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News & Tips: Saga, Shaftesbury, Hammerson & more

Equities in London remain downbeat
December 6, 2017

London shares dipped again in early trading today. Click here for The Trader Nicole Elliott's latest thoughts on the markets. 

IC TIP UPDATES:

Saga (SAGA) suffered a 23 per cent fall in its share price during early morning trading after management warned underlying pre-tax profits for the full year would be lower than expected. This was due to more challenging trading conditions in the insurance broking business and the Monarch Airlines administration affecting its tour operations business. Our recommendation is under review. 

West End landlord Shaftesbury (SHB) is raising up to £265m through a placing of 27.8m shares at 952p a share, which is a 4.8 per cent discount to the previous closing share price and is equivalent to 9.98 per cent of the current share price. The proceeds will be used to buy 72 Broadwick Street for £92m and further expenditure of £20m. It will also purchase the long leasehold interest on 90-104 Berwick Street for £41m as announced in August. The new shares will be entitled to receive the final dividend payable on 16 February 2018 (subject to shareholder approval). Buy

James Fisher & Sons (FSJ), a service provider to marine, oil & gas and other specialist industries, has this morning announced a £9m acquisition of EDS HV Group, although it could end up paying an additional £5.6m subject to profit targets for the two years ending 30 September 2019. Lancashire-headquartered EDS provides a complete range of high voltage engineering services to the renewables industry which James Fisher chief Nick Henry said would broaden the company’s offering to the offshore wind farm sector. We remain buyers.

Oxford Metrics (OMG) achieved 10.7 per cent revenue growth to £29.2m, with an improved net cash position of £9.8m (up from £8.3m). Pre-tax profits fell from £5.1m to £3.7m, after investment in developing the Yotta segment’s cloud-based software products. This division launched Alloy, a cloud-based asset management platform used by central governments and local authorities. Alloy won six licences despite contributing just one month’s performance during the reporting period. Meanwhile, the Vicon business benefitted from the acquisition of IMeasureU, a motion measurement platform. Buy.

KEY STORIES:

Shares in Mulberry (MUL) bounced back this morning despite a slightly higher pre-tax loss reported for the six months ended 30 September 2017. The luxury handbag maker said the weak pound had encouraged a flock of tourist shoppers to London, which had proved a boon for its top line, but our suspicion is the strategy to have recently engaged Meghan Markle photographed toting a number of Mulberry bags in recent months might do it more good before the end of the financial year. The proof already seems to be in the pudding: retail like-for-like sales are up 1 per cent for the 10 weeks to 2 December, with international revenues up 12 per cent and digital sales up 9 per cent.

Glencore (GLEN) has struck another deal with the Ontario Teachers’ Pension Plan (OTPP), this time to form a joint venture focused on base metals streams and royalties. OTPP has coughed up $300m for its stake in the portfolio, which will include a selection of existing royalties “on producing and development stage properties in North and South America”.

Two retail property landlords Hammerson (HMSO) and Intu Properties (INTU) has agreed an all-share merger, with Intu shareholders receiving 0.475 new Hammerson shares for each Intu share, which represents a 27.6 per cent premium on Intu’s previous closing price. There are plans to make disposals of at least £2bn of assets and reduce costs by £25m a year after two years.

Shares in managed services provider Maintel (MAI) plunged this morning after the group announced it expected adjusted cash profits for the full year to be between £12.5-13m, well shy of some analysts previous expectations of around £16m. This was due to high-margin legacy contracts from Azzurri Communications - which it acquired in May 2016 - winding down more quickly than previously expected, as well as the impact of its business partner Avaya entering administration. 

OTHER COMPANY NEWS:

Not for the first time, shares in Genel Energy (GENL) are off today. This time, it’s because the Iraqi Kurdistan-focused oil and gas group has been summoned to a bondholders meeting “to resolve a refinancing of the existing bonds”. The company has suggested a partial early redemption and debt reduction via a new $300m bond, a proposal apparently backed by “a significant proportion” of existing owners of the debt.

Also heading to the debt negotiating table is Hochschild Mining (HOC), which today announced plans to redeem $295m of outstanding bonds, for 3.875 per cent above par. The deal will be financed through the silver miner’s existing cash resources and additional debt facilities, and is expected to lead to a “significant reduction in interest payments”.

Mercia Technologies’ (MERC) investment portfolio fair value grew by 24.4 per cent to £64.7m in the first half, including £9.7m of net new capital invested in nine portfolio companies, and £3m in net fair value gains. And, after the period end, the group invested £1.8m in Aston EyeTech - a new, so-called ‘Emerging Star’ company. Mercia also signed a non-exclusive partnership with the University of Edinburgh, representing the company’s sixth university partnership in Scotland. Shares were up 4 per cent at the time of writing.