London's main indices made an uncertain start to the day. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
These have been a tricky few months to be a base metals miner, as the share price of Central Asia Metals (CAML) attests. But the Aim group’s interim results, out this morning, contain several reassuring details. Both the half-year dividend and cash costs at the Sasa mine have held firm, while net debt has edged down to $125m and full-year production guidance has been maintained. And with the integration of Sasa now “largely complete”, the group is on the hunt for new growth opportunities. The shares, up 3 per cent, are under review.
Investors hoping for fresh information on the Sea Lion development may be frustrated by Rockhopper Exploration’s (RKH) interim results today, which revealed little beyond cash-negative operations (and a $7.4m post-tax loss) in the first six months of 2018. That was despite a fall in investment year-on-year, which explains why Rockhopper is so keen to get the project finalised as soon as possible. Under review.
Shares in Babcock (BAB) have jumped 5 per cent this morning after the group announced it has been trading in line with expectations since April. The announcement follows a July trading update in which the group cut revenue expectations following a review of spend timings at the Ministry of Defence. Management now expects low single-digit organic revenue growth with steady margins for the full year. Confidence appears to be returning. Buy.
KEY STORIES:
Funding Circle has outlined an offer range of between 420p and 530p for its upcoming main market IPO, which it intends to raise £300m in gross proceeds. At the top-end of that price range, that would give the group a market capitalisation of up to £1.8bn. The offer will be open to retail investors via certain intermediaries, with applications to be received by 4pm on 27 September.
Shares in Aveva (AVV) were marked up around 6 per cent this morning after an update ahead of its capital markets day later today. The group has continued to see constant-currency revenue growth in the financial year to date and its full-year outlook remains in line with management’s expectations. It seeks to grow its medium-term sales on a constant-currency basis “at least in line with the blended growth rate of the industrial software market”, estimated to be growing at mid-single digits. This is supported by its expectation of market-beating growth from its underlying software business. Aveva also aims to improve medium-term adjusted operating margins to 30 per cent (against 23.5 per cent in FY2018), and the proportion of recurring revenue from 52 per cent to over 60 per cent.
Gattaca (GATC) has appointed a chief executive, following the abrupt departure of Brian Wilkinson amid a profit warning last year. The recruiter has appointed Kevin Freeguard, former managing director of Verifone Systems’ (NYSE:PAY) UK and Ireland Division. The group’s announcement mentions Mr Freeguard’s “strong track record of business transformation”, but investors clearly disagree. Shares are down 4 per cent in early trading.
Shares in Kingfisher (KGF) fell more than 5 per cent in early trading after the company reported that underlying pre-tax profits fell 14.8 per cent to £375m during the first half, which missed analyst expectations. Management said “solid performance” in the UK and Poland was offset by poor performance in France. Group gross margin fell 40 basis points, impacted by logistics and stock inefficiencies in France.
OTHER COMPANY NEWS:
Stagecoach (SGC) stated that performance of its rail business has been “broadly in line” with expectations during the first quarter, with profitable operations on both East Midlands trains and Virgin Rail Group's West Coast trains. But revenue on East Midlands has slowed due to reduced service to accommodate changes in the Thameslink service. The company’s operations of the East Coast franchise ended early after a key financial covenant was breached. Strip out this and like-for-like revenue growth was 2.1 per cent for UK rail and 5.3 per cent at Virgin.
Accesso Technology’s (ACSO) revenues rose 16.7 per cent to $54.4m over the half-year to June, buoyed by acquisitions made in 2017. This growth rate was affected by the group’s adoption of IFRS 15 – ‘Revenue from Contracts with Customers’ – which altered how revenue was recognised over the period. Had the prior, comparative interims been restated accordingly, revenues would have grown by 47 per cent. Meanwhile, operating costs rose considerably – comprising higher acquisition-related costs and amortisation charges. This led pre-tax profits to fall by 10.2 per cent to $1.45m. The shares were marked down slightly in morning trading.
For the half-year to June, EKF Diagnostics’ (EKF) revenues were down 5.3 per cent on a reported basis at £20.4m, dampened by exchange rates. On a constant-currency basis, these were flat at £21.2m – bearing in mind that the prior-year interims also benefitted from £1.1m in sales from the Saudi tender, which completed in the second half of 2017. Still, earnings were ahead of management’s expectations. Adjusted cash profits came in at £4.9m, up 7 per cent, while pre-tax profits were up 20.1 per cent at £1.7m. The group says the second half has begun well, with improved organic sales and cash profits year-on-year.
