Shares in London's main indices are down in morning trading. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Paragon Banking (PAG) reported a 22 per cent rise in mortgage lending during the final three months of the year, with overall new lending up 40 per cent. Development finance business increased more than four-fold, following last year’s acquisition of Titlestone. Buy-to-let arrears remained at 0.09 per cent of the loan book, while management said there was no evidence of consumer credit weakness. Buy.
Porvair (PRV) shares were unmoved by full year results that delivered a 3 per cent year-on-year increase in reported pre-tax profits to £12m. Revenues growth was strong, edging out management expectations set in December with an 11 per cent increase. The aerospace & industrial division had a mixed year - a quiet first half for orders was followed by a stronger second period, but the group faced challenges in the commissioning of its large gasification projects in South Korea, India and China, owing to “variations in feedstocks and operating conditions”. But the overall picture at the specialist filtration business is promising, and we retain our rating, as the company continues to improve its cash generation and add pages to its order book. Buy.
Shares in SThree (STHR) are up 3 per cent this morning after the group beat profit expectations for the year to November. Gross profit was up 12 per cent thanks to an especially strong performance in Continental Europe. In the year the group completed a restructuring exercise, which included moving its support and HR functions to Glasgow from London. This delivered a £2.6m benefit in the year, with a further £2.9m to come. Despite this, the shares are down considerably on our tip due to fears about the wider economic environment, so we are reviewing our recommendation.
After failing to acquire a portfolio of assets from BP last year, North African explorer-producer SDX Energy (SDX) is busy charting its course for 2019. First up is a plan to cancel its listing in Toronto, which should help to reduce corporate overheads. Not that money is particularly tight; the group ended 2018 with net cash of $17m, and expects to fund this year’s entire $36m capital expenditure programme through its balance sheet and free cash flow. The latter should receive a bump once South Disouq comes online in the middle of the year, while up to 12 wells could be drilled in Morocco. Under review.
After a positive month, Petra Diamonds’ (PDL) share price has gone into reverse this morning, as a first-half update revealed a drop in prices and several negative movements in working capital, all of which conspired to push up net debt to $557m. That was $19m higher than the level at the end of September, and was affected by a $21m advance in credit to Petra’s black economic empowerment powers, an $8.6m advance to the group’s KEM joint venture, and a “$25m revenue shortfall” related to mine disruptions, volatile product mix and weak pricing. Under review.
KEY STORIES:
Rumours are circling that online grocer Ocado (OCDO) is in talks with high street chain Marks and Spencer (MKS) to start delivering the latter’s goods to homes across the country. It could mark the end of Ocado’s long-standing contract with high end supermarket Waitrose, which ends in September 2020. The Mail on Sunday first reported on negotiations, arguing that new M&S chairman Archie Norman is keen to kick-start grocery delivery for the beleaguered chain.
Nucleus (NUC) gained net inflows of £185m during the final quarter of last year, compared with £392m the same time the prior year. However, after suffering £994m in negative market movements, assets under administration by the platform provider declined by 6 per cent to £13.9bn.
Will they or won’t they? Ophir Energy (OPHR) has said its potential acquirer Medco Energi has until the end of Thursday to put up or shut up, after the Takeover Panel granted an extension to the deadline for talks. “The parties are in advanced negotiations with a view to agreeing a recommended transaction at 55 pence per Ophir ordinary share in cash,” the London-listed firm said in a statement this morning, though last we heard, Medco had dropped its offer from 53.8p to 48.5p.
Shares in Rio Tinto (RIO) are up with Chinese iron ore futures this morning, as markets weigh the potential impact of Vale’s latest tailings dam catastrophe in Brazil. Despite forecasts of loose supply and tepid demand – and even before the terrible news from the metal’s largest producer – prices have held up in the past year. That’s particularly good news for Rio, for whom iron ore makes up the lion’s share of profits.
Clinical AI group Sensyne Health (SENS) issued a set of interim results this morning - its first since joining the London market last August. The group revealed revenues of £39,000 (2017: £20,000) for the 6 months to 31 October 2018, as well as a slew of new research agreements, which include partnerships with the Big Data Institute in Oxford, Jefferson Health in the US, and two further NHS Trusts. The company also finished up with cash of £58m and remains on track to deliver Peel Hunt’s estimate for £60,000 in revenues by the year-end.
A boardroom battle may be brewing at Flybe (FLYB). The airline’s largest shareholder Hosking Partners, which owns around 19 per cent of outstanding shares, has requested that the company hold a general meeting to consider ousting Simon Laffin as a director of the company and have him replaced with Eric Kohn. Hosking Partners want Mr Kohn to investigate the sale process between 14 November 2018 to 15 January. Flybe stated that it continues to have “full confidence” in Mr Laffin and that it has acted in the best interest of shareholders at all times.
OTHER COMPANY NEWS:
Shares in TI Fluid Systems (TIFS) vaulted almost 7 per cent in morning trading in response to a positive trading statement against a sluggish backdrop for automobiles. The manufacturer of fluid systems with a primary focus on light vehicles expects to report full-year revenues of €3.5bn (£3bn), in line with previous expectations. Revenue growth is expected to overtake growth in global light vehicle production by around 3 per cent. This is impressive when set against overall statistics for global auto production, which fell 5 per cent in Q4, chiefly dragged down by China where production fell 15 per cent. TI also announces the departure of chief financial officer and executive director Tim Knutson, who will leave the company to pursue other interests by the end of 2019.
Horizon Discovery (HZD) has formed an exclusive partnership with Rutgers - part of the The State University of New Jersey - to develop new gene editing technologies. The two will work together to develop the editing platform designed by the laboratory of Dr. Shengkan Jin, an associate professor of pharmacology at Rutgers Robert Wood Johnson Medical School. As part of the agreement, Horizon has made “a non-material payment” to Rutgers to be able to exclusively license the editing technology for use in all therapeutic applications.
Abcam (ABC) has announced the acquisition of Calico Biolabs for an undisclosed amount. The research tool provider has effectively expanded its range of rabbit monoclonal antibodies via the deal, although the transaction is expected to have “a minimal impact on revenue and earnings for FY2019.”
As part of its ongoing $200m asset disposal programme, Wood Group (WG.) has sold stakes in a UK roadways concession, a China-based fabrication and manufacturing facility, and gas and wind farm energy ventures in Italy, raising cash proceeds of around $54m. Had they stayed as part of the company, the assets would have generated around $8m in operating profits in 2019, but would have sucked up “significant capital commitments” and ongoing interest costs.
Glencore (GLEN) is to press ahead with the transfer of its 8.75 per cent holding in aluminium Rusal to En+ Group, after the Trump administration lifted sanctions on the Oleg Deripaska-controlled counterparties. The swap – which will see 10.55 per cent of the share capital of En+ Group issued to Glencore – was initially put on ice in April, after Mr Deripaska was placed on the oligarch and his entities. He has since ceded control of both En+ and Rusal.
