Shares in London's FTSE100 are up on hopes for a trade deal between the US and China although the more domestically focused mid and small caps are down. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
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Vodafone (VOD) has made two announcements regarding ‘internet of things’ deals. First, Vodafone and Arm have committed to work together to “significantly reduce complexity and costs faced by organisations when implementing Internet of Things (IoT) solutions”. This constitutes an expansion of the two companies’ earlier work around integrated SIM technology. Second, Vodafone Business and AT&T (US: T) are collaborating to accelerate internet of things connectivity and innovation in the automotive industry. The two businesses intend “to develop superior and consistent connected car solutions and experiences for customers” across North America, Europe and Africa. Buy.
AstraZeneca (AZN) announced that the third phase of its Themis trial is now complete and has shown that when taken with aspirin, Brilinta showed a statistically-significant reduction in a composite of major adverse cardiovascular events. The trial was conducted on 19,000 patients with coronary artery disease and type-2 diabetes who hadn’t had a prior heart attack or stroke. Senior vice president Elisabeth Björk said the positive result from the Themis trial may offer a potential benefit for this high-risk patient population. Shares were flat in early trading. Sell.
Reach’s (RCH) revenues rose 16.2 per cent to £724m for the year to 30 December 2018, while like-for-like revenues declined by 6.6 per cent. Adjusted operating profits beat analyst expectations at £146m – up 16.8 per cent. Meanwhile, reported operating losses came in at £108m, against operating profits of £97.9m in 2017. This stemmed partly from a non-cash impairment charge of £200m, after “the more challenging than expected trading environment for advertising revenue generated locally” and short-term uncertainty around Brexit. Revenue in January and February 2019 is expected to fall by 7 per cent like-for-like. The group noted its strong cash generation, and the full-year dividend has been lifted 5.9 per cent to 6.14p. The shares were up 5 per cent this morning. Under review.
Shares in Centamin (CEY) are falling this morning, after the Egyptian miner capped a disappointing year with a final dividend of 3 cents, equivalent to 100 per cent of the $63.4m free cash flow generated in the period, but 56 per cent down on the 2017 payout. Worse, the group has said all-in sustaining costs are likely to rise to between $890 and $950 an ounce, owing to increased volumes scheduled from Sukari’s open pit. Recovery buy.
ADES International (ADES) has secured three-year contract renewals for six onshore rigs operating in Saudi Arabia, in a deal worth $228m to the Middle East oil services outfit’s backlog. The renewal was expected, following ADES acquisition of the rigs in December. Our buy call is under review.
Bunzl (BNZL) has beaten expectations for profit and net debt for 2018, clocking up an adjusted operating profit of seven per cent. The group has faced some challenges in its US and UK businesses, but strong growth in Continental Europe and the rest of the world was enough to offset the difficulties. Alongside the results announcement, management has unveiled the acquisition of Liberty Glove & Safety, a US-based personal protection equipment company, for an undisclosed sum. Buy.
Last Friday afternoon, Gateley (GTLY) announced that it had been notified by certain directors and employees of their intention to sell up to around 4m existing shares at not less than 150p, accounting for around 3.6 per cent of Gateley’s issued share capital. This price represented a 12.5 per cent discount to the previous day’s closing price of 171.5p. Shares in the legal and professional services group subsequently tumbled by around 10 per cent. Gateley said the placing was being undertaken “to satisfy market demand and broaden the institutional investor base of the Company”, and would be implemented via an accelerated bookbuild to institutional investors. After market-close on Friday, the group said the bookbuild had closed and was oversubscribed. Under review.
Tristel (TSTL) reported a 12 per cent increase in revenue to £12m during the first half, with an increase in the gross margin from 75 per cent to 78 per cent. Sales from overseas were up 19 per cent, and now make up 53 per cent of group revenue. The company has transferred the responsibility for CE marking for its medical device products from BSI UK to BSI Amsterdam to mitigate Brexit-related risks, and has also established a warehouse hub in Antwerp and leased a new 23,000 sq ft warehouse in Newmarket. The group is still working towards FDA approval for its surface disinfectant product, but so far has received two EPS approvals. Shares fell 5 per cent in early trading. Buy.
KEY STORIES:
Provident Financial (PFG) has rebuffed Non-Standard Finance’s (NSF) all-share bid, expressing “its disappointment at the unsolicited and highly opportunistic approach taken by NSF, including its decision not to engage with the Board prior to the announcement”. The board said that the “irresponsible” approach did “not reflect the underlying value and upside potential of the company's businesses”, as well as pointing to the “limited regulatory and operational experience within its executive management team of managing a bank”. The sub-prime lender has delayed the release of its 2018 full-year results to 13 March.
Dechra Pharmaceuticals (DPH) reported in line results for the first-half, with revenue up a fifth to £231m, led by North America. However, amortisation costs associated with acquired intangibles almost doubled, pushing down pre-tax profits by half to £9m.
Dialight (DIA) shares rose nearly 8 per cent in morning trading, following two difficult years for the LED specialist that have been dogged by supply side problems. Group revenues were down 7 per cent on the previous year - they actually rose in Dialight’s Europe and APAC operations, but fell 5 per cent in North America. Dialight is getting on top of its operational issues, having significantly reduced its volume of late orders, while in September it reversed its decision to outsource production of lighting components after its former partner Sanmina fell way short of expected standards of supply.
Despite once again generating an annual post-tax loss (this time $94m), Kosmos Energy (KOS) has followed through with its pledge to issue a maiden dividend for the fourth quarter, which comes in at a yield of 3 per cent, once annualised. Net debt remains high at $2bn, though the company sought to assure investors that a decision to buy back shares was sensible, in light of the $250m of cash flow generated in the year, and the “organic” replacement of 130 per cent of production on a net proven basis.
Shares in Ascential (ASCL) are down 2 per cent this morning, following the release of the group’s 2018 full-year results. Overall the results were strong, with organic revenue growth of 6.3 per cent and operating profit from continuing operations up 28.4 per cent. An increase in financing charges forced analyst Peel Hunt to trim forecasts modestly, but trading was by and large in line with expectations.
Shares in Associated British Foods (ABF) fell 2 per cent after the company reported a 2 per cent decline in like-for-like sales at Primark in a pre-close update, which was a bigger fall than analysts had expected. Total Primark sales were 4 per cent ahead of last year due to an increase in selling space. Profits at Primark are expected to be “well ahead” of the same period the year before with a “much higher margin”. The sugar business continues to be affected by lower EU sugar prices, and so revenue from AB Sugar is expected to be lower than last year.
Shares in Persimmon (PSN) fell sharply after it was revealed that the housebuilder has been coming under pressure from housing minister James Brokenshire to explain the company’s practices over using the Help to Buy scheme. This led to worries that its use of the scheme, which is coming up for review, could be affected. However, many of the issues raised such as leasehold sales and poor quality have already been resolved. Hold
OTHER COMPANY NEWS:
The Daily Mail and General Trust (DMGT) noted recent media speculation that it is “considering strategic options in respect of its holding in Euromoney” (Euromoney Institutional Investor (ERM)) and confirmed that it is reviewing options for its stake, in keeping with “its stated strategy of increasing portfolio focus”. DMGT hasn’t received any proposal and is not in discussions with any party to buy this stake. According to Bloomberg, DMGT has a 49 per cent shareholding in Euromoney. Shares in DMGT were up by around 2 per cent this morning.
The most important number in Base Resources’ (BSE) half-year numbers is probably the $34.2m reduction in net debt. The mineral sands group increased its revenues and post-tax profit for the period, but declining grades at Kwale, the group’s sole producing asset, meant that ore mining had to increase by 66 per cent just to maintain the production seen in the corresponding period.
Quartix’s (QTX) revenues grew by 5 per cent to £25.7m for the year to December 2018, buoyed by a 10 per cent rise in fleet sales to £18.8m. In keeping with the group’s pre-announced intention to focus increasingly on the core fleet market, insurance revenues declined by 7 per cent to £7m. The company saw a 3 per cent fall in cash generated from operations to £6.8m. Pre-tax profits rose 22 per cent to £8.1m, and Quartix has declared a final dividend of 10p – including a 6.2p special - taking the full-year total to 12.4p. The shares were up by around 3 per cent this morning.
Shares in Taptica (TAP) were down 5 per cent this morning, after the company said trading at the beginning of its current financial year “has been varied”. Its performance-based advertising activities have continued to face expected industry-wide headwinds in the supply chain. Management anticipates that these will impact the division’s 2019 performance. That said, the group said that one of the factors behind its proposed merger with RhythmOne (RTHM) is to help offset market volatility, with extra access to supply. Taptica’s brand advertising offering has been “robust”. And company said it is still highly cash-generative; it had net cash of $54.4m as at 31 December 2018. Overall, 2018 closed “in-line” with management’s expectations.
Finsbury Food Group (FIF) reported a 3.5 per cent fall in revenue to £152m during the first half, or a 0.5 per cent increase on a like-for-like basis. Group operating profit was flat at £8.7m, while the margin increased from 5.5 per cent to 5.7 per cent. Management said the UK grocery market “continues to be challenging” with “seemingly no rest in cost inflation”, and that the group is addressing this through price increases, investment in automation, and other operational efficiencies.
