking to fund the deal through an equity issue raising £185m, combined with a $160m loan. Shares are down 16 per cent on the announcement and we are reviewing our buy recommendation.
Labour agreements with South African mining unions are invariably hard-fought, so news that Pan African Resources (PAF) has struck a one-year wage deal with workers at its Barberton mine should be taken as a positive. Under the terms of the deal, employees are entitled to an 8 per cent wage rise. A 2.5 day stoppage during the negotiation period was less positive, though full-year production guidance is not set to be effective. We remain buyers.
This has been a punishing year for Tanzanian minnow Shanta Gold (SHG), which has been hit by an unexpected rise in royalties and a working capital deficit of the government’s making. Today the remedial work continued, with the confirmation of a $50m debt facility from Investec, which will be used to bolster liquidity and repurchase outstanding subordinated convertible loan notes due in April 2019. We remain buyers of the turnaround story.
KEY STORIES:
Hilton Food Group (HFG) has acquired child fish processing business Icelandic Group UK Limited for a £80.8m cash consideration. The company also announced that it is aiming to raise around £56m through a non-pre-emptive cash placing. This will help to fund the acquisition through the issue of new shares at 760p each. Shares were up just over 1 per cent in early trading.
Hochschild Mining (HOC) is a big riser this morning, after the Peru-focused gold and silver miner set a production record in its third quarter. Costs, which came into focus at the half-year stage, are reportedly under control, while the group remains on track to deliver its bullish full-year production target of 37 million silver equivalent ounces at an all-in sustaining cost of $12.20-$12.70 an ounce. Net debt is trending in the right direction at $147m, equating to a net debt to trailing cash profit ratio of 0.54.
If you’re in a part of the world which occasionally get too cold to operate in, you need to get your timing right. Nostrum Oil & Gas (NOG) investors were given a dour reminder of this today, as the Kazakh-focused driller announced a delay to the commissioning of the GTU3 gas plant. The new facility, which needs to be connected to the existing GTU1 and GTU2 plants, requires hydro-testing which cannot take place during freezing winter conditions, and so will be postponed until April. Shares are off 3 per cent as the market weighs up the hit to the next two years of earnings.
OTHER COMPANY NEWS:
IP Group (IPO) announced this morning that its offer for Touchstone Innovations (IVO) is now “wholly unconditional”, as acceptances are now in excess of 96 per cent. IP chief executive Alan Aubrey said that the combined group “creates a clear market leader and a company with the scale to help create, build and support the very best world-changing businesses”.
Digital marketing specialist Be Heard Group (BHRD) announced it has been selected by Addison Lee to “help drive the business’ expansion in the UK”. Be Heard’s digital media and analytics agency agenda21 has been appointed as the taxi and managed car company’s lead digital marketing agency.
