Led by disappointing results amongst the blue chip FTSE100, London shares are down in morning trading. Click here for The Trader Nicole Elliott's latest take on the markets.
IC TIP UPDATES:
Shares in HSBC (HSBA) were down 4 per cent in early trading after the Asia-focused banking group missed consensus adjusted pre-tax profit expectations during 2018, despite that figure being 3 per cent higher than the prior year at $21.7bn. Revenue and impairments were weaker than anticipated, resulting in a negative full year cost / income ‘jaws’ of 1.2 per cent. Chairman Mark Tucker also warned about the impact of ongoing trade wars on growth. However, the 51¢ a share dividend was maintained. Buy.
Through its subsidiary Spectrum Payment Services (SPS), FairFX (FFX) has been granted settlement accounts with the Bank of England and has become a direct participant of the UK Faster Payments Scheme (FPS). Buy.
Dotdigital’s (DOTD) revenues rose by a third to £24.9m during the six months to December 2018, with organic revenues up 15 per cent to £20.1m. Sales through strategic partners rose 43 per cent to £10.3m. Pre-tax profits increased by 13.5 per cent to £4.9m. The group’s net cash sat at £16.7m at the half-year end – up by 59 per cent. Management “remains confident” in its full-year expectations. The shares were up by around 5 per cent in morning trading; buy.
Shares in InterContinental Hotels Group (IHG) were up 2 per cent in early trading after the company reported a 12 per cent increase in sales to $1.93bn (£1.49bn) during 2018, with operating profit up 8 per cent to $816m. The hotel company reported the strongest net system size growth in a decade of 4.8 per cent, including 56k room additions, up 17 per cent year-on-year. Chief executive Keith Barr said he is “confident in the year ahead” despite macro-economic and geopolitical uncertainties in some markets. Buy.
KEY STORIES:
The Takeover Panel has given Berry Global Group (US:BERY) until 5pm on 13 March 2019 to make public its intention to offer or not for RPC (RPC). Berry announced that it was considering a cash offer for the UK packaging specialist on 31 January, and has been conducting due diligence since. It’s worth bearing in mind that by its deadline, Berry will have had about six weeks to carry out any preparations for a bid - Apollo Global Management, in contrast, took five months to conduct its due diligence on RPC before lodging its 782p per share bid. RPC has published the scheme document for the Apollo deal today - it has also published a three-year profit forecast as required by the Takeover Code. RPC forecasts full-year adjusted core business operating profits of £415m, rising to £440m in 2020.
Returns to shareholders of BHP (BHP) rose in the six months to December, as the mining giant’s interim dividend climbed to 55 cents a share, and the pay-out ratio passed 75 per cent. However, the return on capital employed declined in the period from 17 to 15 per cent, owing to production outages and higher taxes, meaning these results came in slightly below analyst forecasts. Investors will be hoping that a return to full production in the second half, together with a triumvirate of price rises in the iron ore, copper and oil divisions, could spell a recovery.
Having released the results from its platinum division yesterday, Anglo American (AAL) is out with full-year numbers from its South African iron ore business today. Operational cash flow came in at ZAR18.9bn (£1bn), thanks to an average realised price of $72 a tonne, a rise in product quality, cost savings of ZAR1bn, and a rise in operating efficiency.
The Spectris (SXS) revamp continues, with falls in full-year pre-tax profits and operating margins belying an encouraging step forward for the instruments and controls specialists. Results came in ahead of expectations, with three out of four divisions outperforming analyst Stifel’s projections for the year. New(ish) chief executive Andrew Heath’s ‘Project Uplift’ review of the company has concluded, and a new £30m cost savings plan has been brought in, with £15m-£20m in savings expected in 2019. Spectris has committed to simplifying its financial reporting, with all restructuring costs now taken below the line. The company has earmarked its Malvern Panalytical, HBK and Omega businesses as platforms the growth - the rest of its businesses are under review, and may be disposed. Confidence is returning to the company - the shares have risen 15 per cent since we became buyers in November.
Reported revenue at FirstGroup (FGP) is up 13.7 per cent year to date, or a 5.5 per cent increase at constant currency and excluding the South West Rail franchise. The First Student school bus business was the best performer, with sales up 6.2 per cent during the third quarter and up 5.8 per cent year to date, benefiting from the price increases and higher contract retention rates. The troubled Greyhound coach business has begun to see “early signs of improvement” from the commercial and operational changes made across the network, including withdrawing a significant amount of service from Canada. Shares were up 2 per cent in early trading.
Shares in Future (FUTR) were up by nearly a fifth this morning, after the group said that it now expects the outcome for the first half to be “significantly ahead of its expectations”. Management also now expects Future’s performance for the full year to be significantly ahead of market expectations, notwithstanding “a great deal” of macro-economic uncertainty.
Shares in Paypoint (PAY) have slipped 2 per cent this morning after the group announced chief executive Dominic Taylor would step down as chief executive after 21 years. Mr Taylor will leave on 1 April, to be succeeded by Patrick Headon. Mr Headon previously served as managing director of Wolseley UK.
OTHER COMPANY NEWS:
Greggs’ (GRG) shares rose in early trading after the high street bakery chain revealed an “exceptionally strong start” to 2019. While total sales rose by more than 14 per cent over the seven weeks ended 16 February 2019, company-managed shop like-for-like sales grew 9.6 per cent. And yes - you guessed it - management is crediting the January launch of the somewhat controversial vegan sausage roll for this performance. Bosses said customer transaction numbers have increased as a result, with additional sales “mainly comprising savoury products”.
Cobham (COB) has concluded a dispute with Boeing over the maligned KC-46 aerial refuelling programme with an £86m settlement. Having previously described Boeing’s damages claims as “unquantified”, Cobham will now pay £49m to Boeing in the first half of 2019, balancing out £37m in withheld amounts relating to hose and drogue invoices. Along with £74m in additional costs relating to resetting the schedule for the refuelling programme, the settlement will incur an overall non-underlying charge of £160m upon Cobham’s full-year results.
Data from a third phase trial of Indivior’s (INDV) new opioid addiction treatment Sublocade has been published in medical journal The Lancet. The trial was a pivotal part of the drug’s approval in the US, which regulators gave the thumbs up to first in 2017. Data showed that the monthly, slow-release injection successfully increased abstinence rates and controlled craving and withdrawal symptoms for patients compared to placebo. Last year, the drug racked up sales of $12m - well short of initial estimates - and is projected to earn between $50m and $70m this year.
Online gaming company 888 Holdings (888) has acquired a portfolio of bingo brands, including Costa Bingo, from Jet Management Group for £18m in cash, with £12m being paid to Jet upon closing of the acquisition and the remainder of £6m to be paid in September 2019. The deal is meant to help 888 consolidate its position in the UK online gaming market.
Go-Ahead Group (GOG) announced that it will buy the Queen’s Road bus depot in Manchester from First Group (FGP). The deal, which is due to complete in the next few months, will take Go-Ahead into Manchester, Britain's second-largest urban area, for the first time. Go-Ahead has agreed £11.17m in cash for the acquisition which includes 163 buses.
