After a downbeat few days, shares in London are up solidly in morning trading today. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Shares in Tesco (TSCO) are up close to 1 per cent this morning, after the supermarket giant announced it would cease new mortgage lending and look to sell its mortgage portfolio. The group holds a lending balance of £3.7bn. Tesco Bank chief executive Gerry Mallon said difficult marketing conditions had limited opportunities for profitable growth in recent years. Instead, the group will look to serve “a broader range of customers in more specific areas”. Buy.
WH Smith’s (SMWH) latest trading update contains little that will surprise investors. The group reported growth of more than a quarter in the travel business over the 11 weeks to mid-May 2019. The High Street business continued to decline, with like-for-like sales down 1 per cent. Overall, sales were up 15 per cent, 1 per cent on a like-for-like basis. However, what may come as a surprise is that, after six years at the helm, chief executive Stephen Clarke is stepping down from his role at the end of October. He will be replaced by Carl Cowling. Buy.
Bloomsbury Publishing (BMY) delivered revenues of £163m, up by 0.7 per cent, for the year to February 2019, with statutory pre-tax profits of £12m – up by 3 per cent. On an adjusted basis, pre-tax profits were ahead of market expectations – up 9 per cent to £14.4m. The group cited an “outstanding performance” within its academic and professional division, and an “exceptional” result from its Adult division – in a year that saw many novels. Cash conversion remained robust at 128 per cent. The dividend has been lifted 6 per cent, taking the total pay-out for the year to 7.96p. Buy.
Primary care property group Assura (AGR) saw its portfolio value increase 14 per cent in the 12 months to March, though the increase in net asset value per share was far slimmer at two per cent. The latter increase was principally due to like-for-like property revaluations, as like-for-like rents declined in real terms. Shareholders can at least bank on steady acquisition spend; the figure reached £240m in the period, and has been buttressed already in FY2020 by the acquisition of primary care developer GPI, announced today. Under review.
IMImobile (IMO) has signed a partnership agreement with Telia Norway, with an option to extend to the wider Telia company – the leading telecom operator in the Nordic/ Baltics. This agreement will allow Telia to resell IMImobile’s cloud products, including its enterprise communications-platform-as-a-service offering ‘IMIconnect’ to its enterprise customers. Shares in the group were up by around 3 per cent this morning. Buy.
Galliford Try (GFRD) announced the outcome of its strategic review, including plans to focus its construction division on building, water and highways, which will result in 350 job cuts. The business's target annual revenue will reduce to around £1.3bn, resulting in annualised cost savings of up to £15m from 2021, in an attempt to achieve operating margins of 2 per cent by 2021. Linden Homes has maintained a sales rate since the start of the year fell of 0.68, from 0.71 in 2018. Sell.
Huntsworth (HNT) has announced its acquisition of 70 per cent of Creative-Ceutical S.A.R.L. (‘CC’) – a Luxembourg company – from 100 per cent shareholder Avicenne Invest S.A., a company connected to CC’s founder Pr Mondher Toumi. This is for an initial cash consideration of €15.5m. The group also announced its acquisition of 85 per cent of Kyne Communications, LLC and Kyne Communications Limited through direct and indirect interests (together ‘KYNE’) from founder and majority shareholder David Kyne and his wife Jacqueline Kyne, together with associates, for an initial cash consideration of $17.4m. In the same breath, Huntsworth announced a successful placing raising gross proceeds of £16.3m to part-fund the acquisition. The balance (around £12m) is to be funded from existing debt facilities. Both acquisitions and the placing are together expected to be “accretive”. Buy.
Vitec (VTC) said in an AGM update that trading for the four months to April 2019 was in line with expectations. Production solutions “performed strongly in a non-Olympic year”. Creative solutions continued growing, while imaging solutions “continued to outperform a challenging market”. Here, the group has announced a “significant investment” in its web marketing and e-tail capabilities, to transform imaging solutions’ “digital competencies” and restructure its sales and marketing network by distribution channel. It said this restructuring mirrors consolidation in Europe of major e-commerce customers. The total investment is expected to be around €8.5m, incurred largely in 2019 and 2020. Savings are expected to grow over time to an annual run rate of around €3m by the end of 2021. Buy.
Severn Trent (SVT) has announced that FY2019 group revenue increased by 4.2 per cent to £1.77bn whilst underlying profit before interest and tax rose by 6.3 per cent to £574m (despite absorbing £36m of hot weather costs during the year). Return on regulated equity (RoRE) was 8.1 per cent for the year, partly held back by hitting the waste outcome delivery incentive (ODI) cap. The cumulative AMP6 RoRe was 9.1 per cent. With significant capital investment of £769m, net debt has increased to £5.8bn however cash generated from operations has increased by 7 per cent to £826.3m. Recommendation under review.
KEY STORIES:
Warehouse Reit (WHR) generated a 5.6 per cent increase in its portfolio valuation during the year to March, or 8.9 per cent on the aggregate purchase price. It completed 62 lettings of vacant space, generating rent of £2.1 million per annum, 13 per cent ahead of 31 March 2018 estimated rental value. The dividend was raised from 2.5p to 6p a share.
Shaftesbury (SHB) reported 6.4 per cent like-for-like rental income growth during the first-half, pushing net property income up 5.2 per cent to £48.6m. Like-for-like estimated rental value of the wholly-owned portfolio was up 2.1 per cent, while there was reversionary potential of £30.6m, or 26.4 per cent over annualised current income. That was in contrast to the Longmartin joint venture, which suffered a 4 per cent devaluation to £218m, while Long Acre retail estimated rental values declined 1.7 per cent.
Self storage specialist Big Yellow (BYG) unveiled 7 per cent like-for-like revenue growth during the year to March, with like-for-like store occupancy rising to 82.7 per cent from 80.5 per cent, although that was at the lower end of our expectations at the start of the year. Seven new sites were acquired, taking the pipeline of sites to 12 in London and the South East.
OTHER COMPANY NEWS:
Adhesive products specialist Scapa (SCPA) may have set new revenue and adjusted profit records in its full-year results, released today, but today’s market reaction is likely to be dominated by the news that chief executive Heejae Chae is stepping down after a decade at the group. During that time, he has overseen an expansive, acquisitive, and cost-focused strategy which – in his words – handled downturns without major sacrifices in the top line or profit margins. Shares are down nine per cent in early trading.
Beneath the noise of its ambitious merger activity, sub-prime lender Non-Standard Finance (NSF) has seen “continued strong loan book growth” and a year-on-year reduction in the impairment rate since the beginning of 2019. An annual general meeting, to be held later today, is set to reassure shareholders of the board’s optimism for the rest of the year. The group also reaffirmed its intention to engage with those Provident Financial (PFG) shareholders, representing some 46.5 per cent of the equity, yet to accept their offer, whilst “also working towards satisfying all of the other outstanding offer conditions”.
To no surprise to anyone who follows the UK property market, Mortgage Advice Bureau (MAB1) will today tell attendees of its AGM that housing transactions are “taking longer to complete in this financial year to date, impacting the timing of our banked revenue”. In a more positive development, non-executive chairman, Katherine Innes Ker, will also unveil a five per cent rise in adviser numbers for the year to date, in line with plans, though shares are off five per cent in early trading.
Mercia Technologies (MERC) has made an additional £2m direct investment as part of an (approximately) £2.4m syndicated investment round into Medherant Limited, a clinical-stage company developing products for pain and CNS (central nervous system) diseases, using a unique transdermal delivery technology. Medherant was spun out of the University of Warwick in 2014. It received its first investment from Mercia’s managed funds in 2015.
Following their first full year as a listed company, Knights (KGH) indicates FY2019 revenue is expected to increase by 50.6 per cent to at least £52.4m. This reflects 15 per cent organic growth fuelled in part by a successful recruitment drive during the second half of the year. Adjusted pre-tax profit is anticipated to surge by 102 per cent to £9.7m, slightly ahead of expectations. With higher than normal cash conversion and “excellent” cash generation, net debt of £14.1m is significantly better than market expectations of £17.8m. The group notes that four acquisitions were made during the year providing strong platforms for growth in their respective regions.
A trading update from Restore (RST) indicates core records has experienced net box volume growth in the first quarter whilst the scanning business is trading as anticipated as it gears up for the delivery of its major exam scanning contract. With a continued focus on cost control, operating performance in datashred has remained stable. Customer retention and new business development have been described as “encouraging”. Management’s expectations for the full year remain unchanged. Additionally, the group has announced the appointment of Neil Ritchie as chief financial officer, starting effective 1 October.
Direct carrier billing group Boku (BOKU) has announced an extension of its identity verification capabilities to over 60 countries by the end of 2019. Boku Identity is used by Fortune 500 companies including PayPal and Western Union. It has performed over 1bn user authentications across North America, Western Europe and Asia.
Accesso Technology’s (ACSO) chief executive Paul Noland will say in an AGM statement today that there was a “positive start” to trading in 2019, with management maintaining its existing guidance for the current financial year. It has continued to enjoy strong demand for its core products, as individual products and also increasingly for multiple applications at individual sites. “In order to address the increased demand from customers for joint implementations of multiple Accesso solutions, and to accelerate future growth, the Group is making significant investment into product integration”. The shares were up by around 4 per cent this morning.
Topps Tiles’ (TPT) revenues dipped by 0.2 per cent to £110m over the first half to March 2019. Like-for-like sales grew by 0.2 per cent. The gross margin came in at 61.2 per cent, up from 60.3 per cent. Pre-tax profits came in at £5.2m, down 18.8 per cent – a reflection of trading losses associated with the Parkside business, while it goes through an initial two-year phase of investment in growth, and of non-recurring property provision movements which relate to a number of closures during the period. The interim dividend was maintained at 1.1p, with the full-year dividend planned to be paid out at a level of around two times cover.
First Derivatives’ (FDP) revenues rose by 17 per cent to £217m over the year to February 2019. Pre-tax profits were up 38 per cent to £16.7m, or by 17 per cent tot £22.9m on an adjusted basis. Underpinning this performance was a 17 per cent rise in fintech sales to £167m, helped by growth in services provided to clients and new contract wins including the Canadian Securities Administrators, BitMEX and a major Japanese bank. Martech sales rose 8 per cent to 341.4m, helped by subscriptions improving by a quarter for its marketing cloud platform. Other markets’ revenues rose 85 per cent to 39.3m . During the year, the group agreed to acquire the minority shareholdings in Kx Systems (its flagship technology), taking 100 per cent ownership by 29 June 2019 – funded by new financial facilities.
