Standard Chartered, the IMF's global economic growth estimates and the latest from the morning's trade all feature in Nicole Elliott's Market Outlook. Click here to read.
IC TIP UPDATES:
Indivior (INDV) shares have plunged following news that a grand jury in the Western District of Virginia has issued an indictment in connection with a federal criminal investigation initiated by the US Department of Justice in December 2013. The indictment includes twenty-eight felony counts – including one count of conspiracy to commit mail fraud and 22 counts of wire fraud. According to a statement issued by the company, the allegations are based on actions that occurred “almost exclusively prior to Indivior becoming an independent company”; it was demerged from consumer goods giant Reckitt Benckiser (RB.) at the end of 2014. The company strongly denies all allegations. We remain sellers.
Tesco (TSCO) full-year results are ahead of market expectations, despite a difficult market backdrop for British grocers. Group pre-tax profits of £1.96bn beat Shore Capital’s £1.83bn estimate, following decent expansion in group operating margins from 2.9 per cent this time last year to 3.45 per cent. Management says it’s on track to meet the FY2020 target to grow operating margins to between 3.5 per cent and 4 per cent. Shore Capital says to expect upgrades to both FY2020 and FY2021 numbers in due course. Buy.
Pagegroup’s (PAGE) chief executive Steve Ingham is currently aid up with a back injury following a skiing accident, but this hasn’t prevented the group from reporting a strong performance for the first three months of the year. Gross profit is up 11.7 per cent, slightly behind with the same period last year, when it grew 12.3 per cent. The group has grown across all of its regions, and once again headcount reached a record level, this time 7,842, and the fee earner to operation staff ratio stayed steady at 79:21. Buy.
Liontrust Asset Management (LIO) gained net inflows of £581m in net inflows during the first three months of the year, which coupled with £835m in market movements took assets under management up 13 per cent to £12.7bn. That was up on net new business of £255m the same time in 2018. Buy.
Shares in Central Asia Metals (CAML) are down 10 per cent in early trading today, after the diversified miner posted an increase in cash costs at its two mines, and a final proposed dividend of 8p a share for 2018. That distribution is equivalent to 44 per cent of adjusted free cash flow, and so towards the top-end of CAML’s dividend policy, but means the year-on-year pay-out has softened by 2p. Adjusted EPS and pre-tax profit numbers also came in slightly down on broker Peel Hunt’s forecasts, though the group is well on-course to repaying its $110m net debt within three years. Buy.
AstraZeneca’s (AZN) cancer drug Lynparza has been approved in Europe for use in specific cases of advanced breast cancer. Astra’s executive vice president of oncology Dave Fredrickson says patients throughout the EU will now have access to a targeted and oral chemotherapy-free treatment option for a difficult-to-treat form of the disease. We remain sellers.
Under new accounting rules pertaining to revenue recognition, Tracsis (TRCS) reported sales of £18.8m for the half-year to January 2019 – compared to £18.1m a year earlier under the old accounting rules. Pre-tax profits declined by 11 per cent to £2.1m. By division, rail technology and services saw revenues of £9.9m – up from £9.2m – with pre-tax profits of £3.5m, against £3.4m. The group announced a five-year framework agreement with a major train-owning company in January 2019, and the roll-out is “well underway” with revenues expected to be realised in the second half of this financial year and onwards. Traffic and data services saw revenues of £8.9m (against £8.8m) and pre-tax profits of £0.2m against £0.4m. Tracsis noted that the business typically performs much more strongly in the second half. Buy.
Shares in Hollywood Bowl (BOWL) were up nearly 3 per cent in early trading after the company announced revenue growth of 5.3 per cent, or 4.4 per cent on a like-for-like basis, during the first six months of its financial year. Two new centres were opened in the first half, in line with the company’s target to open two new sites each year. The refurbishment programme is “on track” as the company expects to meet its target of between seven and nine refurbishments this financial year. Buy.
KEY STORIES:
McCarthy & Stone (MCS) reported a 66 per cent drop in pre-tax profits for the first-half, after incurring £14m of exceptional costs incurred in relation to its restructuring programme and redundancies, and a reduction in the land bank. Operating margins declined by 3.5 percentage points as a weak secondary property market prompted the retirement home developer to offer incentives and discounts to homeowners.
Yesterday afternoon Standard Chartered (STAN) announced that it would pay an aggregate $1.05bn in penalties to the US authorities – including the Department of Justice and the Office of the District Attorney for New York County – and Financial Conduct Authority to resolve investigations in relation to alleged violations of US sanctions against Iran. The lender had already taken a $900m provision for the matter during the fourth quarter of 2018 and will take a further $190m charge during the first quarter.
Worldpay (WPY) intends to delist its shares from the London Stock Exchange – where it has a secondary listing – on 20 May 2019. Following completion of the merger between Vantiv and Worldpay in January 2018, the number of shareholders trading and of shares traded on the LSE has “decreased significantly”. Worldpay “believes that the administrative costs in connection with maintaining the listing of Shares on the LSE are no longer justified”. In March 2019, Worldpay and Fidelity National Information Services (US: FIS) said they had entered a definitive merger agreement valuing Worldpay at $43bn. Regardless of whether this merger completes, Worldpay plans to proceed with the delisting. As part of the delisting, Worldpay shareholders holding depositary interests enabling the trading of shares on the LSE will be transitioned into a CREST depositary interest facility. Worldpay intends to provide a proxy service to ensure those shareholders can vote on the FIS deal, which requires shareholder and regulatory approvals.
The offer price for payments group Network International’s (NETW) IPO has been set at 435p per share. It said that based on this price, its market capitalisation upon the commencement of conditional dealings would be £2.18bn. The institutional offer comprises 200m shares, resulting in a free-float of 40 per cent. This excludes Mastercard’s cornerstone investment, which represents around 9.99 per cent of the company’s shares at the time of admission. This cornerstone investment is subject to a 24-month lock-up period and a 36-month standstill not to acquire additional shares without Network International’s board’s approval. Conditional dealings in the company’s ordinary shares began this morning at 8am. Admission is expected to become effective, and unconditional dealings in the shares to commence, at 8am on 15 April 2019.
Yesterday morning, Finablr – the payments and foreign exchange group which owns the business Travelex – announced its intention to publish a registration document and potential intention to float on the London Stock Exchange. The offer would comprise new shares to be issued by the company (to raise gross proceeds of $200m) and an offer of existing shares to be sold by certain shareholders. In the late afternoon, it said that the Financial Conduct Authority (FCA) had approved its registration document.
Asos’s (ASC) half-year numbers start on a sombre note, with management describing the group’s performance as “disappointing”. It’s not hard to see why, as major investments in “transformational projects” impacted results, pushing pre-tax profits down 87 per cent to £4m. However, investors don’t seem to mind, with the shares up eight per cent this morning. Analyst Numis said the result “encourages in the breadth of customer-facing improvements underway”.
Rolls-Royce (RR.) will tell customers today that it plans to quicken the inspection process for its Trent 1000 TEN engines, after Singapore Airlines was forced to ground two of its jets over blade deterioration last week. The European Union Aviation Safety Agency will issue an ‘airworthiness directive’. The engine manufacturer has found that a small number of the high pressure turbine blades in the TENs need to be replaced earlier than envisaged - there are currently more than 180 of this type of engine in service. Shares were flat on the announcement.
The Department for Transport (DfT) has disqualified Stagecoach (SGC) from the three rail franchises it has bid to operate. These competitions were South Eastern, East Midlands, and the West Coast Partnership as a joint venture with Virgin Group and SNCF. An official from the DfT said that Stagecoach’s bids were “non-compliant” with respect to pensions risk, where bidders were asked to bear full long-term funding risk on relevant sections of the Railways Pension Scheme. Stagecoach chief executive Martin Griffiths said the company’s bid was “consistent with industry guidance” and that he believes that the private sector “should not be expected to accept material risks it cannot control and manage”, adding that forcing rail companies to take on these risks could lead to more franchise failures. At the full-year results in June last year, the company cut the dividend to what it felt was a more “sustainable” payout, in that it could be covered by non-rail cash flows.
OTHER COMPANY NEWS:
Ted Baker (TED) has established a new joint venture with Shanghai LongShang Trading Company to expand its business in Mainland China, Hong Kong and Macau. Ted is expected to make a net cash contribution of roughly £3.4m, while transaction-related costs should amount to £6.5m. The JV should marginally boost Ted’s pre-tax profits this year, with the newly-established entity expected to break-even in the 2021/22 financial year.
Aim-listed explorer-producer Eco Atlantic Oil & Gas (ECO) has raised $17m (£12.9m) through the issue of 16.2 million new shares, at 80p a share. The funds will be put towards drilling up to four new potential wells, as well as the scheduled Jethro and Joe wells, and general corporate purposes.
Dunelm (DNLM) shares found further upward momentum this morning after a third quarter update revealed what broker Peel Hunt called “outstanding” growth rates. Story-only sales grew by nearly 10 per cent over the period, compared to analysts’ expectations of just 1 per cent growth. Factor in a 32 per cent surge in online sales and overall top-line growth far exceeded market expectations. As such, Peel Hunt has upgraded current-year pre-tax profit forecasts by £3.2m to £121m - although the broker admits this still only accounts for a 5 per cent rise in like-for-like sales during the final quarter, a conservative estimate in their view.
Online retailer Findel (FDL) has revealed that a takeover offer from its largest shareholder Sports Direct (SPD) has failed to secure the necessary support from remaining investors. According to the Findel board, only 37.82 per cent of shareholders have voiced their support for the 161p a share offer. Regardless, Sports Direct has chosen to extend the offer until 1pm on 24 April 2019 at the same price. It also has until 4 May 2019 to improve or otherwise change its offer and until 18 May 2019 to achieve sufficient acceptances.
Aerospace and defence engineer QinetiQ (QQ.) has completed a £690m buy-in with Scottish Widows, which will cover approximately a third of its pension liabilities. As a result of the transaction, the accounting pension surplus recorded on the QinetiQ’s balance sheet will lower by around £120m with no related cash impact.
