Shares in London were in the red in morning trading today as investors gear up for a week of significant central banking announcements. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Shares in online gambling outfit GVC Holdings (GVC) rose strongly in early trading on news of a new 50:50 joint venture with MGM Resorts International. The two want to work together to create a new online betting platform in the US, taking advantage of the Supreme Court’s recent decision to overturn the Professional and Amateur Sports Protection Act, or PASPA, which previously prohibited sports betting and even other forms of gambling from expanding across the country. It’s thought the new partnership will increase speed of entry to the market for both players. We remain buyers.
A first quarter trading statement from pig producer Cranswick (CWK) has reported a 3.2 per cent improvement in revenues, with good contributions from all divisions. The pig price rose slightly across the period, while investments continued in expanding the group’s capacity, including the commission of a new, purpose-built continental products factory in Bury, Greater Manchester. Work has also started on the new poultry primary processing facility at Eye in Suffolk. With net cash of £8m still on the balance sheet, the group has maintained full-year guidance at this stage. Buy.
Seplat Petroleum (SEPL) has come a long way in a short time, as half-year results attest. Higher production, better oil prices and a sharp fall in unit operating costs meant the gross profit margin climbed 10 percentage points to 51 per cent in the first six months of 2018. Net debt has fallen precipitously, though construction of the 160,000 barrel a day Amukpe to Escravos pipeline is “progressing slower than anticipated”, extending the risks connected to Seplat’s routes to market. Our buy call is under review.
Production from the DNO-operated Peshkabir field in Iraqi Kurdistan continues to surge. It is now past the initial target of 30,000 barrels per day, thanks to a better-than-expected performance from the Peshkabir-5 well. That’s good news for Genel Energy (GENL), which has a 25 per cent working interest in output from the Tawke asset. Shares, up 4 per cent, remain a buy.
Marlowe (MRL) is continuing to build out its water treatment business, announcing the acquisition of Kingfisher Environmental Services. Alongside fire protection, water treatment and other environmental services has been an area of focus for the group, with numerous deals announced this year and last year. With revenues of £2.8m last year, Kingfisher won’t be transformative for the group, but gives a good indicator of management’s areas of focus. Buy.
Babcock (BAB) has hit out at the Sunday Times for a “misleading” article. The article, since removed from the publication’s website, confused the group’s existing DSG contract for maintaining equipment for the Ministry of Defence with a separate contract for Protected Mobility Strategic Support Supplier. The Ministry of Defence contract is due to run until 2025, while the procurement process for the PMSSS contract ended in 2016. The shares haven’t moved much this morning, likely because the article was quickly removed and Babcock’s rebuttal was vehement. Buy.
Shares in National Grid (NG.) are down 2 per cent this morning following the publication of Ofgem’s framework decision for RIIO-2 energy transmission pricing. The regulator hasn’t narrowed the cost of equity range any further than the 3-5 per cent announced previously, and it reconfirmed its intention to use CPIH - a version of consumer price indexation that takes account of the cost of housing - when accounting for regulated asset value. The announcement hasn’t added a huge amount of detail, so the share price drop may also be down to the protests expected at the group’s AGM today, following an industrial dispute with staff in the US. Buy.
KEY STORIES:
CYBG (CYBG) grew mortgage lending 4 per cent during the nine months to June, with lower applications in the second quarter resulting in fewer drawdowns during the third. As previously flagged, mortgage growth during 2018 is expected to be at the lower-end of the guidance range. SME loan growth was slightly better at almost 5 per cent, while improved margins helped offset increased retail pricing pressure in mortgages. The merger with Virgin Money (VM.) is set to complete during the fourth quarter of the year.
River and Mercantile (RIV) reported a 3 per cent uplift in fee-earning assets under management to £33.8bn during the three months to June. Net inflows were £0.6bn, while investment performance added £0.3bn. Derivative solutions gained most net inflows, at £794m, taking assets under management to £18.6bn.
Shares in Clipper Logistics (CLG) have plummeted by more than a fifth in early trading on the unexpected release of full-year results from the company. Pre-tax profits have fallen short of projections as a difficult retail sector weighs on the contract pipeline. Management has also said it is taking a more prudent view on conversion rates when it comes to future contracts. Debt is also on the rise - which seems to have set the market’s teeth on edge today.
OTHER COMPANY NEWS:
A month after their appointment to the board, Petropavlovsk’s (POG) management team looks to have a big job on their hands. Following his re-appointment, chief executive Pavel Maslovskiy has launched a full operational review, which has already revealed “recent disruptions to mining operations” – evidenced in a mixed performance of underground operations, a 13 per cent decline in first half gold production, and delays to commissioning at Malomir and the POX hub. The latter was a major flashpoint in the boardroom battle, though shareholders will hope this isn’t what the new management meant by “disruptions and instability in H1 2018”.
GlobalData’s (DATA) revenues rose 32 per cent to £75m in the first half, buoyed by 9 per cent organic growth and by contributions from acquisitions. Indeed, the information services provider made its largest-ever purchase in April when it bought RVL for £97.3m. On an adjusted basis, cash profits increased by 31 per cent to £14.6m, while the associated margin was flat after investments in infrastructure and adverse currency movements. That said, on a statutory basis, the group reported a pre-tax loss of £4.2m, down from a £0.2m profit - partly the result of costs tied to M&A activity in recent years.
