London shares have lost their early momentum and the FTSE 100 is trading flat mid-morning. Click here for The Trader Nicole Elliott's latest views on the markets.
IC TIP UPDATES:
Ultra Electronics (ULE) continues to perform in line with management expectations, according to a trading update this morning. The company restated that a high order inflow is raising working capital requirements, with “underlying revenue growth and a constrained supply chain” also adding pressure. The result is that cash conversion is expected to sit between 65 per cent and 75 per cent. The shares, which are the fourth most-shorted in the UK, according to Castellain Capital, were down by as much as 6 per cent in morning trading. Under review.
Trive Capital, a shareholder in Diversified Gas & Oil (DGOC), has sold 22.5 million shares in the Aim-listed resources group, at a premium to the current share price. DGOC has not received any proceeds from the placing, which was made with institutional investors, while Trive will hold on to 7.4 million shares. Under review.
WANdisco (WAND) has signed its largest-ever cloud contract with a major US health insurer. The deal is worth around $3m and the client in question will use WANdisco’s flagship big data and cloud product, ‘Fusion’. The contract will last for an initial three-year subscription period, but the client has “substantial data requirements” which could represent an opportunity to grow the subscription over time. WANdisco’s shares were up more than a tenth in early trading, but have fallen in recent months. Recommendation under review.
Time Out (TMO) has signed a conditional lease agreement for a new Time Out Market in London, and planning has already been granted. Time Out Market London will entail a £200m redevelopment of 135,000 sq ft within Waterloo station, using the former international Eurostar terminal. The shares were unmoved in morning trading. Buy.
As a cyclical company, Speedy Hire (SDY) was caught up in the sell-offs seen in the UK equity market since October. However, the group’s shares appear to be gaining back some ground. They have risen 4 per cent this morning following an acquisition announcement. The group paid £9m for training provider Geason Holdings, with the potential for a further £26m over the next three years depending on performance. Buy.
Our buy tip on Bunzl (BNZL) has gotten off to a good start, with the shares up this morning following a trading statement. Expectations for the full year are broadly in line with the Q3 trading statement released in October. Revenue growth is slated for 8-9 per cent at constant currency, though currency translation movements are still constraining growth by 3-4 per cent. The group also announced the acquisition of food service distributor CM Supply and expects its proposed acquisition of Volk Do Brasil to be completed at the beginning of January. Buy.
Shares in John Laing (JLG) are up this morning following a trading update. The infrastructure group has made investment commitments of £267m so far this year, slightly ahead of the previously guided £250m, but management warned a further £20-30m deal was possible this year. Realisations were slightly lower at £241.5m, though they remain on track for the guided £250m. The shares remain broadly in line with the price we tipped them and we remain buyers.
KEY STORIES:
Shares in Serco (SRP) are up a whopping 9 per cent after its pre-close trading statement was better than expected. The group revised up guidance for its trading profit to £90-95m in September, and reiterated its guidance today. More importantly, though, management now expects EPS to be a further 5-10 per cent ahead of the current guidance and net debt is expected to be lower. Analyst Peel Hunt upped its EPS forecast to 5.3p in response. This is a rare bit of good news from the outsourcing market, though we remain cautious.
Shares in G4S (GFS) have rocketed 8 per cent this morning as management announced they are looking at options to spin out the cash solutions business. Analyst Jefferies has been calling for the separation of the division for some time now - we mentioned it in our August update on the group - arguing it was non-core and had slipped to fourth place in terms of market share, from second previously. Hold.
Shares in Ocado (OCDO) are up in early trading on the release of a fourth quarter trading update. The online grocer saw “consistent” revenue growth of 12 per cent over the period - in line with current guidance - as well as double digit growth in average orders per week. The average order size was slightly down at £105 - marking a 1 per cent contraction - although chief executive Tim Steiner said the group’s “unrelenting” focus had led to another quarter of strong growth overall.
It’s fair to say Sports Direct (SPD) - like many of its retail peers - is suffering from a severe lack of investor appetite at the moment. Shares are down almost a third over the last 12 months and fell further this morning on the release of the group’s half-year numbers. Excluding the recent buy out of House of Fraser, adjusted cash profits rose by 15.5 per cent - slightly ahead of management’s expectations - but analysts at Liberum have been forced to trim numbers for FY19 and FY20 to include the effect of the loss-making the department store. The brokerage called the first half a “commendable achievement”, but is “mindful that market conditions remain tough”.
IntegraFin (IHP) gained £4.09bn in net inflows during the year to September, 12 per cent higher than the year before. Together with £1.1bn of market movements, that pushed funds under direction up almost a fifth to £33.1bn. Pre-tax profits were boosted 11 per cent to £40.9m, while management declared to an interim dividend 6.4p a share.
Trading in Africa continues to be tough for PZ Cussons (PZC). The consumer good company said consumer spending in Nigeria remains poor, and cost challenges have worsened due to a further 10 per cent decline in the value of the naira against the US dollar. Together, this means that first have profits will be lower than last year. Management expect this situation in Nigeria to continue and are looking at way to mitigate the impact on the group. Such sentiment sent shares down more than 5 per cent in early trading.
The 6 per cent rise in share price for Tui (TUI) suggests that the market might be relieved by the group’s full-year results, considering other tour operators have reported tough times lately. Indeed, management at Tui described a “challenging” market. Sales over the year to September were up 5 per cent to€19.5bn, but pre-tax profit fell 10 per cent to€972m. Management said the group’s “strong performance” was thanks to its diversification across different destinations and markets.
Shares in Restore (RST) have dropped 7 per cent this morning following the announcement that chief executive Charles Skinner is set to retire. Mr Skinner is a well-respected chief who has run the company since June 2009. He will leave at the end of March next year, to be succeeded by Charles Bligh, formerly chief operating officer and board director of TalkTalk Telecom Group. Hold.
OTHER COMPANY NEWS:
With its shares down to just 24p this morning, Bacanora Lithium (BCN) holds its annual general meeting today under a cloud of dire market sentiment. You wouldn't know that from the statement chairman Mark Hohnen is set to make, which describe a "transformational year" in which the prospective lithium miner completed its feasibility study for the Sonora project, finalised debt commitments and several equity stakes towards its financing, and progressed development of its Zinnwald mine in Germany, which may now be spun off as a separate company. Pointing to strong fundamentals in the lithium market, Mr Hohnen will also say he remains confident that the outstanding funds needed to finance Sonora "will be secured in due course".
Highland Gold Mining (HGM) is to pay a second interim dividend for 2018, meaning it has announced a total pay-out of 16.42p so far this year. Shareholders on the register at 21 December will receive their distribution on 25 January, either in sterling (5p) or US dollars (6.3c).
Smurfit Kappa (SKG) has announced the appointment of Anne Anderson to its board as a non-executive independent director. Ms Anderson most recently served as the ambassador of Ireland to the United States, and will take up her post on 1 January 2019.
Michael Sherwin, Vertu’s (VTU) chief financial officer will leave his post in March 2019. This morning, the company has announced that Karen Anderson - currently deputy chief financial officer and company secretary - will replace him.
RPC Group (RPC) has now completed the sale of its spirits closures business for a pre-tax cash free, debt free consideration of £19m. The disposal follows the sale of its Letica Foodservice business in September. The disposal of its European injection moulding automotive segment is still pending. Shares were unmoved in morning trading.
Shares in Spire Healthcare (SPI) are down sharply this morning after JP Morgan cuts its target price from 256p to 146p. Full-year results aren’t due to hit the market until next March, although a profit warning in August already lowered investors’ expectations.
