Investors in London have sold off shares in the FTSE100 sharply this morning. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
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AstraZeneca (AZN) has announced positive results from a third phase trial of its oncology drug Lynparza in treating pancreatic cancer. Together with US partner Merck (US:MRK), the pharma giant confirmed that the drug met its ‘primary endpoint’ to show a “statistically-significant” and “clinically-meaningful” improvement in “progression free survival” of patients versus placebo. It effectively means that Lynparza has become the first drug of its kind to show efficacy in at least slowing the progression of the disease amongst pancreatic cancer patients. We remain sellers.
Hotel Chocolat’s (HOTC) interim numbers show a 13 per cent jump in revenues over the first six months of the financial year, leaving underlying cash profits up 10 per cent at £17.3m. Having set its sights on taking its brand international, start-up costs in the US and Japan weighed on pre-tax profits. But excluding this, the bottom line bloomed by 11 per cent to £14.4m. The balance sheet also finished up the period in decent nick, with net cash of £21.8m following an 18 per cent surge in operating cash flows to £29.5m. Buy.
Full-year results from Morgan Advanced Materials (MGAM) revealed a 30 per cent fall in pre-tax profits and a 33 per cent fall in operating profits, with engineering company’s thermal products division taking £13.8m of charges relating to the exit of its Brazilian and Venezuelan businesses. The outlook for this year isn’t promising, and the company predicts that “we are likely to see slower growth in the key industrial economies in which we participate”. Under review.
A “challenging operating environment” was blamed by precious metals group Fresnillo (FRES) for a disappointing set of 2018 results, in which gross profit declined 15.6 per cent on 2017. Though margins held up, a higher stripping ratio at the Herradura mine, a rise in depreciation and costs across the group all added to the overheads at a time when Fresnillo is investing heavily in future output. As such, the final dividend dropped to 16.7¢ a share. Under review.
Morses Club (MCL) has made its third acquisition since the start of the year, buying CURO Transatlantic via its subsidiary Shelby Finance out of administration. CURO provided sub-prime loans online, with an outstanding loan book of around £19m and 50,000 customers. Buy.
There have been three new board appointments at WH Smith (SMWH). The first is an internal appointment - Carl Cowling, currently head of the retailer’s high street business - while the others include Simon Emeny, chief executive at pub group Fuller, Smith & Turner (FSTA), and Maurice Thompson, chairman of Greensill Capital and formerly chief executive of Citi Bank. We remain buyers.
Jupiter Fund Management’s (JUP) chief financial officer Charlotte Jones has announced plans to step down from her role from August to join RSA International in the same position. The search for her successor has begun. Sell.
James Fisher & Sons (FSJ) shares rose 3 per cent in morning trading following full-year results that revealed 17 per cent pre-tax profit growth, with all four of its divisions experiencing boosts revenues and underlying operating profits. Highlights for the business included the delivery of two rescue submarines to the Indian navy, thus completing the manufacturing phase of a 25 year contract. The group also secured a £30m contract win for a deep sea rescue vehicle for the South Korean navy. The shares are trading at healthy premium now to the company’s two-year history, so our rating is under review.
Both Portmeirion (PMP) and rival Churchill China (CHH) have bought additional equity in Furlong Mills, a factory providing earthenware pottery from its Stoke-on Trent Factory. PMP spent £363,000 to acquire an additional 7.5 per cent of the issued share capital, bringing its total to 44.4 per cent. CHH, meanwhile, spent £454,000 on a 9.5 per cent stake, bringing its stake to 46.1 per cent. Both group’s announced their purchases after the markets had opened yesterday. We remain buyers of Portmeirion.
Dalata Hotel Group (DAL) reported an 11.8 per cent increase in revenue to €394m (£340m) during 2018, with pre-tax profits up 13 per cent to €87.3m. The average room rate was up 4 per cent to €112.51 with the occupancy rate 60 basis points higher at 83.7 per cent, while revenue per available room improved 4.7 per cent to €94.13. Over 1,150 new rooms opened in Dublin, Belfast, Cork, Galway and Newcastle during the period, and another 2,190 new rooms are in the pipeline to open by 2021. The group reported hotel assets worth €1.2bn including 2018 net upward property revaluation gain of €99.8m. Shares were flat in early trading. Buy.
Springfield Properties (SPR) has continued its rapid growth. In the six months to November 2018 sales were up 38 per cent, while pre-tax profits almost doubled to £6.1m. Such expansion hasn’t come cheap, however, and net debt grew 85 per cent to £25.3m. The group is hoovering up land to turn into new homes, and the landbank grew 17 per cent to 15,096 plots in the period. Buy.
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Shares in XLMedia (XLM) plunged by more than 30 per cent this morning, after the group said that it will lift investment across its higher-margin publishing activities, while materially reducing certain parts of its media activities that are lower-margin and that have unstable revenues. Trading in 2019 has begun in line with bosses’ expectations – although “still seeing operational and regulatory headwinds” – but the move away from media is expected to reduce 2019’s revenues by around $30m. Alongside the publishing investment, this will contribute to an expected $6-7m reduction in 2019’s adjusted cash profits. The group expects its changes to bring higher margins and “better quality of earnings” in the medium-term. Management remains committed to maintaining a progressive dividend policy and the share buyback announced in December.
Standard Chartered (STAN) missed consensus adjusted pre-tax profit forecasts for 2018, after reporting income growth at the bottom-end of management’s 5-7 per cent range. However, profits did benefit from a 38 per cent reduction in credit impairments. Management also reported an increase in returns on tangible equity to 5.1 per cent, from 3.9 per cent, and outlined targets of a return of at least 10 per cent by 2021.
Babcock (BAB) is expecting to report revenues down three per cent for 2018, thanks to a slowdown in the rail business, power outages in South Africa and a step down in the QEC contract. The end of the QEC and Magnox contracts are expected to reduce revenues and operating profits by £400m and £40m, respectively. On top of this, the group will incur a £10m tax charge as a result of restructuring to prepare for the UK leaving the European Union. Shares are down seven per cent this morning.
OTHER COMPANY NEWS:
Meggitt (MGGT) persisted with its commitment to slim down and focus on “attractive markets where we have strong positions” over 2018, completing three disposals and accelerating progress on site consolidation. Full-year results for the aerospace engineer demonstrated revenue growth of 4 per cent while operating profit fell 6 per cent. Free cash flow fell by £30m to £167m, with 63 per cent cash conversion owing to a £30m payment into the US pension scheme and a £38m boost inventory buffers to support growth, site consolidation and the group’s Brexit contingency plans. Shares were down nearly 4 per cent in morning trading.
Shares in Croda (CRDA) dipped 3 per cent in morning trading following full-year results that announced a special dividend of 115p per share and growth across its core businesses. Bad news at the chemical specialist’s new North American plant, which after an initial period of normal operation, suffered a small leak in November 2018 owing to an incorrect gasket fitted during construction. The plant will be brought back online later this year, but will incur quarterly operating costs of £2m until then.
N Brown (BWNG) has found a new chief executive. Having been appointed interim chief executive in September 2018, taking over from Angela Spindler. Mr Johnson will now take over the role permanently, and with immediate effect.
Video games developer and publisher Codemasters (CDM) has announced the release of the game ‘DiRT RALLY 2.0.’ today – the sequel to DiRT Rally. Shares in the company were up by around 2 per cent in morning trading.
Restore (RST) has sold ITP Group, its toner cartridge recycling business. Ink & Toner is buying the group, will give Restore a 40 per cent stake in its business. ITP was lossmaking in 2018, with revenues of around £4m. The disposal is part of management’s plan to focus on its core IT hardware business.
Last night, RhythmOne (RTHM) announced the publication of the scheme document containing the full terms and conditions of its acquisition by Taptica (TAP). The boards of both companies announced that they had reached agreement on the terms of this recommended cash acquisition on 4 February 2019. Other areas covered by the scheme document include an indicative timetable of events, notices of required meetings and details of the action to be taken by RhythmOne’s shareholders.
Collagen food products company Devro (DVO) reported a 1 per cent fall in sales to £253m on a statutory basis during 2018, while pre-tax profits fell nearly a fifth to £17.5m. On an underlying basis, profits before tax increased 9 per cent to £32.1m, as this figure excludes £12.3m of exceptional items like the Devro 100 programme and associated restructuring costs. The volume of products sold was maintained year-on-year, with strong growth in North America, Latin America, and Southeast Asia helping to offset declines in Japan, Russia and China. Shares were up 5 per cent in early trading.
