A wobble on Wall Street has fed into profit taking in London this morning. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
The hedge fund haranguing of Whitbread (WTB) has paid off. This morning chief executive Alison Brittain announced the group would demerge Costa Coffee from the rest of the business within the next two years. The decision came following mounting pressure from two hedge funds, Elliot Advisors and Sachem Head. Both built up stakes in the company before calling for the sale or spin out of Costa. Ms Brittain had said she was open to offers for the coffee shop chain, but the timing was inopportune as it is going through a restructuring programme. Shares are down 1 per cent this morning. Buy.
First Derivatives (FDP) expects to see a full-year financial performance “slightly ahead” of current market forecasts of £180m in sales and £32.9m in adjusted cash profits. The company also gave an update on the reduction of the US Federal corporate tax rate from 35 to 21 per cent. This should bring the group a continuing reduction in its effective tax rate of 4 to 6 per cent. The shares were up just over 1 per cent this morning. Buy.
After market close yesterday, Learning Technologies (LTG) announced its proposed acquisition of talent management platform PeopleFluent for $150m (£107m) - to be funded by a share placing to raise around £80m, and up to $48m (£35m) in incremental debt financing. This morning, LTG delivered the results of the respective placing; 86.7m shares were placed at 98p each, raising gross proceeds (before expenses) of £85m. PeopleFluent will take LTG to a business with approximately £135m in sales, and should be immediately earnings enhancing. It is “transformative” for the group’s US presence. The shares rose 5 per cent in morning trading. Buy.
Building materials group CRH (CRH) blamed poor weather and timing of the Easter break for a two per cent drop in first quarter like-for-like sales. Cash profits for the first six months of 2018 are expected to be flat on the previous year, although, in the absence of more adverse weather, trading in the second half is expected to be ahead of the previous year. Up to €2bn of disposals are expected this year. Buy
KEY STORIES:
Yesterday afternoon, US company SS&C said that it does not plan to make an offer for Fidessa (FDSA). This follows Ion’s announcement of a £1.5bn cash offer for Fidessa last Friday, which trumped the terms of Swiss group Temenos’s £1.4bn proposed deal. Fidessa’s board transferred its recommendation from Temenos to Ion, and the Takeover Panel gave SS&C - then still a potential bidder - until 4 May to confirm its intentions. For now, it looks like Ion has prevailed in the bidding war.
Empiric Student Property (ESP), who late last year sacked their chief executive following a profit warning based on operational inefficiency, appears to be making ground in putting things right, with better management already boosting margins. The student accommodation business remains strong, with bookings for the 2018/19 academic year up at 57 per cent compared with 45 per cent a year earlier. Administration expenses are expected to be down by £10m for the 2018 full-year.
Persimmon (PSN) has revealed that enquiries for new houses in the first four months of 2018 are currently running around 13 per cent ahead of a year earlier. As a consequence, forward sales are up eight per cent at £2.76bn. To meet the increased demand, 65 of the proposed 100 new sales outlets planned for the first half of the year have already been opened.
An AGM statement from cigarette giant British American Tobacco (BATS) has confirmed that exchange rates will continue to play havoc with the company’s translated results this year. If rates were to stay at current levels, the group would face a translational headwind of 7 per cent on operating profit and 8 per cent on earnings per share. Profits are also expected to be largely second-half weighted due to volume shipment phasing and pricing in certain markets. For now, the group continues to prioritise the development of its ‘next-generation’ e-cigarette products, with a “significant” number of new products slated to launch around the third quarter.
Shares in online fast-fashion retailer boohoo.com (BOO) are up significantly this morning after final results came in ahead of analysts’ expectations. Sales of £580m comfortably exceeded Peel Hunt’s forecast for £576.5m, while adjusted pre-tax profits of £51m beat the forecast £48.5m. This allowed for forecast upgrades this morning: Peel Hunt now expects pre-tax profits of £68.4m this year (that’s a 13 per cent improvement on previous estimates), assuming roughly 47 per cent top-line growth.
First quarter production figures for Antofagasta (ANTO) were light, as foreshadowed, but the 4 per cent dip in the copper giant’s share price today suggests the market had not expected lower grades to lead to net cash costs of $1.54 a pound. Investors may also have taken flight at first quarter copper output of 153,800 tonnes, which suggests full-year production might lean towards the lower end of guidance of 705-740,000 tonnes.
OTHER COMPANY NEWS:
Keystone Law (KEYS) has delivered its first set of results since floating on Aim in November 2017. These are “comfortably ahead of market expectations”, according to management. Performance for the year to January was strong, with sales up 23.6 per cent to £31.6m and pre-tax profits up 61 per cent to £1.9m. The law firm has also proposed a 0.84p dividend. Keystone’s shares were down 1 per cent in morning trading.
