Shares in London began the day like the weather, in the deep freeze. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
ITV (ITV) annual results show the extent to which traditional TV companies are struggling amid the changes in the media market. But the new chief executive Carolyn McCall thinks these numbers are “very strong” considering the difficulties. The studios business continues to grow, ITV Hub attracted 39 per cent more viewers than the previous year and strength in the online, pay and interactive division offset declines in TV advertising. With Dame McCall promising a ‘refresh’ of the strategy, we think there are reasons to be optimistic about ITV’s future but they are currently being overlooked by the challenges in the market. Buy
The high visibility at events group Tarsus (TRS) means financial results rarely hold many surprises. 2017 was another strong year, with like-for-like revenues up 7 per cent and adjusted pre-tax profits up 53 per cent compared to 2015 (the last time Tarsus held its biggest events). Buy
Agricultural biotechnology company Genus (GNS) reported a 10 per cent increase in revenue at constant currency during the first half to £239m, with operating profit up by nearly a fifth to £28.3m. This was mainly driven by the bovine division where sales increased 13 per cent, compared to porcine where revenue was up 3 per cent. The company launched Sexcel, its “innovative sexed genetics” product, over the period. Shares fell more than 3 per cent in early trading. Buy.
KEY STORIES:
Headline numbers from events group UBM (UBM) are decent: double digit revenue and adjusted operating profit growth; reduced leverage and an increase in the dividend. Good news for shareholders but also for Informa (INF), the media business which made a very generous offer for UBM at the start of 2017. The acquirer has also announced strong annual results this morning, reporting underlying revenue growth in all four of its divisions. What is perhaps a little concerning is that net debt is only just within management’s target range at 2.5 times adjusted cash profits. This makes the cash and shares offer for UBM look a little risky.
Bacanora Minerals (BCN) rallied at the end of 2017, when the prospective lithium miner announced it had entered a binding placing agreement with NextView to raise £31.2m at just over 94p a share. More than two months on, NextView has failed to pay up, or submit alternative proposals to the Bacanora board. Shares, down more than 40 per cent since a peak at the start of the year, are sharply off this morning.
OTHER COMPANY NEWS:
As an engineer to the power, energy and mining markets, Weir Group’s (WEIR) fortunes neatly track the profitability and capital budgets of natural resources companies. No surprises that 2017 was a blockbuster year for the income statement: operating profits climbed 36 per cent to £292m, as the strong swell in the order book at the interim stage continued into the second half. In 2018, Weir expects “strong revenue and profit growth”.
Seplat (SEPL) is back. Last year, a surge in production and significant tax credits meant full-year net income clocked in at $265m, cash generation leapt, and net debt dropped to just $141m, compared to $516m at the end of 2016. After a difficult few years, the group appears to have turned a corner, and expects an alternative export route for its product to become operational in the third quarter of 2018.
SIG (SHI) announced this morning it would dispose of SIG building systems, its modular offsite construction business. The division has been a thorn in the group’s side in recent years, making a pre-tax loss of £5.7m in 2016. The business will be sold for £1, but SIG will incur cash costs of £4.9m in the years to March 2020 and expects to incur £7.9m in associated exceptional charges. Shares were down 1.2 per cent this morning.
Whitbread (WTB) is pressing on with its international expansion plans with the purchase of 19 hotels in Germany. The sites were bought from Foremost Hospitality Group for an “undisclosed sum”. The acquisition will give Premier Inn a greater presence in the German hotel market and will increase the total pipeline to 31 hotels with over 5,700 rooms across 15 cities. All are expected to be open by the end of 2020. Shares were flat in early trading.
Jardine Lloyd Thompson (JLT) reported 10 per cent revenue growth to £1.39bn for the year to December 2017, with organic growth of 5 per cent and a 35 per cent rise in pre-tax profits to £181.6m. The insurance broker is reorganising into three segments, effective 1 April this year: reinsurance, specialty and employee benefits. This will “deliver globally consistent processes and operational efficiencies”. The group anticipates annualised savings of £40m by 2020, with a one-off cost of £45m spread across 2018 and 2019.
PPHE Hotel Group (PPH) reported that revenue was up by a fifth to £325m during 2017 thanks to new hotel openings in London and Nuremburg. Strip out the new sites and like-for-like sales were still up by 10.3 per cent. The company also made changes to its capital structure by raising equity at its Croatian subsidiary and refinancing of its debt, along with the sale and leaseback of its London Waterloo hotel. Shares fell 2 per cent in early trading.
Shares in PVCu replacement windows specialist Safestyle (SFE) cracked this morning as another profit warning hit investor confidence. Since its last update in mid December, Safestyle has seen ‘continued deterioration’ in its market which it pins on declining consumer confidence. This issue has been exacerbated by the entry of new competition into the market which has resulted in order intake falling below expectations and expectations for the year to 31 December are now ‘materially below’ market forecasts. Shares fell more than 20 per cent to 119p in reaction.
