Yesterday's rally on hopes of a rapprochement in the global trade dispute was short-lived with equities giving up gains this morning. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Wizz Air (WIZZ) increased capacity during November by 7.2 per cent to 2.6m seats, with an 11.2 per cent increase in passenger numbers to 2.4m giving load factor of 91.2 per cent. Over the rolling 12 months, capacity is up 18.6 per cent to 36.2m, with a 19.7 per cent increase in passenger numbers to 33.4m and load factor of 92.3 per cent. Shares fell 2 per cent in early trading. Buy.
Park Group (PARK) reported a better-than-expected pre-tax loss of £1.5m for the first-half - which is typically loss-making - thanks to an improvement in the gross margin. The order book was ahead of the same time last year, driven by stronger corporate business, while management also outlined a new strategy to broaden its exposure to the consumer market beyond Christmas savings. Buy.
Shares in Consort Medical (CSRT) have plummeted after a surprisingly weak set of interim results contained a shock profit warning. The Bespak division - which helps develop drug delivery systems like inhalers - was the main culprit, growing sales by just 1.7 per cent (compared to a 5 per cent consensus estimate) following delays to the launch of Mylan’s generic copy of GSK’s asthma drug Advair. Even worse, a “significant inventory build up” means demand for Consort’s products by Mylan is expected to reduce significantly. The development and manufacturing arm Aesica also “went backwards” with revenues down 2 per cent. Broker Numis has downgraded FY2019 forecasts by 7 per cent at the pre-tax profit level and made a 9 per cent cut to EPS. Our recommendation is under review.
Shares in Oxford Metrics (OMG) were up 4 per cent this morning on a strong set of full-year results to September. Revenues rose 8.6 per cent to £31.7m, while statutory pre-tax profits rose 25 per cent to £4.6m. On top of a 25 per cent dividend hike to 1.5p, the group also recommended a special dividend of 1p. Net cash climbed 33.1 per cent to £12.2m. The company said it had enjoyed good progress in the second year of its five-year strategic growth plan, which sees it aiming to double profits and triple recurring revenues. Buy.
Cloud computing group Iomart (IOM) saw revenues rise 8 per cent to £50.9m over the half-year to September and adjusted pre-tax profits rise 7 per cent to £12.4m. Statutory pre-tax profits came in slightly lower year-on-year, at £7.3m versus £7.8m, after a net increase in the contingent consideration on 2017 acquisitions – as performance for these was ahead of expectations. The dividend has been raised from 2.25p to 2.45p per share. Buy.
Shares in Fulcrum Utility Services (FCRM) have dropped 1 per cent this morning. The group put in a relatively strong performance in the six months to September, but an increase in the issued share capital along with acquisition-related amortisation charges meant the earnings per share dropped back to 1.7p from 1.8p for the same period last year. The group received accreditation to operate smart meters in September, opening up another potential line of business. We are reviewing our buy recommendation.
Shares in Greencore (GNC) fell nearly 6 per cent in early trading after the convenience food company took a cautious tone on Brexit. It stated that although the group believes the risks from Brexit are “manageable in the medium-term”, the near-term challenges associated with a ‘no withdrawal agreement’ are “uncertain”. The company recently sold its US business for $1.08bn (£840m) after it received a “compelling offer” for it. Over the year to September sales were up 4.2 per cent to £1.5bn with adjusted operating profit up 1.7 per cent to £105m, though the margin contracted by 20 basis points to 7 per cent. Sell.
KEY STORIES:
IG Group (IGG) confirmed revenue during the six months to 30 November was around 6 per cent lower than the same time last year, with revenue for the four months since European regulations for retail spread-betting products came into effect down 10 per cent - in line with previous guidance. Around 70 per cent of UK and EU revenue in the four months since the measures were introduced has been generated by professional clients.
Shares in Marlowe (MRL) are up more than 4 per cent this morning following a strong half-year performance. The support services group has seen revenues and pre-tax profits jump by close to 60 per cent on an adjusted basis, while net cash expanded 55 per cent to £4.9m. As ever, the group has been focused on acquisitions to drive growth, completing four deals in the period, with a particular focus on the water treatment and air quality divisions. All this has led management to point to a full-year performance ahead of market expectations.
Shares in Taptica (TAP) plunged 40 per cent this morning, following an announcement from the mobile advertising group yesterday post-market-close. Chief executive Hagai Tal has tendered his resignation, having been found liable for certain statements made in relation to the sale of Plimus Inc, a company of which he was both a shareholder and chief executive at the time of its sale in August 2011. The plaintiffs in the case “are entitled to restitution for breaches of certain representations and warranties”. Details of the claim were disclosed in Taptica’s admission document when it floated as ‘Marimedia’ in 2014. Taptica also said that it has continued to perform well since the September half-year numbers, and expects cash-profit growth in line with market expectations, a higher-than-expected cash profit margin, and cash generation. Revenues will be below expectations after forgoing some lower-margin sales.
Mike Ashley has called for a 20 per cent online sales tax in a bid to save the British high street. The retail tycoon appeared in front of a parliamentary committee yesterday, but said it was “pointless” discussing what the high street would look like in 2030 because it was “already dead”. Mr Ashley recently swooped in to buy stricken department store chain House of Fraser out of administration via his company Sports Direct (SPD), but said he couldn’t make any promises when it came to potentially closing any of the 59 remaining stores. The Newcastle United owner also said that rents on the high street were “prehistoric”, arguing that the likes of Debenhams (DEB) - in which Mr Ashley also has a significant holding - “didn’t suddenly become a bad retailer”, but has simply fallen victim to a broken system. Others condemned Mr Ashley’s comments saying any online tax would simply hand “legacy” retailers with seriously mismanaged and underinvested store estates an advantage.
Travis Perkins (TPK) has announced plans to simplify the business in order to reduce the cost base and improve cash flow. The company is targeting cost savings of £20-£30m over the next 18 months and will proceed with plans to divest its plumbing and heating division.
Go-Ahead Group (GOG) announced that it has reached an agreement with the Department for Transport (DfT) to continue to operate the remainder of the Govia Thameslink Railway franchise until 2021, but will be required to provide £15m of funding this year for “passenger enhancements”. A profit sharing mechanism will be introduced with the DfT, and as a result the margin over the franchise term is now expected to be between 0.75 per cent and 1 per cent (previously 0.75 per cent to 1.5 per cent), with no profit expected in the current financial year. Go-Ahead’s stated that full-year results are still expected to be in line with expectations. Shares were up more than 1 per cent in early trading.
Ryanair (RYA) reported an 11 per cent increase in traffic to 10.4m passengers with a 96 per cent load factor during November, including the contribution from Laudamotion. The airline also announced that it has reached an agreement with a pilot union in Germany four a four-year deal including pay, pension and pilot allowances. Shares were flat in early trading.
OTHER COMPANY NEWS:
Learning and development company Mind Gym (MIND) posted its first half-year results since its June listing. Revenues were up on last year’s comparable period to £19.4m from £17.1m, while gross profit margins grew to 81.6 per cent from 79.1 per cent. Statutory pre-tax profits are down to £1.1m from £2.8m - the company has adjusted PBT to factor in IPO costs, employee share option surrender bonuses and share-based payment charges, along with “aborted transaction advisory fees”, which seems fair enough. The company has seized upon global movements in response to workplace harassment with the launch of a new offering called ‘Respect’, which provides coaching to businesses on these subjects. Shares were flat in morning trading.
discoverIE (DSCV) saw half-year revenues jump 11 per cent to £211.7m from the first half of 2017. The customised electronics supplier experienced organic sales growth of 10 per cent in its design and manufacturing division, while its custom supply business grew 2 per cent organically. Most impressively, it boasts a record order book for the period of £131m, up 18 per cent year-on-year. Shares were unmoved.
Victrex (VCT) enjoyed 15 per cent pre-tax profit growth for the year to 30 September. The polymers manufacturer saw good performance across its industrial and medical divisions, and has finalised a handful of agreements, with ‘aerospace alliances’ now under discussion. Its normal dividend rose 11 per cent, while the company paid out a special dividend of 82.68p per share.
Coats Group (COA) has announced a $5m (£3.9m) investment in Twine Solutions, an Israeli based technology start-up that specialises in digital thread dyeing. Coats will take a 9.5 per cent stake in the company and a seat on the board.
Sage (SGE) announced this morning that Jonathan Howell has been appointed chief financial officer with effect from 10 December. Mr Howell was previously group finance director of Close Brothers Group, and prior to this, chief financial officer of the London Stock Exchange Group. He has also been non-executive director and chairman of the audit and risk committee at Sage since 2013, though he is stepping down from both positions. Former chief financial officer Steve Hare recently became Sage’s chief executive.
S4 Capital (SFOR) – the digital advertising and marketing services company – has agreed to merge with MightyHive, a market-leading programmatic solutions provider, for an enterprise value of $150m. The deal is expected to be “significantly accretive to earnings per share in the first full financial year following completion”. S4 will fund the cash portion of the consideration through a firm placing of 67.3m shares at 110p each, to raise £28.1m, and a placing and open offer to raise £45.9m. The new capital raising is being led by the Stanhope Entrepreneurs Fund. S4’s executive chairman (formerly of WPP) Sir Martin Sorrell said “The merger with MightyHive marks an important second strategic step for S4 Capital. The peanut has now morphed into a coconut, and is growing and ripening”.
Quartix (QTX) – the supplier of subscription-based vehicle tracking systems – believes adjusted cash profits is likely to exceed market expectations for the year to December 2019 by between 10 and 15 per cent. This is largely because of the group’s adoption of IFRS 15, pertaining to revenue from contracts with customers, which has increase profit and revenue in 2018. The estimate is subject to trading for November and December. Revenue and free cash flow are expected to be slightly ahead of market expectations. The shares were up 8 per cent this morning.
Ahead of its capital markets day today, Ascential (ASCL) said “overall” it is trading in line with market expectations. Total revenue to December is expected to be in the range of £345m-£349m against consensus of £344m. On a pro-forma basis, the group expects to deliver organic constant currency growth of between 9 per cent and 10 per cent for 2018. It has continued to invest in order to drive future growth, meaning adjusted cash profits are expected to come in between £101m - £103m against consensus of £103m. Adjusted diluted EPS of 15.1p to 15.6p is expected, against consensus of 15.3p.
Shares in Northgate (NTG) are up 1 per cent this morning. The group saw adjusted pre-tax profits fall back 14 per cent in the six months to October, but this was an expected side effect of management’s initiatives to improve profitability, as well as the integration of the TOM acquisition. As a result, average vehicles on hire was up 13 per cent to 92,800 and management has increased the growth target to double digits for the full year, from high single digits previously.
