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News & Tips: GlaxoSmithKline, William Hill, SuperDry & more

London's blue chips are up a little, but Chinese economic data is weighing on sentiment
January 21, 2019

Shares in the FTSE100 rose in morning trading with mid and small caps largely flat as Chinese economic data weighed on sentiment. Click here for The Trader Nicole Elliott's latest thoughts on the markets. 

IC TIP UPDATES:

Philip Hampton, chairman at pharma giant GlaxoSmithKline (GSK), is stepping down. Mr Hampton has served as the group’s chairman since May 2015, and a search will now begin for his replacement. He said, following the company’s deal with US rival Pfizer, and subsequent separation of the consumer business, now felt like the right time to step down. Buy.

William Hill (WMH) announced that full-year adjusted operating profit for 2018 from continuing operations is expected to be £234m. This represents a 15 per cent decline on the previous year, but within the previously announced range of £225m to £245m. Strip out the costs associated with US expansion and the impact of enhanced customer due diligence measures in online, and this figure would have been up 4 per cent on 2017. Management said the online business has good underlying performance during the year, while retail profits fell as expected on the back of challenging wider high street conditions. William Hill also announced that it has completed the recommended public cash offer to the shareholders of Mr Green & Co, the online gambling company it hopes to buy, and has expended the acceptance period for the target’s shareholders. Shares fell 3 per cent in early trading. Buy.

Superdry (SDRY) shares responded well to news that former Nike executive Phil Dickinson will join the group as its new creative director. Last year, the company’s founder Julian Dunkerton lobbied to return to the company to help turn things around for the clothing chain and, specifically, oversee product design and direction. But the board has confirmed this morning that Mr Dickinson will be in charge of product design, as well as the wide creative vision of the brand. Chief executive Euan Sutherland called Mr Dickinson “one of the best creatives working in our industry”. We remain sellers.

Leeds and Manchester based Town Centre Securities (TOWN) has continued to reposition its portfolio so that its exposure to leisure and retail assets has fallen from 70 per cent of the portfolio to 52 per cent. Occupancy rates rose slightly to 96 per cent despite eight insolvencies or CVAs in the last 12 months. Buy

SDL (SDL) expects revenues to range between £323m - £325m for the year ending 31 December 2018. It expects adjusted operating profits (EBITA) to be in line with expectations, at “no less than” £28.5m (up from £22m a year previously). The group said all parts of the business had performed well. After the acquisition of Donnelley Language Solutions and a £36.2m share placing, SDL’s net cash came in at £14.4m – down from £22.7m. The shares were largely unmoved in morning trading. Buy.

Shares in Keystone Law (KEYS) were up 16 per cent at the time of writing, on the back of a positive trading update for the year to 31 January 2019. The law firm expects to report profits which are “comfortably ahead of current market expectations”. It said that its platform model continues to appeal to high-quality lawyers and new clients. Buy.

In a pre-close trading update for the year to December 2018, Sumo Group (SUMO) said it expects to report results at least in line with management’s expectations. It secured a number of contracts towards the end of the year, underpinning 2019’s financial forecasts. Cash balances as at the year-end were £3.7m, and the company had 592 employees – up from 489 a year previously. Sumo’s shares have fallen in recent months, but were up 6 per cent this morning. Buy.

Dalata Hotel Group (DAL) has leased a new hotel in the Dublin docklands area. Dalata will operate the site on a 35-year operating lease which will be subject to five year rent reviews linked to the Consumer Price Index. Construction on the site has begun with the aim to open in the fourth quarter of 2020. Shares were up 2 per cent in early trading. Buy.

KEY STORIES:

Draper Esprit (GROW) plans to acquire stakes in two funds of German venture capital investor Earlybird, for an aggregate €83m. The group entered into a strategic partnership with Earlybird in July. It plans to raise £100m via a placing, at an issue price of 530p a share.

Just Eat (JE.) chief Peter Plumb is leaving, and Peter Duffy - currently chief customer officer - is stepping in to take his place on an interim basis. The changes are effective immediately, as is a search for a permanent replacement. Mr Plumb said it was time to step aside and “make way for a new leader for the next exciting wave of growth”. This year, the group hopes to report a maiden profit from Canadian business SkipTheDishes, while overall cash profit margins are also expected to show improvement. Full year revenues should fall into the range of £1bn to £1.1bn and underlying cash profits somewhere between £185m to £205m.

Patisserie Holdings (CAKE) announced that it is still in discussions with its bankers to extend the standstill of its bank facilities beyond 18 January, and will issue an update when those discussions have concluded. This follows on from the company’s announcement last week that work carried out by forensic accountants has revealed that the misstatement of the company’s accounts was “extensive, involving very significant manipulation of the balance sheet and profit and loss accounts”. This included “thousands” of false entries into the company's ledgers. Shares are still suspended at 429.5p per share.

A spokesperson for Rolls Royce (RR.) confirmed that the engineering group is in talks with CGN, China’s largest state-backed nuclear company, about providing control systems for the Hualong HPR1000 reactors CGN intends to install at Bradwell, Essex. Rolls Royce has collaborated with CGN for over 30 years, in a relationship that dates back to the launch of CGN’s first nuclear plant in China. The Investors Chronicle was unable to contact CGN for comment - shares were unmoved by news of the talks.

Premier Technical Services Group (PTSG) has acquired Trinity Fire and Security, as part of its strategy to expand its fire protection business. Investors welcomed the £10.8m deal, sending the share price up more than 4 per cent in early trading. House Broker Numis has increased 2019 profit and EPS forecasts 10 per cent in response.

OTHER COMPANY NEWS:

Meggitt (MGGT) will continue to provide American aerospace manufacturer Pratt & Whitney with advanced composite components for F119 and F135 engines, which are used by F-22 Raptor and F-35 Lightning II aircraft. Shares were unmoved on the news that Meggitt has signed a $750m (£584m) 10 year deal with Pratt & Whitney. The components will be made in Meggitt’s new facility in San Diego, California, which opened in August 2018.

A pre-close trading update from Alliance Pharma (APH) has revealed a 22 per cent rise in annual revenues to £124m, although excluding acquisitions this growth rate tempered to just 4 per cent. Underlying profit before tax is expected to be in line with expectations. Free cash flow was also slightly stronger than anticipated, as was the group’s overall leverage position, which is expected to fall below two times cash profits during the second half of 2019.

Total system sales at easyHotel (EZH) were up 31 per cent during the first quarter of its financial year, with revenue up 60 per cent. On a like-for-like basis, owned hotels revenue per available room increased 11.2 per cent, outperforming their competitive set by 5.2 per cent. Management said 2019 is expected to be “more challenging than 2018” and will continue to drive revenue growth and brand recognition through increasing the use of online travel agents, though this will come at the expense of the gross margin. Shares fell 1 per cent in early trading.