After a downbeat performance last week, London shares have bounced back in early trading today. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
OneSavings Bank (OSB) and Charter Court (CCFS) are in talks over an all-share merger that would see shareholders in the former own 55 per cent of the enlarged group, which OSB chief executive Andy Goulding would head up. Both boards believe the “possible combination has the potential to create material shareholder value and has a compelling strategic and financial rationale”. Shares in both groups were up around 10 per cent in early trading. We place our buy recommendations under review.
SafeCharge (SCH) announced this morning that on 17 January 2019, it and Nayax – a cashless payment services provider for the unattended machine industry – agreed to extend their acquiring agreement to the end of 2024. SafeCharge also agreed with Nayax’s founding shareholders that they will – by the end of 2022 – buy back SafeCharge’s shareholding in Nayax for a consideration equal to SafeCharge’s cumulative investment of $24.5m plus 9 per cent interest per year, calculated from between 15 February 2018 until the payment is received. SafeCharge reports its full-year numbers on 13 March. Buy.
The coming year will still be a crucial one for drug developer Hutchison China Meditech (HCM), even though progress in 2018 appears to have set it up well. Annual revenues of $214m came in well ahead of guidance and analysts’ estimates, while a net loss of $75m beat Panmure Gordon’s expectation for losses of $88m. This year, the group expects to spend between $160m-$200m on research and development (R&D). It ended 2018 with cash resources of $420m. We remain buyers.
Further to news last week that Mike Ashley of Sports Direct (SPD) is petitioning for place on Debenhams’ (DEB) board - not the mention the removal of most other members - the company has revealed this morning it is in negotiations to borrow another £150m. Of this, £40m will be used to refinance the £40m bridge facility announced in mid-February. We remain sellers of Debenhams.
An update at the end of January covered many of the headline figures in today’s full-year earnings report from Polymetal International (POLY). But shareholders will still be encouraged to see total cash costs for 2018 coming in at $649 per ounce of gold-equivalent, just below the forecast range, while all-in sustaining costs of $861 an ounce were 4.3 per cent below the mid-point of the forecast range. Buy.
Shareholders hoping that tomorrow’s full-year results from Cairn Energy (CNE) will confirm the oil group’s progress in its arbitration case against India will have to wait. In an update this morning, Cairn said it has been informed by the arbitration panel that an award is “unlikely to be before late 2019”, and that “no specific guidance on timing” can be given. Shareholders were originally told to expect the panel to “issue an award expeditiously” following hearings in the Hague last August. Under review.
Ryanair (RYA) announced that all non-EU shareholders will be treated as “restricted shares” and stripped of voting rights if the UK leaves the EU without a deal later this month. Management said this structure will stay in place until there is no more risk to its airline licences. Shares fell nearly 2 per cent in early trading. Sell.
Britvic (BVIC) announced that Joanne Wilson will join the board as chief financial officer, with a start date that has yet to be announced. Ms Wilson is currently Chief Financial Officer at dunnhumby, a customer data science business that is part of Tesco. Shares were up 1 per cent in early trading. Buy.
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Provident Financial (PFG) has rebuffed Non-Standard Finance’s (NSF) bid once again, after the latter posted offer documents over the weekend. Provident’s board said the document “only superficially addressed the funding and value implications and issues highlighted by Provident with respect to the sale of Moneybarn”, casting doubt on the prospect of the return of proceeds to shareholders. It also drew investors’ attention to a letter sent by the Financial Conduct Authority to NSF, warning it against any plans that would lead to a relaxation in affordability testing.
Shares in Kier (KIE) fell 18 per cent after the construction group revised its net debt position from £130m to £180m. This is largely an accountancy move, and the company expects to deliver a net cash position at the June year-end. And following delays identified with the Broadmoor Hospital redevelopment programme, it is making a provision of £25m. Sell
Shares in Clarkson (CKN) fell 9 per cent in early trading after the shipping services company reported a 6 per cent decline in pre-tax profits to £42.9m during 2018, with EPS down 5 per cent to 98.8p. Chief executive Andy Case said geo-political uncertainty and natural disasters are currently affecting global sentiment and exchange rates, which in part offsets the better visibility from an improved forward order book. He said these headwinds are “having an impact”, especially in the financial business, but expects them to diminish through 2019.
Law firm DWF has announced an offer price of 122p for its IPO, giving it a market capitalisation of around £366m at the beginning of conditional dealings on London’s main market. The offer entails around 61.5m new shares being issued by the company and 16.6m existing shares being sold by selling shareholders, equating to an offer size of £95.2m and representing 26 per cent of DWF’s issued share capital on admission. Conditional dealings started this morning, while unconditional dealings are expected to start at 8am on 15 March 2019.
