Shares in London are flat in late morning trading after a cautious start to the week's trading. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Colder than expected weather has benefitted energy supplier Centrica (CNA) so far in 2018, increasing energy demand. However, this has been partially offset by outages across both the exploration & production and Nuclear businesses. Cost-cutting measures have been effective, expected to generate £200m in savings. The UK energy supply market remains challenging, and the group lost another 62,000 customers in the first four months of 2018. Sell.
Luxury fashion group Burberry (BRBY) has announced a strategic acquisition of leather-goods business from longstanding Italian partner CF&P. The group has worked with the leather expert for more than a decade, but Burberry is effectively taking the team in-house on completion. We remain buyers.
Allergy Therapeutics (AGY) has released new data which proves the efficacy of its novel approach to treating allergies. The study shows that Allergy’s MCT vaccine has a better mechanism of action than traditional aluminium-based treatments. Buy
First quarter results for Caledonia Mining (CMCL) are in, and already the Zimbabwean gold miner is starting to reap the benefits of a higher export credit incentive. Against marginally higher production and an 8 per cent increase in the average realised gold price to $1,312 an ounce, net profits attributable to shareholders rose 35 per cent to $3.15m. Operating cash flow also tripled, allowing net cash to push up a further 14 per cent to $13.4m. Buy.
City Pub Group (CPC) executive chairman said he was pleased trading has “bounced back” after a tough start to the year due to snowy weather. The pub owner reported that total sales during the first 18 weeks of the year were up by a quarter, with the size of the estate having increased by 10 to 44 locations. Shares were up more than 3 per cent in early trading. Buy.
KEY STORIES:
First quarter results from funeral provider Dignity (DTY) are better than expected given the group’s shock January profit warning. A higher death rate (up 8 per cent over the 13 weeks ended 30 March) helped, but so did a change in the sales mix thanks to actions taken around pricing. Although too early to really tell, management suspects a higher number of funerals performed year-on-year could help slow the rate of market share decline too.
Non-Standard Finance (NSF) reported in line trading since its full-year results on 13 March. It has opened 11 out of its 12 Everyday Loans branches scheduled for this year, while risk-adjusted margins remain in line with last year. Guarantor loan sales have been strong, making it the sub-prime lender’s second-largest division. Meanwhile, at Loans at Home, the high number of agents recruited last year means the division remains on track to achieve its 20 per cent loan growth target this year.
Reports are swirling that when Mothercare (MTC) reports full-year results later this week, the mum-and-baby chain is going to ask investors for more money. The group’s been exploring funding options since the start of the year, but reports over the weekend suggest the retailer is going to follow similarly-stricken group Carpetright’s (CPR) example by entering into a company voluntary agreement (CVA), followed by an equity fundraising. Like Carpetright and many other high street chains, Mothercare has struggled to manage a bloated store estate and rising costs.
Despite a 27 per cent increase in the dollar basket price achieves for its platinum output, Lonmin (LMI) posted another $32m operating loss in the six months to March. The period, during which the struggling South African miner received a white knight bid from Sibanye Stillwater, also saw Lonmin’s net cash fall to $17m. That figure, according to chief executive Ben Magara, reflects the “strength of our mine-to-market business”.
Ophir Energy (OPHR) has sold a 40 per cent non-operated interest in its EG-24 exploration licence offshore Equatorial Guinea to Kosmos Energy (KOS), which bought into the Ceiba and Okume fields last year. Ophir, which is yet to secure funding for its nearby Fortuna LNG project, will now be carried for a block-wide 3D seismic survey, and Kosmos has committed to partially fund the costs of drilling a well in the second portion of the exploration licence, should the parties decide to do so.
Richard Ingram’s first update as chief executive of Diploma (DPLM) has been in line with expectations. Adjusted pre-tax profit was up 9 per cent thanks to US corporate tax reforms, while the operating margin expanding 10 basis points to 17.3 per cent. An £11.2m investment in working capital caused the group’s free cash flow to decline 14 per cent to £17.7m. Shares are flat.
Shares in IWG (IWG) have jumped more than 20 per cent this morning after management announced late on Friday it had received three takeover offers from private equity groups. The workspace rental group’s board is evaluating the offers from Starwood Capital, TDR Capital and Lone Star Europe, but no detail has been given on the terms of any offers. IWG already received an offer from Brookfield Asset Management and Onex earlier this year, but turned them down.
OTHER COMPANY NEWS:
With the peso on its knees, and the country’s central bank doing all it can to limit cap inflation, this is a nervy time for Argentina and its investors. This morning, producer-explorer President Energy (PPC) reassured the market that the macro-economic environment has not led to “current or envisaged material adverse changes” to the company’s financial position or prospects. On the operational front, a seven-well workover programme has commenced at Puesto Flores, ahead of an accelerated drilling programme starting September, while the long term test of gas at Estancia Vieja begins next month.
It’s been a long time coming, but Toronto-listed Strongbow Exploration (TSX:SBW) has finally announced plans to list on the Alternative Investment Market, in June. It makes more sense for Strongbow to be listed in the UK; its chief asset, the South Crofty underground tin mine, is located near the towns of Pool and Camborne in Cornwall. Assuming the group can attract the £25m required to “progress to a production decision” by the end of 2019, South Crofty could re-open more than two decades after its closure.
