News & Tips: Bloomsbury Publishing, Asos, Ocado & more

IC TIP UPDATES:

Bloomsbury Publishing (BMY) expects results for the year ending 28 February 2019 to be in line with management’s expectations. Its non-consumer academic and professional business “continues its strong performance” with organic revenue and margin growth and the acquisition of I.B. Tauris, while the consumer division had a number of bestsellers in the second half. Net cash came in at around £27m at the year-end. Buy.

Mulberry’s (MUL) finance director has resigned after three years of service. Neil Ritchie will remain in the role until the end of June and the completion of the company’s audit process. A search for his successor is underway. Sell.

Forecourt retailer Applegreen (APGN) is busy integrating its acquisition of Welcome Break, the UK’s second largest motorway service area operator, which it acquired in October 2018. Bosses say the integration is progressing as planned, although the hotel operations which were acquired as part of the deal have been placed under strategic review. Welcome Break added 43 sites to the company’s existing UK estate - taking the total number of new openings up to 61. This helped group revenue rise by more than 40 per cent last year to €2bn (£1.71bn). We remain buyers.

Revenues for Learning Technologies (LTG) were up 83 per cent to £93.9m in 2018, with recurring revenues up 68 per cent (against 38 per cent a year earlier) – largely underpinned by the acquisition of PeopleFluent. Statutory pre-tax profits came in at £3.4m, against losses of £11,000 in 2017. The group said it has made a good start to 2019, underpinning its confidence in “further progress” in 2019 and reaching its new goal of run-rate revenues of £200m with run-rate operating profits (EBIT) of at least £55m by the end of 2021. The full-year dividend was lifted by 67 per cent to 0.5p per share. The shares have halved since the September interims, but were up by around 6 per cent this morning. Under review.

The copper price may have pulled back in its rally towards $3 a pound, but full-year results from Antofagasta (ANTO) set a bullish tone for the months ahead. Chief executive Iván Arriagada said the record copper production seen last year “will continue into 2019 which we expect to be another record-setting year”. The source of this optimism is a further improvement in grades and “continued strong throughput”. Buy.

Shares in Elecosoft (ELCO) have fallen more than 11 per cent this morning following the release of the group’s full-year results for 2018. Bloomberg put the group’s adjusted EPS for the year at 3p, compared with a consensus estimate of 3.6. However, it must be noted that the group’s own adjusted figures gave an EPS of 3.9p. A growing proportion of revenues are coming from maintenance, supports and subscriptions, in line with the strategy to diversify away from the construction phase of a building’s lifecycle. We are reviewing our buy recommendation.

Shares in Mears (MER) are down 8 per cent this morning. The group missed sales and profit estimates for 2018, with revenues falling across the housing and care divisions. Management has announced it will be drawing back from development work, following a number of shareholders raising concerns about the debt level. Net debt for the year came in at £113m, narrowly behind the target of £110m. We are reviewing our buy recommendation.

KEY STORIES:

Shares in Asos (ASC) fell after the group revealed a less-than-stellar Christmas performance, as well as sluggish growth in the UK, across Europe and the US. At constant currency, sales across the Atlantic actually fell 3 per cent following logistics issues, while an 8 per cent improvement across Europe only helped to lift total retail sales by 11 per cent during the three months ended 28 February. For now, managers expect full-year sales still to rise by 15 per cent, although gross margins will likely contract by as much as 150 basis points as the company continues to keep prices low.

First quarter numbers from Ocado (OCDO) have revealed the impact of the group’s recent warehouse fire in Andover, which it said pulled 1.2 per cent off overall retail sales growth of 11.2 per cent during the period. Contingency plans include setting up a temporary site and and growing its capacity at Erith faster than expected. Nevertheless, the group says it saw strong underlying growth in the number of orders per week, albeit the average order size was slightly lower. As for the recent partnership with M&S (MKS), bosses said only that they were looking forward to the future “with excitement and determination”.

TP Icap (TCAP) reported underlying revenue growth of 3 per cent at constant currencies for 2018, driven by a 1 per cent rise in global broking revenue to £1.28bn. Statutory pre-tax profits dipped 14 per cent to £62m after accounting for goodwill impairments and integration costs. As expected the dividend was also held flat.

Mortgage Advice Bureau (MAB1) grew its adviser base by 12 per cent in 2018, which helped boost gross mortgage lenders by almost a fifth to £14bn. It also grew its market share of new mortgage lending to 4.7 per cent, from 4.3 per cent. However, management expects Brexit-related uncertainty to result in broadly flat revenue per adviser in 2019 and to impact marginally on adviser figures.

Standard Life Aberdeen (SLA) has won its dispute with Lloyds Banking Group (LLOY) after a arbitral tribunal found that Scottish Widows was not entitled to give notice, on 14 February 2018, to terminate the investment management agreements in respect of assets managed by members of the Standard Life Aberdeen group on competition grounds.

Investors were clearly hoping for more from Wood Group’s (WG.) full-year results. Shares in the oil services group are down 9 per cent today, after the adjusted cash profit margin dropped 30 basis points to 5.7 per cent, and $183m of exceptional costs kept the bottom line in the red. And though the group championed “good organic growth” in 2018, chief executive Robin Watson’s confidence in “achieving further growth in 2019” might have struck some shareholders as lacklustre.

Shares in Ferrexpo (FXPO) are down 10 per cent today, after the iron ore pellet manufacturer pushed back release of its full-year results by a fortnight. The source of the delay is the same issue which caused the miner’s shares to fall 12 per cent at the start of February: a probe into the group’s charitable donations to Ukraine-based Blooming Land. Advisers in the UK and Ukraine continue to investigate payments to the charity, including discrepancies in copy bank statements and the application of funds by the charity. Ferrexpo said it intends to announce its results “on or before 3 April 2019”.

OTHER COMPANY NEWS:

For the year to December 2018, Taptica’s (TAP) revenues rose by 31 per cent to $277m. Pre-tax profits rose 56.9 per cent to $27.2m. Net cash came in at $54.4m against net debt of $4m a year earlier. In February 2019, Taptica announced a recommended all-share merger with RhythmOne (RTHM). It expects a $15m discretionary share buyback to start right after completion of the merger. Ofer Druker – currently executive chairman of Taptica’s Tremor Video DSP business – has been proposed as the chairman of the enlarged company.

Softcat’s (SCT) revenues rose 21.1 per cent to £434m for the first half ending 31 January 2019, as reported under new accounting rules IFRS 15 (pertaining to revenue recognition). Gross invoiced income – reflecting gross income billed to customers, adjusted for deferred and accrued revenue items – rose by 28.5 per cent to £608m. Operating profits increased by 40.4 per cent to £33.9m. Total customers grew by 6.5 per cent, with 620 new customers added. The group expects a full-year outcome “marginally ahead of previous expectations”. The shares were up by around 6 per cent this morning.

Zotefoams (ZTF) shares were unmoved by full-year results that revealed a 31 per cent rise in pre-tax profits. The cellular material technology company’s plans for expansion are on track - its Kentucky facility, commissioned in March 2018, added 20 per cent in capacity, with new facilities in the UK and US set to open in 2019, and Poland in 2020. Sports and leisure proved a particularly successful market for the company, with its share of revenues from here growing to 19 per cent from 12 per cent in the prior year.

Judges Scientific (JDG), which acquires and develops scientific instrument businesses, reported record revenues, order intake and cash generation in its full-year results this morning. Revenues were up 9 per cent to £77.9m, while organic order intake rose 6 per cent. The business is positioned to add to its portfolio, having agreed new five-year acquisition facilities for an aggregate of £35m.

Online bingo operator JPJ Group (JPJ) reported a 10 per cent increase in gaming revenue to £320m during 2018, with adjusted net income up by nearly a third to £90.1m. Growth in gaming revenue came primarily from the Vera&John brand, while full-year gaming revenue at the Jackpotjoy brand was flat year-on-year. Free cash flow improved from £97.8m in 2017 to £101m during the reported period, and the adjusted leverage ratio fell from 3.57x last year to 2.68x during the reported period. Shares were up 4 per cent in early trading.  

The Gym Group (GYM) reported a 35.6 per cent increase in revenue to £124m during 2018, with adjusted cash profits up 31.6 per cent to £36.8m. The company opened 17 new gyms and acquired 13 from easyGym during the year, increasing the total estate to 158. Membership numbers were up 19.3 per cent to 724,000, while average revenue per member per month improved from £14.41 to £14.89. Return on capital employed on mature sites was 31 per cent, ahead of the 30 per cent target. Shares were up 6 per cent in early trading.

After some delay, Hurricane Energy (HUR) has hooked up its floating production storage and offloading vessel at the Lancaster field in the North Sea. Shares in the oil group are up 2 per cent this morning on hopes that the early production system will steadily ramp up to 17,000 barrels per day, “net of operating efficiency”.

Oligarch Roman Abramovich, non-executive chairman Alexander Abramov, chief executive Alexander Frolov, non-executive director Eugene Shvidler have collectively sold 1.8 per cent of steelmaker Evraz (EVR), in a placing of 595p per share. Through their various holding companies, the shareholders continue to own more than 60 per cent of the group.