Shares in London showed small gains mid-morning as traders digested another mixed set of news including a new North American trade deal, higher oil prices and lower consumer credit growth in the UK. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Shares in Mitie (MTO) were up 2 per cent this morning, bouncing back 2 per cent following a steep fall last week. The group has sold its pest control business for £40m in cash on a debt free, cash free basis. Unsurprisingly, the buyer is Rentokil Initial (RTO) the highly acquisitive pest control giant. Mitie has also entered into a preferred supplier partnership with Rentokil for use in its facilities management offering. The deal is a positive step, but the problems in Mitie remain widespread. Sell.
Shares in Renew Holdings (RNWH) are up 3 per cent this morning after a positive trading statement. The engineering services division - which now accounts for more than 95 per cent of operating profits - is ahead of budget for the year, with the acquisition of rail company QTS reportedly going “extremely well”. Results are due to be in line with expectations for the year. Buy.
In a pre-close trading update, cloud computing group Iomart (IOM) said trading was in line with management’s expectations for the first half to September, with revenues and trading profits anticipated to be “well ahead” of the same period a year. Bosses are confident about the full-year outlook “and beyond”. Buy.
Shares in Eckoh (ECK) were up 8 per cent this morning on the news that the payments group has won a two-year contract worth $7.4m to provide payment solutions to “one of the largest corporations in the United States”. This marks Eckoh’s largest-ever secure payments deal. It is expected to commence in the final quarter of this financial year, making a “modest” financial contribution to FY2019. Most benefit will be enjoyed in the following two financial years. Buy.
KEY STORIES:
Shares in recruiter Staffline (STAF) are up 3 per cent this morning after the group announced the acquisition of recruiter Passionate About People. The acquisition brings two companies into the Staffline fold: Omega Resource, a flexible staffing company that serves a range of sectors including aerospace, automotive construction, energy and others, as well as Datum RPO, a recruitment process outsourcing company that serves blue-chip companies. Both sound complementary to the group’s existing portfolio, but the real thing that will move the needle in its future performance is the success of its data-led strategy.
Shares in Ryanair (RYA) fell more than 8 per cent in early trading after the budget airline cut its full-year profit forecast by 12 per cent to between €1.1bn to €1.2bn, compared to €1.25bn to €1.35bn previously. Strikes by its pilots and cabin crew have put customers off from booking flights in the remainder of this year, especially for the October break period and Christmas. Fares in the second quarter were down 3 per cent, and third quarter fares are also expected to fall. Higher oil prices are expected to add €460m to the full-year fuel bill, and accommodating passengers affected by strike disruption will add to costs. Management said further disruptions in the third quarter “cannot be ruled out”, so more cuts to full-year forecasts could be on their way. The update sent other airlines falling in early trading, with easyJet (EZJ) down more than 3 per cent, Wizz Air (WIZZ) down 4 per cent, while International Consolidated Airlines (IAG) was down 1 per cent.
OTHER COMPANY NEWS:
Computacenter (CCC) has acquired FusionStorm, a US-based provider of IT solutions. The group plans to integrate FusionStorm into its US business, meaning current Computacenter employee numbers in the Americas region will rise by around 50 per cent. Computacenter says the deal will enable it to offer a full range of services in the US, akin to its offering in Europe. It has paid $70m so far, and will pay up to $20m in extra deferred cash consideration subject to FusionStorm’s performance over the next 15 months. It will also inject another $45m into FusionStorm to refinance existing facilities. The transaction is being funded by Computacenter’s £100m debt facility and other cash resources.
