A stronger pound and rising geopolitical tensions have hit London shares. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
ITV’s (ITV) external revenues rose 3 per cent to £3.21bn in 2018, with non-advertising revenues up 5 per cent at £1.97bn. Pre-tax profits climbed 13.4 per cent to £567m. The group confirmed its proposal with the BBC for the subscription streaming service ‘BritBox’. Net investment in BritBox will be up to £25m in 2019, and around £40m in 2020, before declining. While economic and political uncertainty weighs on advertising demand, advertising is expected to be down 3-4 per cent in the first four months of 2019. Investments, and tough comparatives against Football World Cup revenues, will also impact first-half revenues and profits. The 2018 dividend was lifted 3 per cent to 8p, and ITV said it will deliver on its 2019 dividend commitment. The shares were down 3 per cent this morning. Under review.
GVC (GVC) announced a new commercial relationship with online gaming software provider Playtech (PTEC) that is planned to run until 2025. Playtech will become a key products and services supplier to all GVC brands in both existing and new markets. The deal will combine GVC’s well-known brands and established online gaming business with Playtech’s online platform. The deal will also integrate Playtech's products and services onto the GVC platform in order that they can be made available to the MGM-GVC joint venture in the US, ROAR Digital. Shares in GVC were flat in early trading, while shares in Playtech were up 3 per cent. Buy GVC, hold Playtech.
Tarsus (TRS) saw revenues of £99.7m for the year to December 2018, representing a 15 per cent decline year-on-year but a 46 per cent rise against 2016’s numbers (in keeping with the company’s biennial event cycle). Reported pre-tax profits were up 92 per cent against 2016, at £16.5m. The company has proposed a final dividend of 7.7p, taking the full-year total up by 10 per cent to 11p. It said 2019 had started well, with forward bookings for the year up 10 per cent on a like-for-like basis. The shares were up by around a tenth this morning; buy.
Clinigen (CLIN) shares were flat on the release of half-year numbers this morning, given that most of the figures had been pre-announced. Perhaps it’s also a result of the stock’s big bounce on news that the specialist drug group had acquired the US rights to cancer drug Proleukin from Swiss pharma giant Novartis (NOVN) for $210m (£163m) earlier this month. Clinigen’s recent performance - which saw adjusted cash profits up by a fifth - has been largely boosted by timely acquisitions across both commercial and unlicensed medicines, while operating cash flow of £36.9m beat last year’s £32.7m figure, despite continued infrastructure investments across Europe and the US. Buy.
KEY STORIES:
One joint venture, two very different share price reactions. Following reports yesterday, Marks and Spencer (MKS) has confirmed a new 50/50 partnership with online grocer Ocado (OCDO), aimed at taking the former’s food division digital. Under the terms of the new JV, M&S will pay up to £750m in total to acquire a 50 per cent stake in Ocado’s UK retail business, while the new entity – to be known as Ocado.com – will effectively replace Ocado’s existing relationship with high-end supermarket Waitrose come September 2020. Like that current tie-up, the new platform will offer customers a combination of both Ocado’s own-brand products alongside M&S ranges. Shares in M&S fell 7 per cent in reaction to the news as many remain sceptical that such a deal can help turn around the group’s flagging food division - news of a £600m rights issue likely didn’t help either - while Ocado shares bumped up 5 per cent in early trading.
Four billion dollars. That’s the value of the special dividend that will accompany Rio Tinto’s (RIO) normal distribution when it is paid to shareholders on 18 April. Once paid, total capital returns (including buy-backs, specials and normal dividends) will have reached $29bn since 2016, against a $14bn reduction in net debt and just $13bn in growth and sustaining capital expenditure. Full-year numbers were accompanied by two separate reports, one on the group’s response to the challenges of climate change, another on the discovery of a copper-gold mineralisation at the Winu project in Western Australia, approximately 130 km north of the Telfer mine.
In related news, prospective titanium producer BlueJay Mining (JAY) said it was “optimistic” of concluding an agreement with Rio Tinto to “assess the commercial potential” of the Dundas ilmenite project. The junior miner told the market it had “inadvertently released a statement noting that it was in talks with Rio Tinto Iron and Titanium Canada” regarding a tie-up, following an unfortunate technical issue whilst its IT department was undertaking website maintenance.
OTHER COMPANY NEWS:
Shares fell heavily in Ted Baker (TED) this morning after the group issued what is, effectively, a profit warning. But it’s not a question of poor demand or significant changes in trading. Rather, the business has blamed foreign exchange movements in the final week of the financial year, costs as a result of systems upgrades and an “unanticipated” write-down of inventory of approximately £5m. Analysts at Liberum admit the changes are “unfortunate” but argue they are “one-off, non-cash” and that “there is no impact to the outer year expectations”. For now, management reckons annual pre-tax profits will land around £63m - roughly an £11m reduction on Liberum’s previous forecast of £74.3m.
Weir Group (WEIR) shares were flat on full-year results that revealed 23 per cent revenue growth and similar improvements in adjusted operating profits and pre-tax profits. The engineering group spent the year reshaping its portfolio, completing its largest-ever acquisition in July of ESCO, a provider of equipment for extreme environments, while announcing the disposal of valves and pumps business Flow Control on Monday.
Shares in Nichols (NICL) were up 3 per cent in early trading after the soft drinks company announced a 7 per cent increase in group revenue to £142m during 2018, with operating profit up 10 per cent to £31.6m. Non-executive chairman John Nichols said UK sales performance was driven by the strength of the Vimto brand, as well as opportunities in the out of home sector, a division where the company has recently invested. These trends are expected to continue though the 2019 financial year. In the international business, Nichols is confident that the long term prospects in the Middle East and Africa remain strong, although the ongoing conflict in Yemen continues to create uncertainty for 2019.
