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News & Tips: Diageo, Sirius Minerals, Dignity & more

London's blue chips are ahead
November 12, 2018

London equities are diverging this morning with the FTSE100 up but the FTSE250 and Aim indices in the red. Click here for The Trader Nicole Elliott's latest thoughts on the markets. 

IC TIP UPDATES:

Diageo (DGE) announced that it will sell 19 of its brands to Sazerac for $550m (£428m). The £340m of net proceeds will be returned to shareholders through a share buyback, on top of the £2bn repurchase that was announced at the results in July. Chief executive Ivan Menezes said the disposal of these brands “enables us to have even greater focus on the faster growing premium and above brands in the US spirits portfolio”. Shares were up 1 per cent in early trading. Buy.

Manx Telecom (MANX) has appointed Iarla Hughes as chief financial officer with immediate effect. Mr Hughes joins from International Aerospace Coatings LLP, where he was chief financial officer and company secretary for more than three years. He has over eight years’ experience in the telecoms industry, having been a general manager at Cable & Wireless Ireland, prior to becoming chief financial officer at Digicel Turks and Caicos. He has also held senior finance roles at Cable and Wireless Plc and at Vodafone (VOD). Paul Tierney was previously interim chief financial officer at Manx. Buy.

Sirius Minerals (SXX) has expanded a tunnelling contract with Austrian construction company STRABAG. Sirius is now conducting the engineering, procurement and construction of the fit-out of STRABAG’s mineral transport system. The announcement represents the completion of a construction procurement programme that is aimed at supporting a stage 2 senior debt financing process. After weeks of uncertainty surrounding the company’s direction, its share price continues to wobble and experienced a small drop of 2.9 per cent in morning trading. Our recommendation is under review.

KEY STORIES:

A third quarter update from funeral provider Dignity (DTY) shows a 39 per cent plunge in operating profits to £12.2m, although this still out-performed broker Peel Hunt’s forecast of £12m. Elsewhere average prices were higher than expected too, albeit still on a downward trajectory, while the company also announced its intention to stop pursuing acquisitions in the funeral market. On that note, like-for-like market shares was stable, and analysts at Peel Hunt reckon the group will be able to hit 2018 forecasts. That said, the broker has made a slight trim to its FY2019 forecasts, and now expects adjusted pre-tax profits of roughly £44m (previously £48.5m).

A couple of updates from pharma giant AstraZeneca (AZN) this morning. First, along with US partner Merck, the US Food and Drug Administration (FDA) has accepted a new drug application for the use of cancer drug Lynparza as a maintenance treatment in newly-diagnosed, BRCAm advanced ovarian cancer. Second, the group has also announced positive results from a cardiovascular trial run on diabetes medication Farxiga. The results showed significantly reduced hospitalisation rates for heart failure or cardiovascular death in a 17,000-strong patient population with type-2 diabetes.

OTHER COMPANY NEWS :

Insulation specialist Kingspan (KGP) revealed that sales in the nine months to 30 September 2018 rose by 18 per cent from a year earlier, with sales in the third quarter accelerating by 24 per cent. Growth excluding currency movements was more modest however at four per cent for the nine months and three per cent for the third quarter. Hold.

Playtech (PTEC) announced in a third quarter update that it is on track to achieve its adjusted cash profits goal of between €320m (£281m) and €360m by year end. The digital gaming business reported good revenue growth in its B2B gaming division, and that the acquisition of European gambling business Snaitech had continued to perform well. The previously troubled Asian business has begun to stabilise with an annualised revenue run rate of around €150m. Shares were flat in early trading.

Shares in agriculture and engineering business Carr’s Group (CARR) were up more than 5 per cent in early trading after the company announced a 16.5 per cent increase in sales to £403m during the year to September, with pre-tax profits up 55 per cent to £15.5m. Management said this was driven by growth in the UK agriculture business as farm incomes rise, and by a better than expected performance from US feed blocks thanks to a recovery in cattle prices.