Shares in London were up in morning trading at the end of another uncertain week. Click here for The Trader Nicole Elliott's latest take on the markets.
IC TIP UPDATES:
Shares in Fuller, Smith & Turner (FSTA) were up 22 per cent in early trading after the company announced it would sell its beer business to Asahi Europe for an enterprise value of £250 million on a debt free, cash free basis. This represents a multiple of 23.6 times cash profits. The division being sold includes Fuller’s beer, cider and soft drinks brewing and production, wine wholesaling, as well as the distribution. It also includes the Griffin Brewery, Cornish Orchards, Dark Star Brewing and Nectar Imports businesses. Fuller’s will now be a focused, premium pub and hotel operator. Buy.
Vodafone’s (VOD) revenues were down by €0.8bn to €11bn for the third quarter ending December 2018, which it attributed to its adoption of the accounting standard IFRS15, the sale of its Qatar business and foreign exchange headwinds. The group reiterated its guidance of underlying organic adjusted cash profits (EBITDA) growth of around 3 per cent, and free cash flow (pre-spectrum) of around €5.4bn. Under IFRS15, it expects its organic service revenue growth to be slightly higher and absolute adjusted cash profits to be slightly lower. Vodafone is also reportedly pausing the installation of Huawei equipment in its core networks. The shares dipped yesterday on release of disappointing quarterly results from Southern African business Vodacom, and were down 2 per cent this morning. For now, we remain buyers.
Tritax Big Box (BBOX) has agreed to acquire an 87 per cent stake in db Symmetry, one of the largest privately owned logistics development companies in the UK. This will give it access to over 2,500 acres which, subject to planning consent, will deliver 38.2m square feet of warehouse space. This is significant because this is more than the existing 29.8m sq ft that Tritax currently owns. The acquisition will cost £255m, with an extra £67.7m required to repay deep discounted bonds owned by db Symmetry. To help finance the deal Tritax plans to raise £250m through a placing and open offer on 192m shares at 130p a share, a small discount to the share price. Buy
FairFX’s (FFX) turnover (gross value of currency transactions sold, plus gross value of deposits into bank accounts) for the year to December 2018 was in line with management’s expectations, at £2.36bn – up 111 per cent. This was up 22 per cent excluding the acquisitions of CardOne Banking in August 2017 and City Forex last February. The company expects adjusted cash profits of around £7.5m, up from £1m. Brexit uncertainty weakened sterling against the dollar and euro last year, in turn “weighing on customer sentiment and activity”. And continuing Brexit negotiations continue to act as macro-economic headwinds. But management still expects 2019 to be “another year of significant growth”. The shares have fallen in recent months, but we remain positive. Buy.
Vodafone
Shares in Scisys (SSY) were marked up 4 per cent this morning, following its pre-close trading update for the year to December 2018. Management expects results will “comfortably meet” current market expectations for both revenues and adjusted operating profits. The group’s order book remains strong, helped by various contract wins announced since mid-December, which are collectively valued at around £23m. The closing order book was approximately £100m, up from £91.3m a year previously. Net cash flow was also positive, and year-end net debt fell from £5.9m to £3.1m – notwithstanding exceptional costs in relation to its Brexit contingency plans and the final earnout payment for its 2016 Annova acquisition. Buy.
Shares in Elecosoft (ELCO) were up more than a tenth this morning on a positive trading update for 2018. The group said its results are expected to be significantly higher year-on-year, and “comfortably in line with market expectations”. ShireSystems and ActiveOnline, both acquired during the second half, contributed to revenues and profits in line with bosses’ expectations. And the rest of the company continues to see year-on-year revenue growth, despite macroeconomic uncertainties and adverse currency movements. We remain positive; buy.
Nanoco’s (NANO) shares were lifted 5 per cent this morning on the news that it has signed a contract extension to deliver additional services and materials to an undisclosed US company. Last February, the company announced the signing of a material development and supply agreement with the respective US company. The new contract extension runs from January 2019 to December 2019. Buy.
KEY STORIES:
Opioid addiction specialist Indivior (INDV) has been granted a temporary restraining order by a court in New Jersey which will prevent rival Alvogen Pine Brook from launching a competitive, generic buprenorphine and naloxone sublingual film product. The order will remain in place until 7 February, when a preliminary injunction will be held.
Shares in Earthport (EPO) soared more than 25 per cent this morning on the news that Mastercard has made a recommended cash offer for the payments group, valuing each Earthport share at 33p – or £233m in total. This represents a 10 per cent premium to Visa’s 30p offer, which Earthport had previously recommended. Mastercard’s offer also represents a 343 per cent premium to the closing price of 7.45p for each Earthport share on 24 December 2018, the last business day before Visa made its offer. Earthport has now withdrawn its recommendation of the Visa offer, and proposed to adjourn the Earthport shareholders meeting arranged for 21 February to consider this. The directors “recommend unanimously” that shareholders accept the Mastercard offer.
OTHER COMPANY NEWS:
To South Africa's miners this morning, and an operational update from Pan African Resources (PAF), which saw a 54 per cent bump in its first-half gold production to 81,014 ounces, thanks to better performances from its underground mines and a fresh output from a newly-constructed tailings retreatment plant. The group remains committed to full-year output of 170,000 ounces, which would require a 10 per bump in production in the six months to June. Meanwhile, long-suffering platinum miner Lonmin (LMI), which remains committed to its acquisition by Sibanye-Stillwater, has said a challenge to the proposed tie-up will be heard before South Africa's competition court on 2 April. The appeal has been filed by the Association of Mineworkers and Construction Union (AMCU).
Weir (WEIR) has announced the appointment of Engelbert (Ebbie) Haan to its board as a non-executive director. Mr Haan, who has previous experience at Royal Dutch Shell and Maersk, will commence his role on 18 February 2019.
DS Smith (SMDS) has now completed the acquisition of Spanish rival Europac for €1.7bn (£1.5bn) in cash. Conditions for the compulsory purchase of remaining shares in Europac have been met, so DS Smith will acquire the outstanding 1.17 per cent. Europac will be de-listed from the Spanish by the end of February 2019.
Online shopping group Findel (FDL) triggered a 5 per cent upswing in its share price this morning by releasing a better than expected set of third quarter numbers. Group sales rose by more than 10 per cent over the period, reflecting strong growth from the ‘studio’ division - formerly known as Express Gifts - which managed to offset a continued sales decline at the education segment. The value of online sales increased by 25 per cent, with 78 per cent of total orders being received through online channels.
Sales at A.G. Barr (BAG) are expected to be up 5 per cent to £277m during the year to January, with a 3 per cent increase in volumes and 8 per cent increase in value. Management said the impact of the sugar tax on soft drinks has been evident across the UK soft drinks market with “value growth significantly outstripping volume” during the period. The £30m share repurchase programme is expected to complete in 2019. Shares fell 2 per cent in early trading.
