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News & Tips: St James' Place, Primary Healthcare Properties, Medicx & more

Blue chips are off colour again
January 24, 2019

Shares in the FTSE100 have dipped again but mid caps are more popular. Click here for The Trader Nicole Elliott's latest thoughts on the markets. 

IC TIP UPDATES:

St James’s Place (STJ) gained £2.6bn in net inflows during the fourth quarter, 9 per cent lower than the same time the prior year, while gross flows were behind consensus expectations. New business was also not enough to offset £7.6bn in negative market performance, with funds under management during the final three months of last year down 5 per cent to £95.6bn. We place our buy recommendation under review.

Primary Healthcare Properties (PHP) and MedicX (MXF) have agreed an all share merger, creating a portfolio of 479 primary healthcare centres with a value of around £2.3bn. Under the terms of the merger, MedicX shareholders will receive 0.77 new PHP shares for each MedicX share held. The merger will result in cost savings of around £4m a year, with further savings expected from reduced borrowing costs. Await documents.

Brooks Macdonald (BRK) suffered £1.01bn in negative market movements during the final three months of 2018, which pushed down funds under management 7.2 per cent over the quarter. The wealth manager gained £83m in net inflows, down on £158m the prior quarter. Lower market levels resulted in lower management fees at the quarter end and transactional revenue was impacted by reduced new business flows, a relatively stable asset allocation and the ongoing trend towards all-in fees. We place our buy recommendation under review.

Shares in Quixant (QXT) fell nearly a fifth this morning on the company’s full-year trading update to December. Group revenues are expected to be around $115m, lower than current market forecasts of $120m, largely because of a decline in gaming monitors. This means adjusted pre-tax profits will be lower than market expectations of $18.98m. Net cash as at December was around $9.9m. The company said that, as flagged in its interim numbers, its strategy in its gaming monitors business is to seek to improve margins – hence why management therefore expects to see a reduction in revenues for the year for these products. Recommendation under review.

A strong fourth quarter helped to increase KAZ Minerals’ (KAZ) full-year copper production by 14 per cent to 295Kt (thousand tonnes), and towards the top of guidance. Gold production of 183.4koz (thousand ounces) was also well above the guidance range of 160-175koz, though zinc output was down slightly on 2017. Two days ago, the group announced the completion of its controversial Baimskaya transaction. Buy.

Inland Homes (INL) expects to gain planning consent for its 1,853 home regeneration scheme at Cheshunt Lakeside some time in February, while it has also arranged a £65m revolving credit facility on improved terms. A total of 81 private homes were completed in 2018 together with 63 partnership homes. Buy

Circassia (CIR) has announced it is acquiring the exclusive commercialisation rights from AIT Therapeutics to its ventilator compatible nitric oxide product, AirNOvent in the US and China for just north of $7m (£5.4m). Further payments - some as high as $12m - could be due, depending on certain drug approvals and product launches. The company will also pay royalties on gross profits from future product sales. We remain buyers.

An in-line set of annual numbers from fish farming specialist Benchmark (BMK) didn’t prevent shares from falling in early trading. The past year looks to have been largely successful - revenues grew by 13 per cent and adjusted pre-tax profits by a healthy 19 per cent - but perhaps investors are worried about what analysts at Numis describe as a “slower” start for the nutrition business moving into the new financial year. That division is expected to stage a recovery in the second half though, while the rest of the business is trading in line with management’s expectations. Our recommendation is under review.

Capital & Regional (CAL) expects net rental income in 2018 to have been flat on a year earlier despite a number of CVAs that impacted income by £1.5m. A total of 87 leasing transactions were completed at an average 3.1 per cent premium to previous passing rent. Occupancy rose to 97 per cent, while footfall grew by 0.7 per cent, significantly outperforming the national index which fell by 3.7 per cent. Buy

Shares in Gordon Dadds (GOR) fell by around a fifth this morning, after it announced a proposed placing, open to institutional investors, to raise at least £10m. The minimum placing price of 140p represents a 26 per cent discount to yesterday’s closing price of 189p. The proceeds will be used “to strengthen the Company's balance sheet in order to remain agile and move quickly on its acquisition strategy”. It is subject to approval by shareholders at the general meeting on 11 February 2019. Gordon Dadds also provided information on its takeover of Ince & Co LLP, completed on 31 December 2018. It expects this to be earnings enhancing this year (before exceptional costs) and significantly earnings enhancing for the year to March 2020. As part of the acquisition structure, Ince & Co LLP was put into administration immediately following the acquisition of its members’ interests. Recommendation under review.

Shares in Restaurant Group (RTN) fell 5 per cent in early trading after the company announced a 2 per cent decline in like-for-like sales during 2018. Total sales increased by 1 per cent, and included one week of trade from Wagamama. The pubs business performed well with like-for-like sales increases that continued after the World Cup, but management said the leisure business was impacted by weaker cinema admissions. Wagamama has delivered consistent sales growth in a highly competitive casual dining sector, and should provide Restaurant Group with a welcomed sales boost. Buy.

KEY STORIES:

CMC Markets (CMCX) reported an improvement in net trading revenue during the final three months of last year, compared with the prior quarter, although it remained behind the same time the previous year. The spread-betting specialist reported an improvement in market conditions, with events including trade wars driving client activity.   

Shares in NCC (NCC) plunged by around a fifth this morning, following release of its half-year numbers to November 2018. Total continuing revenues rose 8 per cent to £126m. But while US growth within the dominant ‘assurance’ segment was strong at 20 per cent, the UK’s performance was hindered by “softer demand” in its risk management and governance business, as well as resource shortages in its technical security consulting business, and a planned reduction of third-party reselling sales. Total reported pre-tax profits came in £8.7m, up 58 per cent. Management now anticipates adjusted operating profits of £34m for the full year. The interim dividend was maintained at 1.5p.

What is going on at Savannah Petroleum (SAVP)? Last night, after markets had closed, the Aim-listed group announced a $23m placing, which this morning completed a 9 per cent discount to the share price. The funds have been raised ostensibly for working capital purposes, despite an assurance that its implementation agreement should be signed by the end of the month, and that it should receive a cash inflow of $90m once its Seven Energy transaction completes before April – more than two years after it first started working on the deal. Oddly, Savannah gave no indication of its financial position in the release, and chose not to flag the news to media, as is its normal custom.

Exclude the effect of stoppages at its Minas-Rio operation (which you really shouldn’t), and Anglo American (AAL) saw a 7 per cent increase in copper-equivalent production in the fourth quarter of 2018. Output from the miner’s copper division was particularly strong, while output from De Beers was up 6 per cent year-on-year.

Shares in Fevertree (FEVR) were up 8 per cent in early trading after the drinks mixer company announced a 39 per cent increase in sales to £236m during 2018. Sales in the UK increased 52 per cent, and maintained its position as the number one mixer in the off-trade market. The US business made “significant operational progress”, with sales growth of 21 per cent. Continental Europe also performed well, with sales up by a quarter. The board expects full-year results to be ahead of expectations.

OTHER COMPANY NEWS:

The Daily Mail and General Trust (DMGT) said its first-quarter trading to December 2018 was in line with expectations, and its outlook for FY2019 is unchanged – expecting a mid-single digit underlying decline in revenues with an adjusted operating margin in the high-single digits. Revenues for the respective quarter were up 2 per cent on an underlying basis, and down 2 per cent on a reported basis. B2B (55 per cent of group revenue) saw 3 per cent underlying growth and a 5 per cent reported decline. Meanwhile, consumer media (45 per cent of group revenue), saw a 1 per cent underlying increase, and 3 per cent reported growth. Net cash came in at £203m. The shares were up 1.5 per cent at the time of writing.

Blue Prism (PRSM) published its full-year results to 31 October 2018 this morning, and announced a proposed placing to raise around £100m, “to accelerate global growth”. Over the 12-month period, revenues rose by 125 per cent to £55.2m, with monthly recurring revenues as at the end of October doubling to £5.6m. The company also secured 1,359 software deals, up from 609. Adjusted cash losses of £21.6m represented a significant widening from £8.3m a year earlier – attributed to investments and an increase in sales commission driven by a strong fourth quarter. The placing today, open to institutional investors, completed just before 11am. The issue price per share was 1,100p. The shares were down 1 per cent at the time of writing.

ITE’s (ITE) performance over its first quarter to December was in line with management’s expectations. Like-for-like revenues were up 6 per cent year-on-year, which reflected good underlying trading, partly offset by previously-signalled temporary venue capacity constraints at Acetech Delhi. Revenues came in at around £31.5m, down from £40.7m, largely because this is the smaller biennial quarter and because of the lack of non-core events in Russia, which ITE divested last October. Net debt at the end of the quarter was around £108m, up by around £20m, in line with the company’s expectations. The shares were down by just under 2 per cent this morning.

Earthport (EPO) is today posting a scheme document to its shareholders regarding its prospective takeover by Visa International Service Association. It was announced on 27 December 2018 that the two parties had reached agreed on the terms of a recommended cash offer.

Emis’s (EMIS) trading for the year ending December was in line with management’s expectations. Full-year revenue was up against the comparative period, and the group continued to see growing recurring revenues. As at 31 December, net cash sat at £15.6m – up from £14m – following payments of all amounts due in regards to the settlement agreement with NHS Digital announced on 7 December 2018. The shares were down 2.5 per cent in morning trading.

Premier Oil’s (PMO) confidence in its resource estimates for the Zama discovery has increased, after operator Talos Energy completed its appraisal of the block. In an exploration update, Premier said its Zama-2 well found 152 metres of net pay, in line with pre-drill estimates. Shares are up 2.5 per cent this morning.

Toronto-listed Strongbow Exploration (CA:SBW) today reports that Cornwall Council will invest £1m into the company, once it completes its secondary listing on AIM. The somewhat unusual move, which was unanimously backed by the county’s council, has been made in hopes that Strongbow can restart operations at the former South Crofty mine, a project which according to Cornwall Council’s cabinet “could create over 300 jobs and make a real difference to an area with high levels of deprivation”. Strongbow announced its intention to list last April.

Shares in Medica (MGP) didn’t react all too well to a pre-close trading update this morning, despite a reported 15.6 per cent jump in revenues as well as stable cash profit margins of 30 per cent. Chief executive John Graham expects the group to report an in-line set of numbers on 25 March, as well as finish the year without any debt. But investors are clearly wary of a lack of detail around gross margin growth, as well as the group’s continued tie to cost-cutting at the NHS. We await the full picture before changing our view.

Online gaming company 888 Holdings (888) announced that Itai Pazner, previously chief operating officer, has been appointed as 888's new chief executive officer. Itai Frieberger is standing down as the group's chief executive after more than 14 years with the business, but will remain on the board for the next 12 months to ensure a smooth transition. Shares fell 3 per cent.