Shares in London kicked on again today as they continue to claw back some of last week's dramatic losses. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Commodity prices came to the rescue of South32 (S32) in the last six months of 2017; all things being equal, underlying operating profits would have doubled in the period. In the event, a big drop in sales volumes from the outage at the Illawara coking coal division and a reduction in output from Cannington meant the potential boost in earnings was mooted. An upward revision in unit cost guidance for the latter division, notwithstanding the announcement of a special dividend, has led to selling this morning. We are income buyers.
TT Electronics (TTG) has agreed to acquire the entire issued share capital of Stadium Group (SDM). The consideration is 120p in cash for each Stadium share, which values the business at approximately £45.8m and represents a premium of approximately 44 per cent on the previous day’s closing price. In addition, the Stadium board has declared a special dividend of 2.1p per Stadium share. We remain in the buyers’ circle for TT.
Trifast (TRI) said it is confident that it will deliver its expectations for the year ending 31 March 2018. The company, which produces industrial fastenings, said its balance sheet remains strong and its US operation continues to recover following the impact of Hurricane Harvey. Buy
ConvaTec’s (CTEC) revenues rose 4.5 per cent to $1.76bn for the year to December 2017, with organic growth of 2.3 per cent; beating the group’s guidance of 1-2 per cent. Operating profit was up 60.9 per cent at $247.8m. Supply constraints previously announced in the advanced wound care and ostomy care segments have been resolved, though bosses expect a continued impact in the first half of 2018 due to ostomy backorders and lost orders. Management expects 2.5-3 per cent organic revenue growth for 2018. These results follow a fourth-quarter profit warning; the shares’ 6 per cent rise today may reflect relief among some investors. Recommendation under review.
Information and analytics company Relx (REL) reported a 7 per cent increase in underlying revenue growth to £7.4bn in the year to December 2017 with operating profit up 6 per cent to £2.3bn. The company is dropping its dual parent company holding structure. Dutch shareholders will receive one Relx UK share for each share they currently hold. The changes will come into effect during the third quarter of this year so long as they are approved by shareholders. Shares fell nearly 4 per cent in early trading.
Shares in Oxford BioMedica (OXB) are up 5 per cent this morning, after the group announced a collaboration and licence agreement with Bioverativ. Under the agreement Oxford will develop and manufacture lentiviral vectors for the treatment of haemophilia. The company will receive an upfront payment of $5m (£3.6m), while the total value of the contract could exceed $100m. We are reviewing our sell call.
KEY STORIES:
Management at Standard Life Aberdeen (SLA) confirmed rumours that Lloyds Banking and Scottish Widows are terminating their asset management arrangements with Aberdeen Asset Management, covering £109bn in assets. That’s because Standard Life and Scottish Widows are long-standing rivals. SLA will take a £40m provision against the intangible asset associated with its relationship with Scottish Widows and Lloyds in its 2017 figures.
OTHER COMPANY NEWS:
Schneider Electric released its 2017 results today, including an update on the performance of its industrial software portfolio. Aveva (AVV) notes that this commentary “corresponds broadly, but not precisely” to those assets that are subject to the merger with Aveva. In the fourth quarter to December 2017, the portfolio saw continued growth in revenues for licencing and maintenance, though this was “partly offset” by a decline in revenues for services with particular reference to the mid-stream oil and gas business where there project volume has reduced. Shares in Aveva were up just over 1 per cent this morning.
Shares in Earthport (EPO) were up 5 per cent this morning, after the cross-border payments specialist said revenues for the half-year to December grew by around 8 per cent to £15.4m, while the cash balance was £30.6m - compared to £11.9m as at the end of June. This included £24m in net proceeds from an equity raise in October. That said, the adjusted gross margin fell from 70 per cent to 64 per cent year-on-year, partly due to network delivery costs. Meanwhile, administrative expenses rose by around 7 per cent to £13.9m, constituting 90 per cent of revenues. Adjusted cash losses widened from £1.5m to £3.2m year-on-year.
Connect Group (CNCT) has finally sold its books division to European mid-market investor Aurelius Equity Opportunities for £6m paid in cash. The deal had first been announced in December but Aurelius missed the original 31 January deadline to complete the transaction. Connect chief executive Mark Cashmore said the disposal of the books business would allow the company to “concentrate on its transformation strategy”. Shares were up 1 per cent in early trading.
Shares in Indivior (INDV) plunged 11 per cent this morning following the release of its full year results. The cause of the drop appears to be the group’s announcement it was booking an additional $185m provision for legal costs related to “investigative and antitrust litigation matters”. The group initiated an appeals process against a US District Court that ruled Indian company Dr Reddy’s did not infringe on the group’s patent.
