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News & Tips: GVC, Inmarsat, Serica Energy & more

Equities are steady ahead of a US jobs report
March 9, 2018

London shares were flat in morning trading as traders sat on their hands ahead of a US job report. Click here for The Trader Nicole Elliott's latest thoughts. 

IC TIP UPDATES:

Shares in GVC Holdings (GVC) are up 3 per cent this morning after the gambling company reported that Ladbrokes Coral (LCL) shareholders had voted “overwhelmingly” in favour of the takeover. GVC’s full year results for 2017 were also released, which reported a 16 per cent increase in sales to €896m with a 13 per cent increase in net gaming revenue to over €1bn. In integration of bwin.party is now complete and all key territories are now using the same technology platform. GVC also bought a majority stake in Georgian business Crystalbet since the period end as part of the strategy to expand in regulated markets. Buy.

Shares in Inmarsat (ISAT) were down 8 per cent in early trading after the satellite communications group reported an 8 per cent decline in cash profits last year. Investment in satellite launches and the back office meant capital expenditure was up 45 per cent, meanwhile its enterprise and maritime businesses continued to suffer declining sales. Management has also more than halved the final dividend to 20ȼ a share. We place our buy recommendation under review.    

As of 1 January, 40 per cent of the net cash flow from BP’s Bruce, Keith and Rhum fields has been destined for Serica Energy (SQZ). Commodity prices have held up well – with Brent averaging $67.50 a barrel and gas averaging 52p/therm, but following the shut-down of the Forties pipeline, output has averaged 16,000boepd. That compares with 18,500boepd across 2017, and so lower than projected when the Serica-BP deal was struck. We will watch operations closely, ahead of the scheduled completion of the acquisition in the third quarter of 2018. Buy.

SDX Energy’s (SDX) drilling programme in Morocco is back on the front foot. With the SAH-2 well, which encountered 5 metres of net natural gas pay across two zones, the group takes its strike rate back to five out of seven, and will provide a further update on testing results early next month. Buy.

Yesterday afternoon shares in Fulham Shore (FUL) fell by nearly a fifth to 9p after the owner of The Real Greek and Franco Manca warned that cash profits will miss market expectations. Management said this was primarily due to fewer customers visiting their suburban London locations compared to the same time the previous year. New openings will now be scaled back so that they are funded from the company’s free cash flow due to the “uncertain” outlook for the UK economy and the restaurant sector. Sell.

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OTHER COMPANY NEWS:

While Eurocell’s (ECEL) revenues rose 10 per cent to £225m for the year to December 2017, pre-tax profits dipped 0.7 per cent to £23.7m - dampened by lower consumer confidence and raw material price inflation. The group, which manufactures, distributes and recycles PVC building materials, has been raising selling prices to mitigate the impact of these higher costs. Meanwhile, net debt fell from £20.3m to £14.5m, while management has lifted the dividend by 6 per cent to 9p.

The UK division is still a thorn in the side for SIG (SHI), with management blaming macro uncertainty and “recent events in the construction industry” - which we read to mean the collapse of Carillion - for an increasingly challenging environment. Shares are down 5 per cent this morning following the release of the full year results.

Shares in Renewi (RWI) are down 6 per cent this morning after the group announced it was increasing the provisions against its Barnsley, Doncaster and Rotherham and Wakefield PFI contracts. The total cost of the provisions - after accounting for credits - is £73m. The provisions reflect the expected future losses over the life of contracts in the group’s municipal division. Management said no further charges are expected and there was no material impact on the group’s cash flow or covenants. Hold