Shares in London have found a little support, but without any convincing upwards momentum. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
In the current age of Amazon and Netflix, traditional television broadcasting is a difficult market in which to operate. Shareholders are therefore not expecting an awful lot from ITV (ITV). A 1 per cent drop in revenue in third quarter sent shares up more than 2 per cent in early trading as investors seemed impressed that ITV had managed to offset the sharp downturn in TV advertising with strong studio sales. We like the way ITV has diversified to deal with the market challenges in recent years and rate shares a buy.
Vodafone (VOD) has upgraded its adjusted cash profit guidance for the year to March 2018. Strong growth in the first half of the financial year means management now anticipate adjusted cash profits of €14.95bn up 10 per cent at constant currencies. Excluding the costs of expanding the UK spectrum of mobile coverage, free cash flow is now expected to exceed €5bn. Buy.
B&M’s (BME) amazing run continues, with a set of interim results which defied retail industry trends. Like-for-like sales rose 7.5 per cent across the first half, accelerating considerably during the second quarter, helping to push cash profits up by a fifth. The trouble with this kind of performance is that the market starts to split hairs. The shares actually fell 2 per cent after analysts concluded that the German business could do with a bit of a boost. Profits there fell as a result of weak summer trading, and management have decided to appoint a new local boss to help perk things up. Our recommendation is under review.
Aviva (AV.) has acquired Irish insurer Friends First for €130m (£116m), making it the largest composite insurer in Ireland. The sum represents a multiple of 0.8 times Friends First’s adjusted net asset value. The company focuses on life protection, pension and investment products for individuals and companies. Buy.
Double digit revenue growth in interventional oncology, interventional vascular and all four of BTG’s (BTG) solely owned legacy pharmaceutical products sent group sales up 13 per cent at constant currencies to £341m. The pace of growth is expected to continue in the interventional divisions in the second half and beyond, particularly as the group continues to invest in more novel products for unmet areas of clinical need. Buy
Half-year figures reaffirm that the resolution of operational issues at Carclo’s (CAR) technical plastics division is having the desired effect on performance. A 16 per cent rise in underlying profitability at LED technologies partially offset the difficulties at technical plastics and the group’s smaller aerospace arm, but underlying earnings were restricted to 4.5p a share from 5.6p a year earlier. Nonetheless, with a higher proportion of design and tooling profits recognised in the second half, shareholders can look ahead with increased confidence. Buy
Speedy Hire’s (SDY) shares have shot up more than 4 per cent this morning after the equipment hire specialist reported results ahead of expectations. The groups restructuring efforts are paying off, leading return on capital employed to jump to 9.4 per cent from 5.1 per cent last year, underlying pre tax profit to climb 58.8 per cent from last year to £10.8m and net debt to drop to £63.1m from £71.4m. The group’s recovery looks to be well underway. Buy.
A nine month trading update seems to have contained some of the concerns investors had for UBM’s (UBM) acquisition of Allworld earlier in the year. The integration remains on track and existing events have performed well. Management expects revenues to be “at least” in line with full year expectations. Buy
Peer Ascential (ASCL) also confirms that its events in the second half - which includes the large US edition of Money2020 - have performed as expected and has reiterated its guidance for the full year. Without the integration concerns of its peer UBM, Ascential’s shares have had a good run in the last year as demand for global events continues to grow. Buy
Abcam (ABC) rarely disappoints its investors and a pre-AGM update has, once again, sent the share price up. Chairman Murray Hennessy has confirmed that the first few months of the 2018 financial year have progressed as expected. Abcam is an expensive company but continues to display strong growth prospects so we rate the shares a buy.
Computacenter’s (CCC) management is confident that trading so far this year is “comfortably ahead of expectations” and therefore full year results will be better than previously anticipated. The exceptionally strong performance means the group has delayed the tender offer during which it plans to return £100m of cash until January 2018 (previously December 2017). Shares are up 8 per cent in early trading and we retain our buy rating.
Shares in Polypipe (PLP) rose 3 per cent after the plastic piping and ventilation manufacturer revealed that revenue for the 10 months to 31 October was up by 8.2 per cent from a year earlier. Trading was boosted by continued demand from the new build housing sector, although the public and private repair, maintenance and improvement sectors remained more of a challenge, not helped by some larger road projects being delayed. Buy
Bovis (BVS) continued to make up ground following a root and branch restructuring, and targeted housing output for the current year has already been secured. Simplifying and streamlining the operating structure also means that there will be around £100m net cash at the 31 December 2017 year end. Buy
Regional REIT (RGL) has exchanged 66 leases to new tenants since the start of 2017, and when fully occupied these will generate around £2.9m of rental income. The office and light industrial property landlord also increased its third interim dividend to 1.8p a share. Buy
Sales at FirstGroup (FGP) were up 3.5 per cent at constant currency during the first half of the year to £2.8bn, including a contribution from the new South Western Rail franchise from August along with favourable foreign exchange. Strip out SWR and revenue was up by 0.9 per cent. Adjusted operating profit was flat due to a £6m cost from the impact of the hurricanes in North America and Puerto Rico. Analysts called the results “slightly better than expected”, and added that seasonal weighting tends to be towards the second half. Shares fell nearly 2 per cent in early trading. Buy.
KEY STORIES:
Shares in Tesco (TSCO) shot up 5 per cent in early trading on news that the Competition and Markets Authority (CMA) has given the provisional thumbs-up to its takeover of wholesaler Booker (BOK). Investors were concerned that the CMA might block the £3.7bn deal or demand rigorous amendments to its terms. But the regulator said this morning it did not see how the tie-up would lead to higher prices or a poorer service for customers. The deal was first referred in January for a deeper investigation into competition concerns.
Aveva’s (AVV) first results since announcing its merger with French peer Schneider Electric are reassuringly solid. Revenues grew 6 per cent at constant currencies, while pre-tax profits leapt 16 per cent after omitting negative currency movements. The group has outpaced the growth of its soon-to-be other half. Schneider Electric’s software business reported a 4 per cent increase in revenue to $285m. The integration is reportedly progressing as expected with closure still due at the end of the year.
Shares in Intermediate Capital (ICP) were up 8 per cent in morning trading after the fund manager reported a 14 per cent rise in assets under management. Third party fee income - an increasingly important area of the business - was up almost a quarter, although this was offset by lower investment income. However, management raised the interim dividend by a fifth to 9p a share.
At the third quarter update Jackpotjoy (JPJ) reiterated their warning the introduction of the point of consumption (POC) tax in the UK on bonuses will impact the group’s full-year profitability. Spending on marketing is also expected to be weighted towards the second half of the year. This appears to already be coming through, as adjusted net income fell 14 per cent during the quarter to £18.3m. But gaming sales improved by 14 per cent to £75.4m with 13 per cent more average active customers at 251,186. Shares fell more than 1 per cent in early trading.
Paper and packaging specialist James Cropper (CRPR) as had another set of strong results, with strong demand for products related to fuel cells driving demand in its technical fibre products division to the highest ever level. However, the high price of pulp is putting severe pressure on the paper division. Pre tax profit is up 14 per cent to £2.3m while diluted EPS is up 33 per cent.
Yesterday, STM Group (STM) suspended its shares on Aim pending a further statement. This morning, the company said that chief executive Alan Kentish has been released from arrest and police bail in Gibraltar, without any charge. The group notes that separately, an application was submitted for judicial review against the Royal Gibraltar Police to the Supreme Court in Gibraltar on 9 November; no date has been established yet for this hearing. The board has been advised that the documentation lodged with this judicial review supports the view that there is no merit to the allegations against Mr Kentish. By way of background, on 30 October, STM announced that in 2015, Mr Kentish had filed two Suspicious Activity Reports with the company's Money Laundering Reporting Officer about the beneficial owner of a client. These were then relayed to the Gibraltar Financial Intelligence Unit, but the MLRO received no response - reflecting the GFIU's acceptance that STM should continue as normal. On 19 October this year, Mr Kentish was arrested by police in Gibraltar "on the allegation of failure to disclose under the Proceeds of Crime Act 2015". Separately, STM has also announced that certain of its Gibraltar regulated subsidiaries have received notice from the Gibraltar Financial Services Commission of the appointment of inspectors. STM's board and subsidiaries have taken legal advice as to whether the GFSC has grounds to do this. The subsidiaries have filed and served an appeal against these appointments with the Gibraltar Supreme Court. They "are in ongoing dialogue with the GFSC in relation to establishing a collaborative route forward". STM's shares fell 18 per cent upon resuming trading at midday today.
OTHER COMPANY NEWS:
Oxford Instruments (OXIG) reported flat revenues for the first half, with adjusted operating profit up nearly 15 per cent and a significant reduction in net debt from £141.1m to £45.5m after the sale of its Industrial Analysis business. The interim dividend has been maintained at 3.7p.
Shares in appScatter (APPS) were up 4 per cent at the time of writing, after the company - which allows paying users to manage their apps on multiple app stores - announced that the formal launch of its platform will take place on 22 November.
Mercia Technologies (MERC) issued a life sciences and biosciences sector update this morning. The investment group has a current portfolio of five “emerging starts” businesses within this sector, representing around 20 per cent of its direct investment portfolio by value. And, the the group is working with more than 10 companies within its managed funds, with one example being Aston Eyetech - developing lightweight ultra-portable eye testing technology. Mercia exited from Abzena, an Aim-listed direct portfolio company, as part of its strategy to focus on realising cash. This marked Mercia’s second profitable cash exit since listing on Aim.
Science in Sport (SIS) has announced a conditional firm placing and open offer to raise £15m, with a view to investing in the US sports nutrition market (specifically for online distribution), the football market and the Italian sports nutrition market. Shares were up 3.6 per cent at the time of writing.
