Shares in London dipped a little in morning trading as traders continued to consolidate after recent highs. Click here for the latest thoughts of The Trader Nicole Elliott.
IC TIP UPDATES:
Shares in Tate & Lyle (TATE) were up more than 4 per cent this morning after the ingredients maker reported a 23 per cent increase in pre-tax profits to £286m in the year to March, despite a 2 per cent fall in sales to £2.7bn. The group announced three programmes to “accelerate business performance”, including targeted cost savings, new product development, and a focus on certain areas like beverages and soups. Buy.
Paragon Banking (PAG) grew its mortgage lending more than a fifth during the first half of the year, predominately thanks to buy-to-let loans to professional landlords. Commercial lending was also up almost half on the previous year, following the acquisition of Iceberg, which provides credit to solicitors. However, management guided towards its net interest margin rising 5 basis points for the full-year, at the lower-end of its previously-flagged range. Buy.
Just when Petra Diamonds (PDL) appeared to be out of the woods, the company has come cap in hand to shareholders. Today, the group has proposed a five-for-eight, fully underwritten rights issue at 40p a share, which will raise $178m (£133m) to reduce the group’s banking facilities and bolster a capital position that has been tested by a strengthened rand and tax and export issues at the Williamson mine in Tanzania. As part of the fundraising board is coughing up $6m. Our buy recommendation, which had been recovering, is now 29 per cent under water at 67p, though this represents a premium to the theoretical ex-rights price of 62p, suggesting the refinancing has some backers. Under review.
Has ADES International (ADES) got something big planned? The jack-up rig specialist has secured another $140m credit facility – to add to the proceeds raised at last year’s IPO and a recently-signed $450m facility with Bank of America – which “further enhances the group’s purchasing power”. Nominally, the new facility will be used to finance the purchase of the Nabors rigs, announced in December. We remain buyers.
Costs at Atalaya Mining (ATYM) are under control. At least, that’s the assessment on the Spanish copper miner’s first quarter results, in the eyes of Canaccord Genuity. Cash profits ticked up 16 per cent to €15m, thanks to strong realised pricing and a decline in costs to $2.27 per pound, down from $2.35 in the final quarter of 2017. We are buyers of Atalaya’s two-track growth story.
StatPro (SOG), the provider of cloud-based portfolio analysis software, said this morning that trading for the current financial year is in line with expectations. New sales of its StatPro Revolution product “have progressed well” with both new and existing clients. As already announced, a top 10 fund administrator is due to start using Revolution in a deal worth a minimum of $0.5m per year. The Revolution fixed income platform will be launched early in the third quarter of 2018. Buy.
Interim profits at Shoe Zone (SHOE) have peaked at £1m - a marked improvement on the £300,000 reported this time last year. This was predominantly a result of an improved cost base, particularly as rent renewals fell by more than a fifth on average. Fewer finance expenses also helped, while cash levels increased by 28 per cent to £5.9m. This helped lift the interim dividend by 3 per cent to 3.5p a share. We remain buyers.
Young’s & Co (YNGA) reported a 3.9 per cent increase in sales to £279m during the year to April, while operating profit was up 1.9 per cent to £43.5m. Chief executive Patrick Dardis said the results were delivered despite a challenging market backdrop, with cost increases like business rates and the apprenticeship levy, and strong comparatives. In the first seven weeks of the current financial year sales are up 11 per cent, or 7.5 per cent on a like-for-like basis. Shares were up less than 1 per cent in early trading. Buy.
KEY STORIES:
Shares in United Utilities (UU.) are down more than 4 per cent this morning, most likely due to a drop in profits. Lower profits were attributed to a tax credit in the previous year that did not recur. Like all water companies at the moment, UU was keen to stress its performance delivering for customers over the current AMP cycle. It performed well on a number of customer satisfaction metrics, achieving its best ever scores against Ofwat’s service incentive mechanism.
Shares in HSS Hire (HSS) have jumped 9 per cent this morning after it announced its recovery was gathering steam. The group posted adjusted cash profits of £13.8m in the period, compared with £8.4m in the same period last year. Management’s focus going forward is to reduce leverage, which was broadly flat in the period. The results here sound promising, but we’ll have to see more than one quarter of improvements to exit our sell recommendation.
Capital & Counties (CAPC) is planning to split the company into two listed companies. One will run the highly profitable Covent Garden portfolio and the other will have to deal with the Earls Court residential development which has come under pressure following disagreements with the local authority. The move effectively underpins the share price, and we upgrade our advice from sell to hold.
Shares in Renewi (RWI) are up 7 per cent this morning after it beat expectations for the full year. In spite of upgraded forecasts, profit came in ahead and underlying EPS was up 18 per cent in constant currency. Synergies generated by the merger that turned Shanks Group into Renewi are continuing to come in faster than expected, with €15m (£13.3m) generated so far of a €30m target. We think fears over the Chinese import ban have been overblown.
OTHER COMPANY NEWS:
Earthport (EPO) has appointed a new chief executive, effective 1 July 2018: Amanda Mesler. She is currently general manager at Microsoft, a role from which she will depart in July, and she was previously chief operating officer at Misys - a private equity-backed financial services software company. In total, she has more than 25 years in senior management roles. To coincide with her arrival, Hank Uberoi will step down as executive chairman of Earthport, remaining on the board as a non-executive director and senior advisor. Phil Hickman will return to his role as non-executive chairman.
Southeastern services from London Bridge station have now resume in full, boosting passenger revenue at Go-Ahead Group (GOG) by 3.5 per cent and passenger journeys by 1 per cent during the five months to 23rd May. Sales in the regional bus division were flat, while the number of passenger journeys fell by 2 per cent. In London, there are fewer contracts coming up for renewal over the next two financial years, which management expects to lead to lower capital expenditure and a corresponding increase in cash flows. Revenue in this division improved by 3 per cent, though mileage was flat. Shares were up less than 1 per cent in early trading.
Like-for-like sales at Kingfisher (KFG) fell 4 per cent to £2.8bn during the first quarter. Sales growth in Screwfix was not enough to offset the decline in B&Q UK and Ireland, leading to a 5.4 per cent decline in revenue in the UK and Ireland to £1.2bn. In France, poor weather contributed to a 3.9 per cent decline in sales to £1.1bn. The supplier of home improvement products also announced that up to £50m worth of shares will be repurchased. Shares were up less than 1 per cent in early trading.
PayPoint’s (PAY) net revenue fell 3.5 per cent to £120m, while pre-tax profits fell 23.4 per cent to £52.9m for the year to March. On a continuing basis – excluding PayByPhone and Drop and Collect, which were sold in December 2016 – net revenue rose 1.8 per cent to £120m, buoyed by underlying net revenue growth of £6.3m in areas including UK retail services, and Romania. Continuing pre-tax profits fell 0.8 per cent to £52.9m. Management anticipates a “progression” in pre-tax profits this financial year, despite £5m in expected headwinds. A final dividend of 30.5p per share has been supplemented by 24.5p special cash. The shares were up 4 per cent this morning.
Shares in Wizz Air (WIZZ) were up nearly 6 per cent in early trading after the budget airline reported that the number of passengers it carried increased by a quarter to 29.6m during the year to March, boosting revenue by 24 per cent to €1.9bn (£1.7bn). Ticket revenue increased by 23.7 per cent to €1.1bn, while ancillary revenue was up 24.4 per cent to €816m, representing 42 per cent of total revenue.
