Shares in London's main indices have risen modestly after a rebound in UK construction activity but concerns remain about the potential for a full blown global trade war. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
The US Department of Justice has ordered Glencore (GLEN) to hand over documents and other records relating to the commodities giant’s “business in Nigeria, the Democratic Republic of Congo and Venezuela from 2007 to present”. The subpoena, issued yesterday, relates to “compliance with the Foreign Corrupt Practices Act and United States money laundering statutes”. Unsurprisingly, shares in the commodities giant are down 11.5 per cent in early trading, wiping off £6bn in market capitalisation. Our sell call is under review.
Paragon Banking (PAG) has confirmed the acquisition of development finance provider Titlestone for £48m, where is will also buy a portfolio if loans for around £226m. Outstanding balances stood at £76m, with loans written at higher yields than the group’s wider portfolio. That’s expected to expand the group’s net interest margin in future, although a reduction in the common equity tier one ratio means this year’s £50m share buyback programme will be suspended and reassessed at the year-end. Buy.
Mobile payments group Bango (BGO) has partnered with Pandora (US: P) - the largest music streaming service in the US - to enable subscriptions through Pandora reseller partners. This means eligible customers can add a bundled subscription to Pandora Premium to their mobile plan. Customers of mobile network operator AT&T are the first to be able to do this. Shares in Bango were up 2 per cent this morning. Buy.
RM (RM), which supplies technology and resources to the education sector, enjoyed 33.1 per cent revenue growth to £94.9m for the first half – buoyed by its acquisition of The Consortium last year. While Consortium’s profit seasonality slightly dampened group operating margins, it is still expected to deliver £4m per year in synergies by 2020. Overall, pre-tax profits rose 84 per cent to £6.9m, and RM lifted its interim dividend by 15 per cent to 1.90p. The shares were up 7 per cent in morning trading. Buy.
IMImobile (IMO) has agreed to buy Impact Mobile, Canada’s dominant provider of mobile engagement solutions, from Dealnet Capital. The acquisition will cost an initial C$25m (£14.4m) with deferred cash consideration of C$2.5m (£1.4m). IMImobile says the deal is “highly complementary” to its product set and customer base, and should be immediately significantly earnings enhancing. Impact provides software services to mobile operators, retailers, SMS aggregators, government agencies and household brands across Canada and the US. Shares in IMImobile were up 5 per cent in morning trading. Buy.
Entertainment One (ETO) has bulked up its original film production division by buying the remaining stake in Sierra Pictures and bringing it under full ownership. Buy.
Wizz Air (WIZZ) added 20.5 per cent more capacity to 3.2m seats during June and carried 21.8 per cent more passengers, bringing load factor up 1 percentage point to 93.3 per cent. This brings the total number of passengers carried over the rolling 12 months to June to 31.1m, an increase of nearly a quarter on the same time in 2017, with 21.8 per cent more capacity at 33.9m seats. In June six new routes were announced, including destinations in the UK, Poland, and Romania. Shares were up more than 1 per cent in early trading. Buy.
On The Beach Group (OTB) has appointed Elaine O'Donnell as a non-executive director. She is also a non-executive director at Findel, Games Workshop, and MSIF. Richard Segal will step down from his position as non-executive chair of the board and chair of the nomination committee. He will be replaced by Lee Ginsberg, who has been senior independent director since 2015. Shares were up more than 2 per cent in early trading. Buy.
Shares in Marshall Motor Holdings (MMH) rose on news of a robust first half performance, with underlying pre-tax profits now expected to report marginally ahead of market expectations. That’s the result of closing six loss-making sites, tight cost control and better than expected trading against a difficult market backdrop. We remain buyers.
News that Adam Crozier has joined the board of fast-fashion e-tailer Asos (ASC) has supported the share price this morning. The ex-ITV boss will replace Brian McBride on 29 November this year, having already assumed the same role at Costa Coffee-owner Whitbread (WTB) earlier this year. We maintain our buy rating.
Costain (COST) delivered a solid trading update for the six months to June 2018, and profits for the full-year are likely to meet expectations. At £3.7bn, the forward order book was unchanged from a year ago at £3.7bn, and Costain is also the preferred bidder on contracts worth £400m. Finances are strong, with £75m net cash on the balance sheet. Buy
Iron ore pellet miner and manufacturer Ferrexpo (FXPO) had telegraphed the planned 65-day shutdown of its production line, but second quarter output figures appear to have disappointed investors. Shares are off three per cent this morning, though all told the hit to production isn’t major: total pellet production is down 2.9 per cent quarter-on-quarter, or 1.2 per cent when comparing half-year numbers with 2017. We remain buyers.
KEY STORIES:
Amid the growing trend for pharmaceutical outsourcing, UDG Healthcare (UDG) is bulking up its operations. Management plans to spend a total of $84m (£64m) on two US-based communications businesses, funded out of its existing cash and debt resources. Both businesses are expected to be earnings enhancing in their first year.
Water regulator Ofwat has updated on PR19, the next price review period. A number of decisions have been made, but the most relevant for investors as we see it is related to the dividend and executive remuneration. The focus on customers is being strengthened, and companies will have to explain how their dividend policies take account of their performance for customers over the period. Executive remuneration will face a similar test, being more closely linked to “stretching performance delivery for customers”. Analyst RBC Capital Markets view these changes as positive, improving perception of the sector and reducing the risk of nationalisation.
OTHER COMPANY NEWS:
Microgen (MCGN) has sold its payments business - a small, non-core part of its Microgen Financial Systems segment - for £6.9m, to CJJ Investments, a subsidiary of a large US tech group. The payments business provides BACS payment products and services to various UK businesses, and enjoyed revenue of £1.4m in 2017 with £1m in operating profits. Microgen says the disposal will allow Microgen Financial Systems to focus on its trust and fund administration business.
Early - and perhaps slightly surprising success - from the new Jurassic World video game has prompted management at Frontier Developments (FDEV) to raise its revenue estimates for the current financial year (which ends in May 2019). The game was launched just three weeks ago, but has been in high demand since then, resulting in upgrades from analysts at both Liberum and FinnCap.
Traffic at Ryanair (RYA) increased by 7 per cent to 12.6m customers during June, with load factor flat at 96 per cent. Over the rolling 12 months the airline carried 7 per cent more passengers to 132.9m. Air traffic controller strikes in the UK, France, and Germany meant that more than 1,100 flights were cancelled during June, compared to 41 cancellations in June 2017. Shares were flat in early trading.
In addition to yesterday’s note, the board at Premier Foods (PFD) has released a presentation on its investors website detailing why they believe Gavin Darby is best placed to continue the role as chief executive, and urging shareholders to vote for his re-election on 18 July. Mr Darby is under pressure from Oasis Investments, which has just over a 9 per cent stake in the company, to step down from his role.
Completion of Savannah Petroleum’s (SAVP) complex Seven Energy transaction in Nigeria is taking a little longer than initially expected. Finalisation is now expected this quarter, once an implementation agreement is signed, and ministerial consent is given. But until Savannah can complete the deal, it has no access to the cash flow generated by production from Uquo and Stubb Creek. Against this, and despite support from a World Bank guarantee, Panmure Gordon flagged the potential strain on the cash position, given that the three-well programme in Niger is set to cost around $20m.
