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News & Tips: JD Sports, Kainos, Galliford Try & more

London shares have started the day in positive fashion
April 16, 2019

All the major indices in London are in positive territory as healthy jobs data from the UK has improved sentiment. Click here for The Trader Nicole Elliott's latest thoughts on the markets. 

IC TIP UPDATES:

After a strong performance over the Christmas period, JD Sports (JD.) has impressed once again with its growth over the year to 2 February 2019. The group has shrugged off the difficult UK retail environment to deliver what house broker Peel Hunt described as “a truly vintage year”. Sales grew by almost half, to £4.72bn over the year, up on last year’s already impressive 33 per cent rise. Online growth far outstripped in-store, with like-for-like sales up 30 per cent compared with 3 per cent store growth. Early indicators are that the US business is doing well, too. Buy.

Kainos (KNOS) said trading for the year ending March 2019 has continued in line with market expectations, as updated following the trading update on 4 February 2019. The company “remains well positioned in its core markets, underpinned by a strong sales performance”. Digital transformation and Workday services have driven growth in the digital services business. The digital platforms business performed in line with expectations, buoyed by the Kainos Smart platform. As at the period-end, the group had no debt and strong cash generation. Buy.

StatPro (SOG) has increased and extended its financing facilities with Wells Fargo Capital Finance, with the addition of £5.2m of committed facility and an additional £6m of uncommitted capital. This secured financing facility is “available for acquisitions, share buy-backs and general corporate purposes”. After the increase, StatPro’s total facilities are around £49.1m, entailing a £10m committed revolving credit facility, £29.1m in committed term/ deferred drawdown multi-currency loans and a £10m uncommitted additional facility. The term for the committed facility has been extended to April 2024, subject to compliance with agreed covenants. Buy.

Shares in Card Factory (CARD) has seen its share price jump 5 per cent this morning. The group had a difficult time last year and, in spite of a drop in underlying profits and EPS, it appears investors feared worse. Sales were up 3 per cent, driven by management’s new store rollout programme. However, like-for-like sales were flat for the year even as the stroe network grew by 51 outlets. Back in September, there were fears the special dividend would be the last for some time, but management sounds more optimistic. It expects to declare a special payout at the interim results later in the year. We are reviewing our sell recommendation.

KEY STORIES:

Galliford Try (GFRD) has announced a strategic review of its construction business, which will reduce its size but result in a £30-40m reduction in group post-exceptional pre-tax profit this year. The single largest element relates to the Queensferry Crossing joint venture, which has recently increased its estimated final costs on the project. Shares fell almost a fifth in early trading.

Ashmore (ASHM) reported an 11 per cent rise in assets under management during the first three months of the year to $85.3bn. Net inflows were $5bn, while market gains were $3.6bn. Corporate debt and multi-asset strategies reported the largest increases in assets under management at 30 per cent and 25 per cent, respectively, during the quarter.  

Shares in Rio Tinto (RIO) may be on a tear so far in 2019, but operationally, the mining giant is falling far short of expectations. In a first quarter trading update, released this morning, Rio said shipments of iron ore were 14 per cent lower year-on-year, and “significantly impacted by the weather disruptions in March and the fire at Cape Lambert A in January”. In fact, these events are likely to knock second quarter production, and has led to a downgrade in full-year iron ore shipment guidance to between 333 and 343 million tonnes (from 338 to 350 million tonnes, previously). Copper, titanium dioxide, bauxite and iron ore pellet production were all up year-on-year.

Finablr – the payments and foreign exchange company which owns Travelex – has confirmed its intention to float on the London Stock Exchange. The final offer price in relation to the IPO will be determined following a book-building process, and admission is currently expected to occur in May 2019.

OTHER COMPANY NEWS:

Zama, the Talos Energy-operated discovery offshore Mexico in which Premier Oil (PMO) holds a 25 per cent stake, has undergone a successful side-track well test. Premier shares are up 3 per cent in early trading.

Telit Communications’ (TCM) revenues grew by 14.1 per cent to $428m during 2018, with cloud and connectivity revenues up by 23.1 per cent to $34.1m.The group noted that it saw stabilisation of its gross margin – a major objective of its turnaround plan. While the full-year gross margin sat at 32.6 per cent – down from 35.1 per cent for the whole of 2017 – this marked an improvement against the second half of 2017 (31.5 per cent). Pre-tax losses narrowed from $56.8m to $39.8m. Meanwhile, net debt sat at $34m – up from $30.2m a year earlier.  

G4S (GFS) has released a positive trading statement for the first three months of 2019. Momentum continued from the second half of last year, leading to a 4.8 per cent increase in the start of the year. The growth was fairly well split between the security and cash divisions, which had growth of 4.9 per cent and 4.4 per cent, respectively. However, there was no substantive update on the separation of the cash business - management only said it continued to make “good progress” - or on the potential offer from Canadian security group Gardaworld.