IC TIP UPDATES:
Budget airline Wizz Air (WIZZ) increased capacity by a fifth during August to 3.6m seats, while the number of passengers it carried during the month increased by the same proportion to 3.5m giving a load factor of 95.6 per cent. This brings the increase in capacity over the rolling 12 months to 21.7 per cent at 35.2m seats available, carrying 22.7 per cent more passengers at 32.3m giving load factor of 91.8 per cent. Shares were up 1 per cent in early trading. Buy.
Dalata Hotel Group (DAL) has announced its first dividend payment of 3¢ at today’s interim results. During the first half the hotel group increased sales by 10.6 per cent to €181m, with pre-tax profits up 8.3 per cent to €35.4m. Revenue per available room was up 7.1 per cent to €89.39 on the back of higher room rates and occupancy. Shares fell more than 1 per cent in early trading. Buy.
Shares in Inspired Energy (INSE) have dipped this morning following the interim results announcement. The group has continued its strong growth on some fronts, with revenues up 33 per cent and cash generated from operations up 43 per cent, but on closer look some cracks are beginning to appear. The order book, which has traditionally been an indicator of future growth, was up only 3 per cent in the period. Diluted EPS also declined by a quarter. We are reviewing our buy recommendation.
Johnson Service Group (JSG) is expecting to beat market expectations for the full year. The group clocked up organic revenue growth of 7.2 per cent in the first half of the year, topped up by acquisitions in the Horeca (hotels, restaurants, catering) division. Margins remained stable in the period and the workwear division demonstrated strong growth. Buy.
Shares in bicycle retailer Halfords (HFD) have rebounded this morning after a trading update revealed strong growth across all divisions for the 20 weeks ended 17 August. Retail sales rose by 2.6 per cent, while autocentres registered a 3.9 per cent improvement. On an underlying basis, revenues rose by 2.8 per cent at the group level, while online sales rocketed by more than 11 per cent. Guidance for the full-year performance is unchanged for now. Our recommendation is under review.
Tesco (TSCO) has appointed a deal-making expert to its board in Melissa Bethell. Ms Bethall was, until the start of the year, a senior executive with Bain Capital. She joins the supermarket’s board as a non-executive director - something chairman John Allan hopes will be of “significant benefit” to the company. We remain buyers.
KEY STORIES:
Mattioli Woods (MTW) reported a 22 per cent rise in cash profits during the year to the end of May, with a margin of 21.6 per cent, ahead of management’s 20 per cent target. The wealth manager gained net inflows – including market movements – of £804m, with Sipps and Ssaa products gaining the lion’s share.
Amigo Loans’ (AMGO) shares were down 5 per cent in early trading after the guarantor lending group announced founder James Benamor intends to resign from the board with effect from the end of September. Mr Benamor’s family office, Richmond, said it would like to concentrate on private investments in which it can play an active role.
For Highland Gold Mining (HGM) chief executive officer Denis Alexandrov, the first half of 2018 was a period marked by “incremental progress” and production targets fulfilled “despite operating challenges at each of our mines”. Interim numbers brought no news on an upcoming reserve report, which is due this autumn, though Mr Alexandrov has identified safety and creeping total cash costs as two areas to address before 2019.
Shares in Alfa Financial Software (ALFA) plunged more than a tenth this morning on its half-year results to June. Revenues fell 27 per cent to £32.9m, while operating profits declined 39 per cent to £8.6m. This follows a profit warning in June, when management revised full-year guidance for both revenues and operating profits after one of Alfa’s major customers delayed its implementation project, and two other contracts faced delays while the respective customers considered expanding the scope of their projects. Still, Alfa says it’s trading in line with its revised expectations, and that its pipeline remains healthy. Encouragingly, it has signed an upgrade and expansion deal with a leading retail bank.
Gattaca (GATC) is planning to withdraw from a wide range of territories, including Contracts Telecoms Infrastructure markers in Africa, Asia and Latin America, as well as Dubai, Kuala Lumpur and Qatar. It is also consolidating its London and Bromley operations into one office. The withdrawals come following a review of the group’s international footprint, and the group also plans to open a new hub in the US alongside the existing one in Dallas, Texas. Sell.
OTHER COMPANY NEWS:
Though its shares remain suspended amid a $100m fundraising and a potential reverse takeover of an unnamed mine, Chaarat Gold Holdings (CGH) has today announced a 46 per cent increase in the mineral resource for its Tulkubash asset in the Kyrgyz Republic. Encouragingly, the measured and indicated grade has also stepped up 57 per cent to 1.35g per tonne.
Shares in Taptica (TAP) rose more than a tenth this morning, after the mobile advertising group said revenues for the half-year to June soared 119 per cent to $144m, gross profit climbed 126 per cent to $58.5m and pre-tax profits came in at $14.2m, up 37.6 per cent. Notably, the prior period was before Taptica’s major acquisition of Tremor Video, which contributed $71.9m in revenues from brand advertising. Looking ahead, management expects to see “significant year-on-year growth” with cash profits beating market expectations.
Direct carrier billing specialist Boku (BOKU) – which allows consumers to charge purchases made via their mobile devices to their phone bills – saw total payment volume rise 153 per cent for the half-year to June to $1.5bn. Revenues were up 66 per cent to $16.9m, and the group saw its first positive adjusted cash profits of $2.5m – up from $2.8m losses a year earlier. Reported pre-tax losses narrowed from $6.4m to $0.56m. Management expects the second half to see continued growth, although strengthening comparatives will mean this will “slow a little” in percentage terms.
A third-quarter statement from convenience chain McColl’s (MCLS) hasn’t inspired much change in the share price this morning, as like-for-like sales fell 0.9 per cent. That might be an improvement on the second quarter decline of 3.1 per cent, but was still largely the result of disruption to the supply chain in the wake of the Palmer & Harvey collapse last year. A supply contract with Morrisons (MRW) is now fully underway, while further sale and leaseback transaction gave rise to a £10m cash windfall.
Unlike sector peer Vertu (VTU), shares in Cambria Automobiles (CAMB) haven’t held up quite as well on the back of a trading update released this morning. Adjusted profits for the 11 months to 31 July 2018 are behind the prior year, consistent with the first half performance, where profitability fell by 14.3 per cent year-on-year. This is largely the result of continued pressure in the new car market, although sales of used vehicles and aftersales services have held up well.
Shares in Craneware (CRW) responded positively to full-year results this morning, rising 5 per cent in early trading. ‘New’ sales at the group – defined as sales to new customers, of new products or services doubled, reflecting five key contract wins and extensions. Renewal rates also stayed north of 100 per cent, as did operating cash conversion. This allowed for a 20 per cent hike in the ordinary dividend to 24p a share.
Shares in Earthport (EPO) were up around 4 per cent this morning, after the cross-border payments group announced the appointment of Sunil Sabharwal as non-executive director. Mr Sabharwal was previously a US board member to the International Monetary Fund (IMF).
After a big rise yesterday, shares in Hurricane Energy (HUR) are up another 8 per cent this morning, after Cantor Fitzgerald raised its near-term target price on the North Sea independent from 80p to 87p. The broker described yesterday’s $378m farm-in deal with Spirit Energy as “transformational as it demonstrates the attractiveness of the basement play, and provides a clear pathway to grow production and reserves”.
Green Man Gaming has announced its intention to float on Aim. The company, which sells digital video games that can be downloaded onto PCs and other console platforms, plans to IPO in late September. Since being incorporated in 2009, the group has grown revenues to £47.5m for the year to December 2017, with around £6.7m of external investment. It has enjoyed a compound annual revenue growth rate of 26.7 per cent over the past three years. It anticipates reaching a cash profit margin of 3 per cent in the medium term, as it lifts marketing expenditure, and plans to grow revenues by a minimum of 25 per cent each year.
Noting the recent movement in its share price, video games developer Codemasters (CDM) has issued a trading update, stating that trading for the year-to-date is in line with management’s expectations. The shares were down more than a tenth yesterday against Friday’s close. This morning, they are up 3 per cent. Codemasters said it has generated revenues of £35.5m in the five months ending August, including sales of Onrush (released in June) and F1 2018 (released in August) and its back catalogue of games. The group will issue a half-year trading update on 8 October.
Telit Communications (TCM) is pushing ahead with its turnaround plan. Management said the company is “progressing well” with cost optimisation, reorganisation and stabilisation in gross margins. The sale of its automotive division for $105m is expected to complete by the end of the year. Sales during the first half were up 13.6 per cent to $202m, though gross profit was down 3 per cent to $67.8m while the margin fell 5.6 per cent to 33.6 per cent. Double digit revenue growth is expected at the full year, but we continue to have concerns over corporate governance. Shares were up 2 per cent in early trading. Sell.
