Shares in London have risen again in early trading, buoyed by a rising oil price. Click here for The Trader Nicole Elliott's latest views on the markets.
IC TIP UPDATES:
Shares in translation and intellectual property specialist RWS Holdings (RWS) are down 14 per cent this morning after management announced currency headwinds from the US were likely to lead to profits below expectations for the full year if conditions don’t improve. The group is more exposed to the US than it typically has been due to the recent acquisition of Moravia, a localisation specialist which makes more than 95 per cent of its revenues in dollars. We are reviewing our buy recommendation.
Shares in Palace Capital (PCA) rose nearly three per cent after the commercial property landlord delivered a strong trading update. Earlier criticism following a discounted share placing to raise £65.7m for the purchase of RT Warren now appears to be misplaced. The acquisition comprised 21 commercial buildings and 65 residential units, but three residential units have already been sold at a 14 per cent premium to book value, and discussions are ongoing to sell another 60. Adjusted pre-tax profits for the year to March 2018 are now expected to be ahead of expectations. Buy.
IMImobile’s (IMO) turnover rose more than 45 per cent for the year ending March 2018, ahead of market expectations. Gross profit was up over 17 per cent, while cash profits and post-tax profits stood in line with expectations after expected investment activity. Cash conversion exceeded 85 per cent. Europe and the Americas saw strong organic gross profit growth, while the Middle East and Africa saw some new long-term contracts – though this did not completely mitigate gross profit declines here from currency headwinds and a customer contract renewal. IMImobile’s shares were up 2 per cent this morning. Buy.
Shares in Marlowe (MRL) are up a little over 1 per cent this morning. The group announced the acquisition of Island Fire Protection, the latest in a series of fire safety businesses it has snapped up. The business is relatively small with revenues of £2.1m in the year to April 2017, but hints at Marlowe’s ever-growing position in the fire protection sector. Buy.
Continuing its multi-year track record of forecast-smashing growth, Focusrite (TUNE) is out with half-year results today. Cash profits again rose 30 per cent to £8m, while net cash has more than doubled in 12 months. Given the positive tone of the outlook, that seems set to continue, regardless of a 33 per cent hike in the interim dividend. Our buy call is under review.
The oil price may be strong, but times are challenging for Serica Energy (SQZ). This morning, the North Sea driller said that the blockage at the Lomond-Everest pipeline is still yet to be resolved, meaning production from its Erskine field remains suspended. Instead, the pipeline operator Chrysaor is moving ahead to build a 26km bypass pipeline. We remain buyers of Serica, whose BKR deal is set to complete later this year.
KEY STORIES:
Shares in Proactis (PHD) were down more than 40 per cent this morning, after the spend-control software group said first-half reported revenue had been “slower to build”. This stemmed from the strengthening of the pound, which weighed on performance in the US and Europe, along with the impact of losing “a number of customers” towards the end of the period. While management doesn’t expect this loss to continue, it will affect the second half. Still, there were positive signs – the order book sat at £47.8m against £28m year-on-year, and bosses believe they’ll meet their cost savings targets by the end of FY2018 following the transformative acquisition of Perfect Commerce.
At the start of April, Anglo American (AAL) revealed that a leak at its Minas-Rio iron ore pipeline in Brazil had forced the shutdown of operations. Amid an inspection of the pipeline, the miner this morning revealed that pipeline operations will now only begin their ramp-up in the fourth quarter of 2018, thereby “resulting in a $300m-$400m reduction in cash profits for the full year.
OTHER COMPANY NEWS:
It’s all changes at gambling group Sportech (SPO). Suffice to say, last year was a frenetic one. A formal sales process has concluded in a huge restructuring for the company, with a brand new management team currently being assembled, and due to be based in North America. Inevitably this has mucked around the numbers somewhat, so the focus remains on the future. For now, shareholders will be pleased to hear that the £75m worth of sales proceeds from the football pools disposal has been returned in two tranches, while the group is also debt free, with a net cash position of £12m.
Sumo Group (SUMO), the provider of development services to the video games industry, today announced its first set of results since joining Aim in December 2017. These full-year numbers reflect the leveraged structure in existence prior to its IPO at the end of the reporting period, as well as pre-flotation restructuring. Sales reached £30.6m, against pro-forma sales of £24.1m for 2016. Pre-tax losses widened considerably to £28m from £2.1m, largely driven by amortisation costs of £27.6m stemming from a change in accounting estimates regarding the useful economic life of intangible assets. Net cash was strong at £12.4m versus net debt of £52.2m.
Law firm Rosenblatt Group has announced its plan to float on the Aim market. No further details have been given at present, but the firm will join three others – Gateley, Gordon Dadds and Keystone Law – on London’s junior market.
