Shares in London look set to end a downbeat week on a mildly positive note with small gains on Friday morning. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
A week after questions were raised over its funding requirements and increasing capital costs, Sirius Minerals (SXX) suddenly has “sufficient liquidity to fund the project in Q2 2019”, after existing investor Hancock agreed to drawdown on a minerals royalty deed signed in October 2016. The arrangement, for which Sirius will be paid $250m by Wednesday, will provide Hancock with a 5 per cent royalty on gross revenues once the Woodsmith mine enters production. We remain buyers.
Shares in Character Group (CCT) are up 4 per cent in early trading after management said the company had returned to growth, as predicted, in the second half of its financial year. Character's UK domestic business has delivered record sales, and the results for the year to August 2018 will “comfortably reach market expectations”. Both the company’s in-house brands and distributed lines have been “selling extremely well”. Management feel confident about the autumn/winter trading period, which includes the all-important Christmas season. Buy.
Close Brothers (CBG) has agreed the sale of its retail point of sale business to Swedish payment solutions group Klarna Bank, expected to complete within the calendar year. The business had a loan book of £66m at the end of July. Shares were up 2 per cent in early trading. Buy.
Yesterday, Ideagen (IDEA) announced the placing of around 14.1m shares – representing 6.9 per cent of its issued share capital – with institutional investors at 142p, to raise £20m. This closed successfully yesterday afternoon. The company plans to put the proceeds towards specific acquisition opportunities. First, a competing governance, risk and compliance (GRC) software provider for which it would pay around £21m in cash. If it goes ahead, this deal is expected to complete within the next four weeks. Next, two other GRC software-as-a-service businesses in aviation and environmental health and safety respectively, worth around £2m-£3m. These would theoretically complete within six months. Buy.
KEY STORIES:
Shares in Investec (INVP) were up 9 per cent in early trading after management revealed plans to demerger the asset management business and list it on the London Stock Exchange, with an inward listing in Johannesburg. Management’s stake in the investment management company will be retained and the remaining group may retain a minority stake in the business. Post the implementation of the transaction, shareholders of the Investec group will have a direct shareholding in the investment management business, in addition to their holding in the remaining group. Fani Titi and Hendrik du Toit will become joint chief executives of the group from October.
Like-for-like sales at JD Wetherspoon (JDW) were up 5 per cent during the year to July, or 2 per cent on a reported basis to £1.7bn, with operating profits up 2.9 per cent to £132m. Free cash flow per share fell 8.9 per cent to 88.4p, but the dividend was maintained at 12p. Chairman Tim Martin took the results as an opportunity to reiterate his claims that food prices will not rise due to a no-deal Brexit, and urged the government to consider tax equality among supermarkets, pubs, and restaurants, claiming that pubs have lost half their beer sales to supermarkets in the last three decades or so. Shares were flat in early trading.
OTHER COMPANY NEWS:
Photo-Me International (PHTM), the operator of photo booths and washing machines, has sold its 50 per cent stake in Stilla Technologies SA, a Paris-based European biotechnology company. The holding was sold for €5m (£4.5m) after the company built up the stake in 2015 and 2016 for a total of €1.5m paid. The current accounts and loans between the Photo-Me and Stilla have been fully reimbursed for a total of €2.1m.
Shares in SThree (STHR) are up 3 per cent this morning following a trading update. Gross profits were up 13 per cent, with the strongest growth coming from Continental Europe and the US. The group has a strong bias towards contract or temporary recruitment, which was up 14 per cent, but permanent hiring also performed well, with gross profit up 9 per cent.
