Mixed results from the latest stress tests for the UK banking sector have failed to dent confidence in London markets this morning. Click here for The Trader Nicole Elliott's latest thoughts.
IC TIP UPDATES:
Dairy Crest (DCG) has appointed Moni Mannings to its board as a non-executive director as a member of the audit, nomination and remuneration committees. She is also a non-executive director of Polypipe Group, where she chairs the Remuneration Committee, and is a non-executive director of Investec Bank. Buy.
Cranswick (CWK) spent a record £29m on capital expenditure during the first half of its financial year, primarily on a new continental foods facility in Lancashire that will combine two existing sites into one. The company also announced a new poultry facility to be developed in Suffolk that is expected to be in operation by the end of 2019. Sales were up by nearly a quarter to £715m, or 18 per cent on a like-for-like basis. Shares were up nearly 8 per cent in early trading. Buy.
Shares in Sophos (SOPH) were down 7 per cent this morning, following an announcement after market-close last night that private equity firm Apax and its subsidiary Pentagon Lock intended to sell 51.2m shares in the cyber-security group via a placing. These shares comprised around 49.6 per cent of the sellers’ holdings in Sophos. This morning, the results of the placing were announced; gross proceeds of £315m were raised. Closing of the placing is expected to take place on 30 November, and subsequently the selling shareholders will hold 11.2 per cent of the company’s shares. Recommendation under review.
Park Group (PKG) reported a 7 per cent increase in billings during the first half of the year, pushing sales up 3 per cent to £75m. However, with revenue second-half weighted, and due to the group’s increased scale, it reported a £2.2m operating loss. Following its launch earlier this year, 31 clients have signed up to online rewards service Love2Shop Worldwide. Buy.
Flooring group Victoria (VCP) has continued its strategy of combining acquisitions and organic growth, sending revenues up 24 per cent in the period. High exceptionals related to acquisitions distorted the statutory numbers, but pre tax profit was up 26 per cent on an underlying basis. Buy.
KEY STORIES:
Royal Bank of Scotland (RBS) and Barclays (BARC) emerged as the weakest lenders from this year’s Bank of England stress tests, both falling below their minimum capital requirements. RBS’s capital ratio fell to 7 per cent, below its 7.4 per cent minimum “systematic reference point”, while Barclays declined to 7.4 per cent, below its 7.9 per cent threshold. However, neither were required to submit a revised capital plan. The stress test modelled an adverse economic scenario, which included a 9.5 per cent rise in UK unemployment and a 33 per cent fall in house prices.
OTHER COMPANIES NEWS:
Shares in Game Digital (GMD) were up 7 per cent at the time of writing, after the company announced the disposal of its Multiplay Digital business to Unit Technologies APS. This follows management’s decision to evaluate its strategic options for digital activities. Multiplay will be sold for a cash consideration of £19m, entailing £17.1m paid on completion (taking place today) and £1.9m to be held for 19 months in escrow. Multiplay is “non-cash generating” and “non-core” to Game Digital, and its sale proceeds will be retained within the group. Multiplay saw revenues of £4.5m for the year ending 29 July, with a pre-tax loss of £0.8m. This sale is significant in size, taking into account the overall group’s market capitalisation of £76m.
Worldpay (WPG) gave an update yesterday afternoon on the anticipated merger with Vantiv, and its trading for the nine months ending 30 September. Vantiv and Worldpay “have made good progress on all aspects of the transaction and integration planning has commenced”. Vantiv published its proxy statement yesterday. Both companies expect their shareholder meetings to take place in early January next year, with the merger expected to complete in mid-January (subject to conditions including shareholder approvals). In terms of Worldpay's performance, revenue increased by 8 per cent to £1.27bn in the third quarter against the same period a year earlier. This was buoyed by a 7 per cent rise in total transaction value. Net revenue increased by 7 per cent to £303.3m in the third quarter, reflecting a 17 per cent increase in the Global eCom business, a 2 per cent rise in WPUK and a a 2 per cent rise in WPUS. This overall improvement came in spite of scheme fees, which were not “fully passed on to customers”.
IG Design (IGR) reported revenue growth of 14 per cent to £167m in the first half, with pre-tax profits up 20 per cent to £9.5m. Net debt fell by £6.2m to £70.2m. Bosses noted that “cost headwinds are undoubtedly stronger than ever” but say that “our businesses are well positioned to combat these”. They cite a full order book and strong performance in the first half; the group appears to be on track to meet full year market expectations for profit and “other key underlying metrics” nonetheless shares were down 10 per cent in morning trading.
KCom (KCOM) reported an 8 per cent reduction in revenue to £151.3m in the first half, with pre-tax profits falling by 8 per cent. This stemmed from an expected decline in legacy activities and the recognition of losses and provisions relating to previously identified software contracts in the Enterprise business. The group says it is on track to make fibre available to the final 25 per cent of premises in the Hull and East Yorkshire addressable market by March 2019. Shares were down 4 per cent at the time of writing.
WANdisco (WAND) has announced its patented technology - WANdisco Fusion - has been integrated with Amazon Web Services (AWS) “Snowball”. This data transport solution allows large quantities of data to be transferred in and out of the AWS cloud. Shares were up just over 1.5 per cent this morning.
Accesso Technology (ACSO) gave an update on recent awards won for its technology, the impact on its end-markets and the group’s growth trajectory to date. The respective awards included two at the 2017 IAAPA Attractions Expo. Accesso was also given the title of mid-market business of the year at the Lloyds National Business Awards.
Gordon Dadds (GOR) released half-year results today, reporting a 14.5 per cent rise in revenues to £12.9m, with operating profits up by 44 per cent to £3.5m. Exceptional items of £1.9m stem from the costs of the flotation and recent acquisitions. Pre-tax profits were consequently £1.3m, down from £2.5m a year earlier. The law firm, which listed on Aim on 4 August, had net cash of £12.5m as at 30 September.
Unilever (ULVR) is getting ready to hold its annual investor event later this week that will update shareholders about how management are planning to create value. The Connected for Growth cost savings plan is on track, which is expected to translate into underlying sales growth of between 3 and 5 per cent between now and 2020. The company reiterated its 20 per cent operating margin target by 2020.
888 Holdings (888) has appointed Anne de Kerckhove as a non-executive director, and will serve on the remuneration committee, nominations committee, audit committee and gaming compliance committee. She was previously chief executive of digital subscription start-up Iron.
British American Tobacco (BATS) has appointed Ricardo Oberlander as president and chief executive of Reynolds America, previously regional director of the Americas. He will replace Debra Crew, who has decided to leave the company as of the end of December. Kingsley Wheaton, previously managing director of next generation products, will replace Mr Oberlander as regional director for the Americas and Sub Saharan Africa.
Greencore (GNC) reported that group pre-tax profit fell 74.3 per cent to £12.4m in the year to September, pushing earnings per share down 80 per cent to 1.9p. But once the numbers are adjusted to factor in money spent on investment and restructuring charges, adjusted pre-tax profit was up 35.9 per cent to £116.7m while adjusted EPS fell by 3.8 per cent to 15.4p. Chief executive Patrick Coventry said the company’s transformation has “not been without its challenges” but believes this has set the group up well for future progress. Shares were flat in early trading.
Treatt (TET) announced a proposed placing of around 5.3m shares at 410p each. The £21.6m the company is hoping to raise will be used to accelerate expansion plans in the US and to help fund the development and relocation of its UK site. The flavour manufacturer also announced that revenue during the year to September was up by a quarter to £109.6m while adjusted pre-tax profit improved 45.7 per cent to £12.9m. Shares were up more than 5 per cent in early trading.
Shares in Pets at Home (PETS) have fallen more than 6 per cent this morning after the group reported tightening margins and falling profits. The gross margin was impacted by price repositioning, as well as foreign currency movements leading to a tightening of 198bps. Chief executive Ian Kellett also announced his retirement. He will leave on May 31 2018 and will be succeeded by Peter Pritchard, chief executive of the group’s retail division.
