Shares in London fell into the red in early trading in reaction to mixed economic data which shows consumers continue to spend, but business is holding back. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Budget airline easyJet (EZJ) expects to deliver headline pre-tax profit of between £570m and £580m at the full year – the top end of previously stated guidance. This is despite a loss of around £115m expected on its new slots at Berlin’s Tegel airport and disruption from air traffic controller strikes. Passenger numbers excluding Tegel are expected to increase by 5.4 per cent to 84.6m, driven by an 4.2 per cent increase in capacity to 90.3m seats, with load factor up 1 percentage point to 93.6 per cent. Management expect capacity to increase by 10 per cent in the year to September 2019 to around 105m seats. Shares were flat in early trading. Buy.
Applegreen (APGN) shares have resumed trading this morning following news that the group has conditionally raised €175m (£156m) to part-fund a majority stake acquisition in motorway service business Welcome Break. An admission document fully explaining details of the transaction is also now available to investors on the company website and will be circulated to shareholders later today. Dealings in the placing shares is expected to commence on 25 October. The shares rose strongly in early trading. We remain buyers.
Yesterday morning, law firm Gordon Dadds (GOR) said that it “notes the press speculation” that it is in discussions about a potential merger with the law firm Ince & Co. It said that the boards of both firms are in discussions to merge the two businesses. While there “can be no certainty at this time” that the deal will go ahead, Gordon Dadds said it would update shareholders in due course. Its shares were subsequently suspended from trading on Aim.
“The next year is set to be exciting for SolGold (SOLG) and its stakeholders,” states the copper-gold chairman’s Brian Moller in today’s half-year numbers. For many, the most immediate question is neither how much the maiden resource is likely to be upgraded by the end of the year, nor what the preliminary economic assessment will reveal in early 2019, or even what will be found in the group’s 10 regional projects. It is whether two of those stakeholders – BHP Billiton and NewCrest Mining – will make a bid for the Ecuador-based miner. Buy.
Ideagen (IDEA) has acquired Morgan Kai for £20.5m. Morgan Kai comprises an internal audit management product called ‘MKinsight’. Over 77 per cent of Morgan Kai’s customers are international, with 28 per cent based in the US. On a current run-rate, it is generating around £5.3m in revenues, with current run-rate recurring revenues of £3.2m and adjusted run-rate cash profits of £1.7m. The acquisition is expected to be immediately earnings-enhancing, adding £2m to cash profits for the year to April 2020 after achieving £0.3m in synergies. This announcement follows Ideagen’s share placing to raise £20m on 13 September, intending to making three potential acquisitions. Buy.
KEY STORIES:
The Competition and Markets Authority (CMA) has published the findings from its phase one investigation into the possible merger between supermarket chains Sainsbury’s (SBRY) and Asda. Regulators have identified 463 areas where the two businesses overlap and could lead to a ‘substantial lessening of competition’ (SLC). Reports in the Financial Times put the potential disposal figure at 230 for the deal to win the regulatory greenlight. However, some analysts believe the number could be considerably lower if the CMA decides to include German discounters Aldi and Lidl as credible competitors; both groups were excluded from the first phase of the investigation.
Shares in Numis (NUM) were down 6 per cent in early trading after the brokerage revealed trading during the second-half was weaker than the first, resulting in a 3 per cent increase in revenue for the full-year. Average fees for the corporate broking and advisory business were lower during the latter part of the year, although revenue is still expected to be higher than the prior year.
Shares in RSA Insurance (RSA) fell nearly nine per cent after the insurer warned that weather related losses were higher than expected. And while the group’s international businesses remained profitable, the UK underwriting arm made a £70m loss, taking the combined ratio out to 110 per cent. Claims were also up from last year in Canada.
Shares in Serco (SRP) have jumped 16 per cent this morning, after management raised expectations for adjusted trading profit in 2018 to £90-95m, from £80m previously. Net debt is also expected to come in at the lower end of the group’s £200-250m range. It was previously expected to be in the mid-to-upper part of the range.
OTHER COMPANY NEWS:
Serica Energy (SQZ) says “good progress [has been] achieved on all elements of the transaction to acquire BP interests in the Bruce, Keith and Rhum fields”, though the sticking point remains sharing the Rhum field with Iran’s state oil company. In interim figures, out today, the group states “constructive discussions” have been held with both US and UK authorities, and that completion of the deal remains on track. In the six months to June, the group posted an $8.4m loss, and ended the period with net cash of $21m.
The complex plates which move beneath the surface of Savannah Petroleum (SAVP) are starting to fuse, but the situation remains very complicated. This morning, the West African explorer-producer posted half-year numbers, which summarise a period marked by two discoveries in Niger, completion of a $125m placing to fund the acquisition of a portfolio of assets and debt from Seven Energy, and a swing to net debt. Borrowings are now set to expand further, after the group signed a $50m facility with “a leading Geneva-based oil trading firm” at Libor plus 6 per cent. This will be used for general corporate purposes, presumably including the construction of an early production system in Niger, also announced today.
