Shares in London were flat in morning trading as US equities futures reacted badly to the resignation of President Trump's economic adviser Gary Cohn. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Legal & General (LGEN) grew operating profits 12 per cent last year, even after stripping out reserves released due to lower mortality assumptions. Its institutional retirement business continued to benefit from pension schemes’ derisking and made good in-roads in the US, completing 15 bulk deals. Management recommended a 7 per cent increase in the overall dividend. Buy.
In the last week, Rio Tinto’s (RIO) share price has been hopping around more than usual, amid the possibility Donald Trump will sign off on tariffs for steel and aluminium. Rio, whose Canadian aluminium smelting operations in Quebec and British Columbia sell more than $2bn to US customers annually, could face a direct hit from the tariffs, not to mention the looming threat of tit-for-tat measures on other goods. Shares are off 2 per cent this morning, after Trump’s chief economic adviser Gary Cohn, who opposed the tariffs, announced his resignation. Rio is our only buy tip among the FTSE 100 mining stocks, and we are following events closely.
Shares in Restaurant Group (RTN) are up 9 per cent this morning after the company announced a 1.8 per cent fall in group sales to £679m, not quite as bad as analysts had been expecting, while pre-tax profits came in at £43.6m compared to a £49.3m loss last year. Chief executive Andy McCue said the group is starting off 2018 with a “significantly more competitive” offering in its leisure business, opportunities for growth in pubs, and more efficient business overall. Buy.
It is not completely clear why NMC’s (NMC) annual results sparked a 7 per cent share price decline in early trading. The group reported a 17 per cent increase in organic revenues, widening margins and double digit cash profit growth. Investors are perhaps concerned that the fall in occupancy rates in the healthcare division could be a sign of rising competition in the Middle Eastern healthcare market, or that management doesn’t seem concerned about returning to the market for more money next time it wants to build a new hospital. Or maybe the share price drop merely reflected a bit of profit taking after a spectacular year. Buy
Cloud communications specialist IMImobile (IMO) has launched rich communications services (RCS) business messaging on its IMIconnect platform. RCS is a concept designed to upgrade normal SMS text messages, with the potential for better-quality photos, video calls and audio messages among other features. IMImobile has been working with partners including GSMA, Google and Vodafone UK to drive the adoption of RCS. Shares were up just over 1 per cent in morning trading. Buy.
Shares in WANdisco (WAND) were up 5 per cent in early trading, after the live data group reported record bookings growth of 45 per cent year-on-year. Specifically, big data bookings for the company’s WANdisco Fusion product climbed 121 per cent to $15.7m. Meanwhile, overall revenues rose by 73 per cent to $19.6m. That said, pre-tax losses expanded from $10m to $14m, largely due to an exceptional finance loss. Separately, WANdisco also announced that it has partnered with Alibaba Cloud - marking its first original equipment manufacturer agreement in China. Buy.
Equiniti (EQN) has continued to impress investors since our tip in June last year, reporting a 6.6 per cent increase in underlying cash profits in its full year results this morning. The group recently completed its acquisition of Wells Fargo Shareowner Services, which has distorted the statutory results, but analysts at Peel Hunt judged the acquisition important enough to justify upgrading their forecasts. Buy.
KEY STORIES:
Shares in engineering giant Rolls Royce (RR.) raced out of the blocks this morning, rising 12 per cent after the company reported full year financial results which came in ahead of expectations. Reported revenues rose by 9 per cent to £16.3bn and profits came in at £4.9bn on the same basis, a dramatic turnaround from hefty reported losses last year. Management is also confident that the restructuring programme it has put in place will engender further operational improvements during the coming year.
Energy regulatory Ofgem has proposed a new regulatory regime for networks targeting a significantly lower range of returns. The proposed changes would impose a cost of equity range of 3-5 per cent, the lowest ever proposed in Britain. Analysts at RBC Capital Markets predict the changes could have a negative impact on earnings for both National Grid (NG.) and SSE (SSE), but shares in the former are up 1 per cent this morning, and shares in the latter have stayed level.
For Ophir Energy (OPHR) chief executive Nick Cooper, 2017 was a year of “important steps to adapt and right-size the business”, though the shares’ massive discount to net asset value tells another story. The reason? Simple: the group has still not been able to reach a final investment decision on Fortuna, despite “significant progress”. Shares are off at 52p this morning.
Paddy Power Betfair (PPB) reported a 13 per cent increase in sales during 2017 to £1.7bn with operating profit up nearly a fifth to £392m. The bookie is planning to spend an additional £20m on marketing in 2018 to increase market share in both the UK and international markets. Chief executive Peter Jackson said the company’s “scale, leading customer propositions and strong balance sheet” should mean that it well prepared to take on the regulatory and fiscal changes that are expected in the UK, Australia, and the US. Shares fell 4 per cent in early trading.
OTHER COMPANY NEWS:
Shares in waste management group Biffa (BIFF) have fallen 12 per cent this morning following the release of a trading update from the group. Overall the group is performing well, but regulatory changes in China regarding the import of recycled commodities are creating headwinds. It’s difficult to say how long these will last, but management expect them to persist in the short term. Analysts at Peel Hunt, meanwhile, warn the Chinese government’s actions “look increasingly permanent”. Hold.
Microgen (MCGN) achieved huge revenue growth of 46 per cent to £62.6m for the year to December 2017, and 37 per cent excluding the impact of recent acquisitions. Within aptitude software, the larger segment by sales, revenue climbed 68 per cent to £44.3m with recurring revenue here up by more than a half, and operating profit up significantly from £3.8m to £7.1m. Meanwhile, revenue for the financial systems segment was up by a tenth, including 76 per cent recurring revenues. The shares were up 2 per cent in early trading.
Shares in FDM (FDM) were up nearly 7 per cent this morning, after the IT group reported a 23 per cent rise in full-year revenues, with ‘Mountie’ revenue - pertaining to FDM recruits trained in specialist IT services - up 24 per cent year-on-year. The company won 72 new clients globally against 49 in 2016, and continued to diversify across sectors. Nearly three-quarters of new clients won during the year were outside the financial services industry. A final dividend of 14p takes the 2017 total to 26p; up 33 per cent.
Cyber-security company Crossrider (CROS) has changed its name to Kape Technologies and will trade under the ticker ‘KAPE’ on Aim from 13 March. The group says this new name reflects its transformation over the last 18 months, and its plan to become a leading product-provider for consumers’ online security and privacy.
It’s a tough time for motor retailers as new car sales volumes fall, and diesel scrappage schemes take root, but shares in Lookers (LOOK) actually held up well on the back of full-year results this morning. Analysts at Peel Hunt commended the group for reporting growth in sales and gross profit across new cars, used cars and aftersales against a tough market backdrop, although “record” adjusted pre-tax profits of £68.4m still fell short of the brokerage’s expectations. Crucially, however, the group’s balance sheet remains in good nick, with the ratio of net debt to cash profits below one times. Management has also announced a £10m share buyback scheme, which will continue to run up until the end of 2018.
Unlike competitors Hays and Robert Walters, shares in PageGroup (PAGE) fell in early trading after the recruiter admitted it was cautious over prospects for the UK in light of ongoing uncertainty around Brexit. The domestic market accounts for around a fifth of the group’s gross profits, and was the only region which failed to report bottom line growth last year. Thankfully, Europe, the Middle East and Africa - which account for the lion’s share of earnings - reported a healthy 15 per cent improvement in gross profit. Management said its focus would be to protect margins in the UK this year, which could include lowering the headcount in its largest single market.
Stock Spirits (STCK) reported a 5.2 per cent increase in sales to €275m (£247m) during 2017 thanks to an increase in sales volumes, though profit for the year more than halved to €11.3m due to an exceptional charge on its Italian business. Performance in the Polish business stabilised over the year, which chief executive Mirek Stachowicz had called a “top priority”. Shares fell 1 per cent in early trading.
4imprint (FOUR) reported a 12 per cent rise in full-year sales to $628m, with pre-tax profits up 19 per cent at $40.7m. A small rise in the total dividend to 42.6p has been supplemented by a proposed 43.2p special dividend. The group will continue to invest in raising awareness around its own brand, requiring an approximate budget of $7m this year. This should help the group to fulfil its new strategic goal of achieving $1bn in revenues by 2022. That said, the shares were down 5 per cent in morning trading - perhaps reflecting the news that operating profit is likely to be flat in 2018, as a result of this investment.
