IC TIP UPDATES:
Hays (HAS) has become a slave to high expectations. Shares are down 5 per cent this morning, in spite of record international profits and dividends. Growing net cash allowed the group to announce an 18 per cent increase in the dividend to 3.81p and a special dividend of 5p per share. Investors may have been disappointed by the group’s performance in the UK, where it continued to struggle with net fee growth of just 2 per cent. However, with headcount up 8 per cent, we see growth continuing. Buy.
In a trading update, Scisys (SSY) said it expects “year-on-year progress” in 2018. The two halves should be more balanced than 2017, which saw a stronger second half. So, interim results to June should reflect an uptick against the same period a year earlier. Cash generation over the six months was strong. Net debt declined from £5.9m as at December to £3.3m. And the order book sat at around £100m. Management is confident about the outlook for 2018 “and beyond”. Separately, we learnt that the British Library has commissioned Scisys to provide a national digital radio archive management solution. The shares were up 5 per cent this morning. Buy.
The Competition and Markets Authority has published the provisional findings for its investigation into the proposed merger of SSE’s (SSE) household energy business and Npower, Innogy’s household energy business. The regulator has found the proposed deal does not raise competition concerns as it is not expected to have a significant impact on standard variable tariff (SVT) pricing. People can submit views and evidence on the decision until 20 September, before the publication of the final report on 22 October. Buy.
Shares in Hunting (HTG) are up more than 11 per cent today, after the North America-focused oil and gas services group returned to the dividend list, after a two-and-a-half-year hiatus. That wasn’t the only good news for shareholders: management anticipates activity levels within US onshore basins will remain strong, negating loss-making international segments. Under review.
Shares in Morses Club (MCL) were down around 11 per cent in early trading despite the sub-prime lender reporting a 4 per cent rise in credit issuance during the first-half. However, that was lower than the 25 per cent growth during the same period last year. Growth in cash collections were also slightly behind last year at 11.9 per cent, compared with 12.7 per cent. We place our buy recommendation under review.
Arrow Global (ARW) reported 15 per cent growth in core collections during the first-half, with an underwriting performance of 103 per cent of original forecasts. Assets under management were up 29 per cent to £49.3bn, while the investment business made record portfolio acquisitions of £145m, from £125m the same time the prior year. Buy.
Severn Trent (SVT) has bulked up its renewable energy operations with the acquisition of Agrivert, a company specialising in anaerobic digestion and waste composting. SVT has bought the company and its subsidiaries for £120m. The announcement wasn’t released until 10 am, rather than the typical 7 am, so share price reaction is difficult to judge. However, investors will likely welcome the announcement as a move to diversify the group’s business away from pure-play water. Buy.
KEY STORIES:
Asa International (ASAI) grew clients by more than a quarter during the first half to just over 2m. The microfinance group which listed on the main market in July – boosted the loan book by almost a third to $314m, generating a 39 per cent return on equity, which was also up on 33.4 per cent the same time last year. However, pre-tax profits came in 8 per cent lower due to higher operating costs, including personnel expenses.
Shares in Amigo Loans (AMGO) were down 7 per cent in early trading after the guarantor loan provider reported a 79 per cent jump in impairments as a proportion of revenue during the first quarter. The newly-listed group incurred impairments representing 25 per cent of revenue during the three months to the end of June, up from 14 per cent the same time last year. However, the net loan book was up more than a third to £638m.
OTHER COMPANY NEWS:
Ahead of moving into a pre-close period before it announces annual results on 11 October, WH Smith (SMWH) has said it expects numbers to report in line with current market expectations. Over at the travel division, the group opened eight stores in Madrid Terminal 4 in mid-August and have also opened the first of six stores in Rio de Janeiro. That takes the number of international outlets to 286. Meanwhile, on the high street the company is working hard to keep costs down and margins intact. New store trials are currently under way, and a newly developed stationery range is expected to perform well.
Idox’s (IDOX) chief financial officer Jane Mackie has resigned, stepping down from her role with immediate effect. She will remain with the group until February next year to enable the board to appoint a successor. The shares were down 1 per cent this morning.
Recruiter Harvey Nash (HVN) put out a broadly positive trading statement this morning. The group has seen growth in revenues and gross profit, thanks to increases in contract recruitment, managed services and outsourcing. Shares are up 1 per cent, but the real story here is the all-cash offer made by The Power Of Talent to acquire the group earlier in August. HVN’s directors intend to unanimously recommend the offer, which prices the shares at 130p. Hold.
There’s been some horse trading at Horse Hill. For £4.5m cash and 234m new shares, UK Oil & Gas Investments (UKOG) has acquired Solo Oil’s 15 per cent stake in HHDL, the vehicle which in turn owns 65 per cent of the Horse Hill discovery, also known as the “Gatwick gusher”.
OptiBiotix’s (OPTI) revenues for the half-year to May rose 7.6 per cent to £80,560. The life sciences group also reported a pre-tax loss of £1.19m against a profit of £3.1m a year earlier. The previous year’s income statement included the profits on disposal of its subsidiary, SkinBioTherapeutics (SBTX), which listed separately on Aim. OptiBiotix still holds a 41.9 per cent stake in SkinBioTherapeutics and, over the six months to May, reported a £209,229 share of SkinBioTherapeutics’ loss. Overall, OptiBiotix announced seven new agreements over the period in the USA, Asia and Europe. It has signed 19 deals since March 2017. The shares were marked down slightly in morning trading.
Eddie Stobart Logistics (ESL) reported a 23.9 per cent decline in operating profit to £5.1m during the first half, despite sales increasing by a quarter to £359m. Management said it’s been costly for the company to implement some major contracts it’s won., and that cash flow has been impacted by investment in warehousing assets and net working capital to support new deals. The first half tends to be cost heavy, while the second half tends to see the benefits. Shares were flat in early trading.
