Shares in London began the week off a little after Asia markets came off the boil overnight with geopolitical concerns still to the fore. Click here for The Trader Nicole Elliott's latest thoughts.
IC TIP UPDATES:
Sir Martin Sorrell surprised the world on Saturday evening when he announced he would be stepping down as chief executive of WPP (WPP), the company he has led for 33 years. The departure comes two weeks after an investigation into claims of personal misconduct against Sir Martin (which he denies). The enigmatic boss said departing now would be in the best interest of the company, its staff and investors, although the latter don’t seem convinced, sending the share price down when the markets opened on Monday morning. We can’t help but think Sir Martin is fleeing a sinking ship. WPP’s shares are down a third in the last month and the way ahead doesn’t look any easier as challenges in the marketing industry mount. Sell
Shire (SHP) has agreed to sell its oncology business to French pharma group Servier for $2.4bn. The deal adds complications to Takeda’s potential takeover as the oncology business was said to be a key draw for the Japanese group. Takeda has until 25 April to make its bid formal and Shire has said that the oncology sale will widen the group’s options in the run up to this deadline. Beyond then, management said the proceeds of the sale would likely be returned to shareholders. Buy
Amerisur Resources (AMER) shares are up 4 per cent this morning, as preliminary results reveal revenue growth of 96 per cent in 2017. Shareholders may also have been encouraged by a focus on upgrades to resources and reserves, though the current production rate of 6,500 barrels of oil per day is short of the exit rate promised at the end of last year. Our buy call is under review.
Battening down the hatches in 2017, Shanta Gold (SHG) reduced all-in sustaining costs to $743 an ounce, $38 below guidance. This in turn, in a difficult year, allowed the Tanzanian miner to bring down net debt, despite a drop in grades and gold sales. We remain buyers of the Shanta recovery.
Shares in Rio Tinto (RIO) rallied last week, as US sanctions on Rusal left traders scrambling for new product, and aluminium prices surging. At the same time, Rio has been forced to declare force majeure on certain contracts with Rusal, to whom the mining giant sells bauxite to Rusal’s refinery in Ireland. Rusal also has a 20 per cent interest in Rio’s Queensland Alumina venture, and sells alumina for use in Rio’s smelters in France and Iceland. Rio is a buy.
Kainos’s (KNOS) trading for the year to March was in line with market expectations. Growth in the IT group’s digital services business was particularly strong, buoyed by its digital transformation and Workday offerings, and ongoing momentum among its government and healthcare clients. Sales performance here was “very strong”, driving an improvement in its contracted backlog. Meanwhile, the digital platforms segment performed in line, despite the short-term effects of the NHS’s funding limitations on Kainos’s evolve platform. The company had no debt and good cash generation as at the year-end. Buy.
Shares in Whitbread (WTB) are up more than 6 per cent this morning after that Elliot Advisers have now acquired a 6 per cent stake in the company – the point at which they must disclose their position. Reports over the weekend stated that the US-based activist investor group had come to Whitbread’s management with a plan to split up Premier Inn and Costa through a demerger. Chief executive Alison Brittain has said in the past that she would be open to offers for Costa, but that the timing now would not be good given the turnaround plan in progress. Buy.
KEY STORIES:
Despite issuing a no intention to bid notice earlier this month, DNO has again raised its stake in Faroe Petroleum (FPM) to 28.7 per cent. Panmure Gordon’s Colin Smith believe the Norwegian driller will continue to acquire shares at 125p a pop until it has a 29.9 per cent holding, short of the level that would trigger a bid, but enough “to exert pressure on Faroe in ways potentially more favourable to its than to Faroe’s other shareholders”.
Draper Esprit (GROW) expects the value of its gross portfolio to have increased by half to £244 during the 12 months to March 2018. That growth reflects £71m in investments and a £51m fair value increase. Investments made during the period include £18m into Paris-based blockchain security company and putting more cash behind existing investments like review website Trustpilot.
Management at Carr’s Group (CARR) said the agriculture company is on track to deliver record profits by the full year after a strong first half. Sales increased by 13.2 per cent to £200m during the six months to March, with pre-tax profits up more than a fifth to £10.9m. Chief executive Tim Davies said the results for the first half “slightly exceeded” the board’s expectations. He added there is now greater visibility on the impact Brexit may have in relation to direct payments to farmers in the near term, though the issue of trade agreements both within the EU and the rest of the world is still uncertain. Shares were up 12 per cent in early trading.
OTHER COMPANY NEWS:
Vedanta Resources (VED) has found a new chief executive. Srinivasan Venkatakrishnan, the chief executive of Johannesburg-listed AngloGold Ashanti (ZA:ANG), will take the top job from Kuldip Kaura, who has served as interim CEO since the departure of Tom Albanese.
