Equity indices in London are in negative territory on Friday morning. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES :
There are certainly some positives to draw from Pearson’s (PSON) full year results. 2017 numbers came in line with the recently updated guidance, net debt has fallen and management has confirmed that 2018 guidance is no worse than it was already expected to be. But there is no escaping the fact that Pearson is operating in a very tough market. Revenues, adjusted operating profits and EPS all fell in 2017 (even with the helpful change to US tax laws) and are forecast to fall further in 2018. Sell
Ofcom has eased the price controls on BT’s (BT.A) Openreach subsidiary in the hope that it will foster more competition in the fibre broadband space. The regulator has said the monthly wholesale cost for leasing the fibre optic cables off Openreach will fall gradually to £11.92 by 2021 (ahead of the previous £11.23 target). The regulation may seem like a brief respite for BT, which has been hammered for not investing enough in its fibre optic cable network, but BT has said it will have a financial impact on Openreach’s revenue and profits of roughly £80m to £120m in the 2019 financial year. It is likely to spark an increase in competition. TalkTalk (TALK), CityFibre (CITY), Vodafone (VOD) and Virgin Media are already beginning to invest in competitive networks, which could end BT’s dominance in the internet telecoms space. Sell
KEY STORIES :
Royal Bank of Scotland (RBS) posted its first statutory pre-tax profit in three years at £2.2bn for 2017. That’s compared with a loss of £4.1bn the previous year, thanks to a substantial reduction in litigation and conduct costs. Net interest income was also up 3 per cent to almost £9bn. However, the state-owned bank expects to incur restructuring charges of around £2.5bn across this year and next, partly relating to the completion of the State Aid remedy and reintegration of the former Williams & Glyn (W&G) business. That’s higher than the £1bn initially expected.
Standard Life Aberdeen’s (SLA) progression to fully-fledged asset manager has been completed. While announcing its 2017 results, the newly-merged group said it plans to sell it its insurance business to Phoenix (PHNX) for £3.2bn. The disposed businesses account for £159bn in assets under administration and includes its UK workplace, UK mature retail and Europe businesses. However, SLA will retain its retail adviser platforms - Wrap, Parmenion and Elevate. The offer will be made up of £2.28bn in cash and SLA will gain a 19.99 per cent stake in Phoenix.
Just a matter of days after it was fined £6.2m by the Gambling Commission for breaching anti-money-laundering and social responsibility regulations, high street bookie William Hill (WMH) has reported a 7 per cent rise in revenue, and an 11 per cent rise in adjusted operating profits for the 2017 financial year. EPS of 27.9p was 9 per cent ahead of consensus forecasts thanks to a lower than expected tax rate. But analysts admit that regulation remains “key” for the coming year, both in terms of a possible threat and an opportunity - a possible repeal of The Professional and Amateur Sports Protection Act of 1992 could liberate the legal status of sports betting throughout the United States.
Results from British Airways owner International Consolidated Airlines (IAG) were largely what the market expected to see, but a hint of weaker profits in the fourth quarter sent the shares down in early trading. Fourth quarter operating profits fell as a result of higher employee bonus costs, which left group operating profit slightly short of some analysts’ forecasts. The group also announced a new €500m share buyback, matching last year’s programme. Management’s initial guidance for the current financial year is for a 4 per cent increase in operating profit, consistent with current consensus forecasts.
OTHER COMPANY NEWS:
Phoenix UK Fund is to make a total investment of £19.45m in beleaguered stamp and coin company Stanley Gibbons (SGI). The fund will reduce Stanley Gibbons’ total external bank debt finance from around £17m to £10m, and will raise its cash resources by around £5.4m net of the fees of the transaction. Phoenix will also acquire the company’s Guernsey operations, which are in administration, for £2.75m. It will buy a 58 per cent stake in Stanley Gibbons via a £6.2m share subscription. Shares were up 15 per cent in early trading.
StatPro (SOG) has acquired the remaining 27.3 per cent shareholding in InfoVest - a South African headquartered software provider - for £1.9m. Prior to this, StatPro had a 72.7 per cent stake. The group expects this transaction to be earnings enhancing this year. Shares were up 1.6 per cent this morning.
