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News & Tips: Unilever, AstraZeneca, Weir & more

Equities are enjoying a moment in the sunshine
April 19, 2018

Shares in London are positive again in morning trading. Click here for The Trader Nicole Elliott's latest thoughts. 

IC TIP UPDATES:

Unilever (ULVR) reported a 3.4 per cent increase in underlying sales growth, or 3.7 per cent once you strip out the now sold spreads business, during the first quarter. This is on track with the consumer good’s giant’s goal of delivering between 3 and 5 per cent of underlying sales growth. Encouragingly, this came mainly from higher sales volumes rather than from price increases. The €6bn (£5.2bn) share buyback programme is set to start in May as a way to return the after-tax proceeds from the sale of spreads to shareholders, in addition to an 8 per cent increase in dividend. Shares fell more than 2 per cent in early trading. Buy.

AstraZeneca’s(AZN) strong pipeline of drugs in development has once again delivered good news. The Food and Drug Administration has approved non-small cell lung cancer treatment Tagrisso for the treatment of first-line patients. This latest announcement follows hot on the heels of the European Medicines Agency accepting Lynparza, the cancer drug AstraZeneca has been working on in partnership with Merck (MRK). Buy.

The share price of Ultra Electronics (ULE) has taken another hit, after it revealed that it is being investigated for suspected corruption by the Serious Fraud Office. The engineering group reported itself to the watchdog and the matter concerns the “conduct of business in Algeria by Ultra, its subsidiaries, employees and associated persons”. Recommendation under review.

KEY STORIES:

Another day, another management switch-up at beleaguered children’s chain Mothercare (MTC). This morning it’s emerged that Clive Whiley has been appointed as the group’s interim executive chairman, replacing Alan Parker. Mr Parker was thanked by the remaining board members for his “calm leadership through a challenging period”. New chief executive David Wood admits the company is currently facing “a number of challenges”, not least a “highly competitive retail environment”. The group continues to pursue a refinancing plan with its lending partners.

A study published in the New England Journal of Medicine showed Trelegy Ellipta, a GlaxoSmithKline (GSK) product used to treat chronic obstructive pulmonary disease, achieved superiority over rival forms of combination therapy. The treatment resulted in fewer hospitalisations and a significant reduction on on-treatment all-cause mortality. 

Shares in Weir Group (WEIR) were up 6 per cent in early trading after it reported first quarter orders were ahead more than a fifth on the prior year. Oil and gas orders were up more than half driven by pressure pumping demand in North American shale. The engineer also announced the $1.3bn acquisition of ESCO, a provider of surface mining Ground Engaging Tools, alongside the sale of its Flow Control business. It’s also conducting a share placing, representing 7.4 per cent of the existing share capital.

It seems strange to be blaming snow on a day like this, but that’s exactly what department store chain Debenhams (DEB) has done in an attempt to explain away a 52 per cent crash in underlying interim pre-tax profits. The group hasn’t ignored the fact that the retail market is “highly volatile”, but it says heavy snow in March forced the temporary closure of 100 stores, which had a negative 1 per cent impact on like-for-like sales. A disappointing Christmas had already prompted widespread and prolonged discounting, which exacerbated the gross margin decline by 160 basis points. This dragged cash profits down by 39 per cent, while exceptional charges took pre-tax profits down further. The dividend has also been halved to 0.5p.

Sales at Camellia (CAM) increased by 16 per cent to £298m during 2017. Profits recovered from a £5.9m loss in 2016 to a £28.6m gain this year, though the bulk of this was due to proceeds from the sale of private bank Duncan Lawrie. The sale of the business was part of the company’s strategy to focus on its core business, mainly agriculture, and dispose of any peripheral operations. Shares were flat in early trading.

OTHER COMPANY NEWS:

Following its merger with Schneider’s software business, Aveva (AVV) expects revenues for the enlarged group to be in line with management’s expectations on a 12-month pro-forma basis to March 2018. Trading for the ‘heritage’ Aveva group was strong; stabilised conditions in its oil and gas and marine end markets helped to buoy revenues in the second half. This meant full-year revenues grew at a “comfortable double digit rate” at constant currencies, up from 5.9 per cent seen in the first half. Meanwhile, trading for the heritage Schneider software business was “solid”, with low single-digit revenue growth at constant currencies. Shares in Aveva were up 4 per cent this morning.

Shares in Idox (IDOX) were down 8 per cent this morning, after a trading update revealed first-half results would be “well below the same period last year” due to first-quarter disruption, changes in revenue recognition and a seasonal skew to second-half trading. The group expects that its restructuring, once completed, should deliver annualised savings of around £7m. Management is confident about delivering an “improved performance” for the full year, in keeping with market expectations. Idox’s AGM takes place later today.

Shares in RhythmOne (RTHM) were up nearly a fifth this morning, after the digital advertising company said revenues would rise by at least 71 per cent to $255m for the full year to March 2018, while adjusted cash profits would rise by at least 900 per cent to $14m. For the second half alone, revenues climbed around 69 per cent to $141m and adjusted cash profits rose 187 per cent to $10.9m.  Highlights over the period included strong operating cash flow, and the discovery of greater synergies than expected from its acquisition of YuMe.