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News & Tips: Ricardo, SDL, Finsbury Food & more

Equities are muted at the start of the week
July 16, 2018

The week has begun quietly in London with the FTSE100 off marginally. Click here for The Trader Nicole Elliott's latest thoughts. 

IC TIP UPDATES:

As part of a recently completed European research initiative to achieve more efficient and cost-effective hybrid powertrains for both passenger cars and commercial vehicles, Ricardo (RCDO) announced that it is has created a new 48V e-motor offering up to a 50 per cent increase in power density compared with current production machines. Buy.

Shares in SDL (SDL) were up 3 per cent this morning, after the language translation technology group announced its acquisition of Donnelley Language Solutions (DLS) for $77.5m (£60.1m). To help finance this, SDL has proposed a placing of up to 8.2m shares at 440p each – representing around 10 per cent of its issued share capital – to raise gross proceeds of up to £36.2m. DLS is a specialist language and linguistics provider, and operates in SDL’s ‘premium sectors’ – financial services and life sciences. It enjoyed 5 per cent sales growth to $71.4m and adjusted cash profits of $5.8m for the year to December 2017. Buy.

Shares in Finsbury Food Group (FIF) fell more than 2 per cent in early trading after the company announced in a pre-close trading statement that the challenging UK environment experienced over the period showed no signs of abating. Operational efficiency and price increases helped to offset this tough trading environment during the year to June. Total group like-for-like sales were up 2.4 per cent to £290m, though total group revenue including closed businesses fell 3.4 per cent to £304m. The core UK bakery division grew 2.8 per cent on a like-for-like basis, ahead of the wider market. Our buy tip is under review.

First Derivatives (FDP) has been chosen alongside its partner CGI to provide a ‘next-generation’ electricity information exchange for Fingrid – the transmission system operator for Finland. The group says this energy contract reflects the applicability of its flagship ‘Kx’ technology to the utilities sector. The shares were up 1 per cent in morning trading. Buy.

When it begins production at South Disouq in the fourth quarter of 2018, SDX Energy (SDX) aims to produce some 50mmscf (million standard cubic feet) per day. Those hopes for the Egyptian portfolio have received a further boost, after the SD-4X appraisal well flowed at 30.4mmscfd, higher than the SD-1X well test. We remain buyers.

Shares in Atalaya Mining (ATYM) are off 4 per cent this morning, though there’s little to fault in a second quarter production update. Higher copper ore throughput meant output climbed 10 per cent in the three months to June, ahead of the targeted full-year run-rate, and realised prices came in at $3.12 per pound. Meanwhile, both the Touro development and Riotinto expansion projects are moving ahead. Buy.

OTHER COMPANY NEWS:

Seeing Machines (SEE) has appointed Jack Boyer OBE as non-executive director and ‘chairman designate’ with immediate effect. Ken Kroeger, the current chairman and interim chief executive, now becomes chief executive on a permanent basis. Mr Boyer will take over from his as chairman in January 2019. Previously, Mr Boyer was chairman of Ilika (IKA), non-executive director at Laird and deputy chairman of the Advanced Materials Leadership Council. He has held other roles, and has founded and led various companies. The shares were down 3 per cent in morning trading.

Internet platform Centralnic (CNIC) will acquire KeyDrive for an enterprise value of $44.5m, with a performance-based additional earn-out of up to $10.5m. KeyDrive is a technology group operating in the domain name services industry. It saw revenues of $58.3m and adjusted cash profits of $5.9m for the year to December 2017. The reverse takeover will be funded partly by the placing of 46.2m shares at 52p each, raising around £24m in gross proceeds. This represents a 10.3 per cent discount to the closing price (58p) on 13 March 2018 – the last day before the group’s shares were suspended pending the acquisition announcement.