Shares in London have see-sawed this morning but are in positive territory on hopes that President Trump might ease up on planned controls over Chinese investment in the US.
IC TIP UPDATES:
Shares in Whitbread (WTB) were up more than 2 per cent in early trading after the company announced total group sales growth of 3.2 per cent during the first quarter of its financial year, mainly driven by new openings. Total sales at Premier Inn were up 2.5 per cent, but fell 0.9 per cent on a like-for-like basis. Similarly at Costa, total sales improved 5.2 per cent, but comparable revenue was down 2 per cent. “Constructive steps” have been taken towards the Costa demerger, and progress continues to be made on the core infrastructure and efficiency work that was already underway. Buy.
Liontrust Asset Management (LIO) gained £1bn in net inflows during the year to March 2018, which along with £430m in market returns and £2.5bn in assets gained through the acquisition of Alliance Trust Investments, took assets under management up 61 per cent to £10.5bn. That boosted pre-tax profits by more than a third. Shares were up 3 per cent in early trading. Buy.
In Sumo Group’s (SUMO) first AGM statement since listing on Aim last December, chairman Ken Beaty said trading is in line with current market expectations and Sumo is “well positioned to take advantage of growth in the global software market”. The company, which provides creative and development services to the video games industry, has also continued to enjoy positive cash balances. The board anticipates full-year results in line with market expectations. The shares were up 4 per cent in morning trading. Buy.
Cloud communications group IMImobile (IMO) saw revenues rise 46 per cent to £111m for the year ending March, comprising 7 per cent organic growth and contributions from the Infracast, Sumotext and Healthcare Communications acquisitions. Overall gross profits climbed 17 per cent, despite a 17 per cent decline in the Middle East and Africa regions following the devaluation of Nigeria’s currency and the renewal of a contract with mobile operator MTN in the country. After acquisition-related costs, pre-tax profits fell 48 per cent to £2.7m – though these rose 12 per cent on an adjusted basis. FY2019 has started well, with trading in line with expectations. Buy.
Bango (BGO) has expanded the use of its billing technology, so that customers can sign up for Amazon Prime Video in the UK through a “leading mobile operator”. This means the mobile operator’s customers can subscribe to Prime Video as part of their mobile contract. The shares were up 9 per cent at the time of writing. Buy.
SSE (SSE) has released a shareholder circular outlining its case for the demerging of its household supply business to combine with energy supplier nPower. The 200 page document outlines the case for the demerger and gives proforma numbers offering more detail on the proposed group than has been previously available. SSE has also proposed two resolutions for its upcoming AGM, one for the payment of a special dividend in kind, in the form of shares in the new company and a waiver of obligation for Innogy - parent company of nPower - to make a general offer for all of the issued shares in the new group on completion. Buy.
The Financial Conduct Authority has advised outsourcer Mitie (MTO) that it has discontinued its investigation into financial information released in March 2016 and a profit warning the group issued in September 2016. The FCA has previously raised questions about the manner of preparation and content of the former and the timeliness of the latter. The news will be a relief to the group, but investors still sent the shares down almost 2 per cent in early trading. Sell.
Shares in Berkeley Energia (BKY) may be down 20 per cent in the last three weeks, but the prospective uranium miner has today informed the market that it “is not aware of any information that has not been announced which, if known, could provide an explanation”. Various Spanish media reports questioning the new government’s support for the project might point to one source of sudden bearishness. We remain buyers.
Diversified Gas & Oil (DGOC) stock will recommence trading on Friday, after the Appalachian driller received backing from shareholders to fund a $575m acquisition of an unnamed target, apparently the largest purchase by an oil and gas company in the history of Aim. In addition to a renegotiated $1bn debt facility, $250m of fresh equity is being raised at 97p, a premium to the undisturbed trading price prior to last week’s announcement of the deal. Our buy call is under review.
KEY STORIES:
One of AstraZeneca’s (AZN) many new cancer drugs has successfully completed a final phase trial. Lynparza - which is being developed alongside US pharma giant (and IC 2017 tip of the year), Merck (MRK) - prolonged the progression free survival of ovarian cancer patients with the BRCA gene mutation who had not yet been given any other treatments. AstraZeneca and Merck will now file for regulatory approval in the US, with the hope of expanding the sales potential of Lynparza, which is already approved for women who had previously been treated with chemotherapy.
Yesterday, French satellite company Eutelsat confirmed that it had ruled out a bid for its peer Inmarsat (ISAT) sending the companies share price down 11 per cent. Investors had been hoping for a bidding war between Eutelsat and US group EchoStar - which has had its preliminary bid for the group rejected by management. Acquisition still seems the likely outcome for the beleaguered telecoms company which has seen its share price crash as competition picks up across the industry. The group is currently awaiting a second offer from EchoStar.
There has been something of a revolt at Faroe Petroleum’s (FPM) annual general meeting. Ordinary votes to re-appoint non-executive chairman John William Sharp Bentley, approve a remuneration report and give directors all powers of the company were each approved with significant opposition. Special resolutions giving directors power to allot shares for cash without offering them to shareholders first, and to buyback shares, were both defeated. Shares have responded positively to the news, perhaps on the implication that DNO, which built a stake earlier this year, may be eyeing a takeover before long.
Shares in IWG (IWG) are down 5 per cent this morning following a profit warning in the group’s latest trading statement, noting a combination of opening losses and incremental overhead costs stemming from high network growth, as well as weak performance in the UK business. These are expected to wipe £15-20m from the group’s previous profit expectations.
OTHER COMPANY NEWS:
FairFX (FFX) has launched its ‘Fair Everywhere’ global current account for small businesses. This allows businesses to manage day-to-day banking and international money transfers in one current account and to automate bill payments through direct debits, among other benefits.
At the company’s AGM Walker Greenbank (WGB) chairman Terry Stannard said trading during the current financial year reflects a “difficult marketplace”. During the first four and a half months of the year brand sales fell 6 per cent in the UK, and overseas were down 1.9 per cent at constant currency or 3.8 per cent in reportable currency. Income from margin licence continues to “perform strongly”. Expectations for the full year remain unchanged.
