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News & Tips: Scisys, Hunting, Greene King & more

Shares in London are off, marginally
June 28, 2018

A quieter day for London equities sees the FTSE 100 down a little in morning trading. 

IC TIP UPDATES:

Scisys (SSY) – which supplies software to the media and broadcast, space, government, defence and commercial sectors – gave a positive trading update this morning, citing an “impressive start” to 2018. The group’s order book now exceeds £100m, against £91.3m at the December year-end. Management plans to protect Scisys’s participation in EU-funded space programmes including Galileo and EGNOS, irrespective of the outcome of Brexit negotiations. As previously announced, this may entail redomiciling to the EU. Cash generation was strong, and net debt fell from £5.9m as at December to £1.9m by the end of May. The shares were up 4 per cent in morning trading. Buy.

BCA Marketplace (BCA) recorded strong profit growth in the face of an industry-wide slump in the auto market, thanks to increased volumes in WeBuyAnyCar and outsourced remarketing contracts, along with contributions from acquired businesses. Cash profits were up 17.6 per cent to £160m, which enabled the group to hike its final dividend for the year to 5.95p from 4.55p last year, taking its full-year dividend to 8.55p from 6.75p. The group was recently the target of a takeover approach from private equity firm Apax Partners LLP. Recommendation under review.

With its first half of 2018 drawing to a close, Hunting (HTG) today confirmed it is trading in line with full-year forecasts, despite a management warning of “a cautious view on the rate of recovery in the wider” oil services market. Strong activity levels among US unconventional drillers, alongside “improving sentiment in the US offshore market” alongside regional improvements in the Asia Pacific and Middle East, continues to be offset by “challenging” rates of activity in Europe and Canada. The broader recovery of the last year is underlined by a net cash balance of $30m, which would be higher had inventory levels not increased 14 per cent to $325m. We remain buyers.

Shares in Greene King (GNK) fell 9 per cent in early trading after the pub group revealed that sales in the year to April had fallen 1.8 per cent to £2.2bn, while adjusted pre-tax profits were down 11.2 per cent to £243m.  Management called it a challenging year as “consumer confidence remains fragile” while a number of industry-specific costs continue to rise above inflation. The company still managed £44m of cost savings through its mitigation programme and synergies from the Spirit acquisition. The current financial year is off to a good start, with pub companies like-for-like sales up 2.2 per cent in the first either weeks and an expected World Cup boost. Buy.

KEY STORIES:

In the latest sign of oil majors positioning themselves for a de-carbonised future, BP (BP.) has announced it is to buy Chargemaster, operator of the UK’s largest electric vehicle (EV) charging network and billed as “the leading supplier of EV charging infrastructure”. The FTSE 100 giant said the deal would result in the deployment of a “fast and ultra-fast charging network” on BP’s UK garage forecourts. Chargemaster chief executive David Martell said the deal “marks a true milestone in the move towards low carbon motoring in the UK”.

Sibanye-Stillwater has cleared another hurdle in its proposed acquisition of struggling platinum miner Lonmin (LMI). Today, the Competition and Markets Authority gave the thumbs up to the deal, though approval from South African competition authorities, as well shareholders of both companies, still awaits. Shares are off 3 per cent this morning, suggesting not every investor sees themselves in Lonmin chief executive Ben Magara’s contention that the move is “in the best interest of our stakeholders”.

XPS Pensions (XPS) - formerly Xafinity - grew revenue more than a quarter last year, following the acquisition of Punter Southall. However, underlying revenue was 4.4 per cent, after clients won during the first-half fed through to a stronger second-half performance. Pre-tax profits also came in at £4.2m, compared with a loss of £14.1m, after merger-related costs reduced.

Seven weeks on from a bullish trading update, Wood Group (WG.) remains “on track to deliver growth in 2018”, according to chief executive Robin Watson. Overall, trading momentum has boosted activity levels, and the company sees early signs of recovery in the core oil and gas market. That said, the full year outlook is unchanged and the half-year EBITA (earnings before interest, tax and amortisation) margin is likely to come in at a pretty thin 5 per cent.

Shares in Stagecoach (SGC) fell nearly 3 per cent in early trading after it announced the full-year dividend would be cut to 7.7p, compared to 11.9p last year, in light of £85.6m worth of “significant exceptional costs” associated with Virgin Trains East Coast. Management called the dividend payout a more “sustainable level” and which is covered by the normalised, annual free cash flows from its non-rail operations. Group sales fell nearly a fifth to £3.3bn, reflecting the end of the South West Trains franchise, with total operating profit down 3 per cent to £180m.

OTHER COMPANY NEWS:

Law firm Gordon Dadds (GOR) has announced its first set of full-year numbers since listing on Aim last August. Revenues rose 25.3 per cent to £31.2m, though management says these results “mask the growth” achieved via acquisitions - most of which were made later in the year, contributing little to the 12-month performance to March. Indeed, annualised revenues as at the year-end exceeded £42m. Pre-tax profits were down from £6.8m to £6.4m, largely due to flotation-related costs. The group expects to see “significant further growth” this year from more acquisitions, and organic momentum stemming from cross-referral of clients between its businesses. The shares were up 7 per cent this morning.

As announced on Monday this week, behavioural science group Mind Gym (MIND) has listed on Aim today. It was expected to have a market cap of around £145m on admission, based on the placing offer price of 146p per share.

Online bingo operator Jackpotjoy (JPJ) will now be known simply as “JPJ Group”, effective immediately. The company is also transferring from a standard listing to a premium one as of 26th July. The board of directors believe the company has reached an “appropriate stage” in its development to merit a premium listing, and believe this shows commitment to corporate governance and provides an platform for future growth.

Redcentric’s (RCN) full year results had few surprises for investors this mornings, given its recent trading statements. While the most recent statement guided for cash profits 10 per cent below expectations in the coming year, 2018 performance remains fairly solid with profits and margins expanding in the face of declining revenues . After the results period, the group was awarded the Yorkshire and Humber Public Services Network framework contract, which could provide a massive boost to the top line. 

PPHE Hotel Group (PPH) has agreed to refinance four of its Park Plaza Hotels – London Park Royal, County Hall London, Leeds, and Nottingham. Luxembourg-based Banque Hapoalim will provide a new £45m facility with a seven-year term at a 4.367 per cent fixed rate.