Join our community of smart investors

News & Tips: Superdry, M&S, Paragon Banking & more

The fashion chain's shares jump 10 per cent on appointment of an interim chief financial officer
May 22, 2019

Click here to read this morning's Market Outlook from The Trader Nicole Elliott.

IC TIP UPDATES:

Buy-to-let mortgage-focused Paragon Banking (PAG) has raised its interim dividend 27 per cent to 7p per share today, after posting a 30 per cent growth in lending volumes in its half-year to March. Though capital ratios dipped, the group said pushes into SME loans and consumers in specialist lending markets was paying off, and lay behind the eight basis point increase in the net interest margin to 2.24 per cent. Buy.

Merchant banking group Close Brothers (CBG) put in a “solid performance” in its third quarter to 30 April, as a 1.5 per cent increase in its loan book was offset by lower activity levels in its market-facing business. However, while client activity remained subdued in the asset management division, positive market movements and net inflows lifted the value of its managed assets from £10.3bn to £10.9bn. Buy.

Inland Homes (INL) has announced that its planning application at Wilton Park, Beaconsfield is scheduled to go before the planning committee in early June 2019 with an officer's recommendation for approval. Meanwhile the Cheshunt Lakeside development was heard again by the planning committee on 21 May and while the application was recommended for approval by the planning officers, members of the planning committee of Broxbourne District Council resolved to defer making a decision once again. Buy.

Dotdigital (DOTD) has successfully completed the integration of the Comapi CPaaS (communications platform as a service) technology into the engagement cloud platform of its core dotmailer SaaS (software as a service) based marketing platform. This acquisition has “delivered its core strategic objective which was to accelerate the route to market” of dotdigital’s omnichannel engagement cloud offering. Dotdigital bought Comapi in November 2017. Buy.

U&I (UAI) cited a “robust performance” for the 13-month period to March 2019, “against a very challenging backdrop”. Development and trading gains sat at £42.8m –against £68.3m in the prior year. Pre-tax profits came in at £6.3m, down from £48.2m. Without a year “marked by growing political, planning and economic uncertainty”, the group believes its gains would have exceeded its upper £50m target. Looking ahead, it has revised down its targets for development and trading gains to £35-45m for FY2020 (from £45-55m) and revised up its targets to £45-55m (from £35-45m) for FY2021. It added that it has a good pipeline of short and long-term projects, and is prioritising delivering these over the year ahead. Recommendation under review.

Britvic’s (BVIC) revenues for the half year to April 2019 grew by 4.9 per cent to £769m, with pre-tax profits up 4.8 per cent to £34.9m. Organic revenues edged up by 1.9 per cent. The group cited organic brand contribution growth across all its geographies, and noted that the soft drinks levy in Great Britain has “accelerated consumer trend towards our low/no sugar portfolio”. The interim dividend has been lifted by 5.1 per cent to 8.3p. Buy.

Shares in Safecharge (SCH) soared by over a fifth this morning on the news that it has received a recommended cash acquisition offer from payments company Nuvei. Under the terms of the acquisition, SafeCharge shareholders are entitled to receive $5.55 for every share (£4.36). This represents a premium of around 25 per cent to the closing price of £3.50 per SafeCharge share on 21 May 2019. In total, the deal values SafeCharge fully-diluted share capital at around $889m (£699m). Nuvei has received irrevocable undertakings to vote to approve the acquisition’s scheme from Northenstar Investments, an investment holding company controlled by Teddy Sagi – SafeCharge’s majority shareholder – in respect of around 68 per cent of the group’s shares in issue.

Shares in Superdry (SDRY) jumped 10 per cent this morning after the group announced it has appointed an interim chief financial officer. Most of the group’s top management quit after founder Julian Dunkerton was voted back onto the board earlier in the year, so the appointment of Nick Gresham - currently chief financial officer at online sports and cycling retailer Wiggle - will bring some welcome stability to the top team. Things have been improving for the group, but we have yet to see concrete evidence that Mr Dunkerton’s plan can deliver improvements at the bottom line. Sell.

 

KEY STORIES:

Reflecting adjusted operating losses of £285m and £22.3m in energy portfolio management and thermal generation respectively, SSE (SSE) has announced that group adjusted operating profit has declined by 27 per cent to £1.13bn for FY2019. The fall was largely driven by a decline in the wholesale business, with networks adjusted operating profit increasing by 9 per cent thanks to a strong performance from electricity transmission. With energy services still held for disposal, Katie Bickerstaffe has been appointed as executive chair to oversee the business’s future outside of the group. Given that the headline numbers are broadly in line with consensus expectations, RBC Capital Markets describes the results as “surprisingly dull”. Shares are down over 2 per cent this morning.

Bovis Homes (BVS) reported a rise in the average weekly private sales rate per site to 0.61 since the start of the year from 0.52. The housebuilder has opened seven new sites since January and expects to open a further 16 sites this year. Cost control improvements - alongside margin initiatives - are expected to offset build cost inflation of between 3 and 4 per cent.    

Great Portland Estates (GPOR) reported a 1 per cent rise in its adjusted NAV for the year to March, although pre-tax profits were depressed by a smaller surplus from investment properties than the prior year. The rent roll was up 6.2 per cent to £100m, while 68 new lettings were completed at 6.9 per cent above estimated rental values at March 2018.

Barrick Gold has made the first public move in the much-rumoured takeover of Acacia Mining (ACA), in which holds a 64 per cent stake. The offer of 0.1533 Barrick shares per Acacia share values the Tanzania-focused gold miner at $787m (£621m). The offer, which is not yet official, comes as the two companies’ relationship has deteriorated over discussions with the government of Tanzania, which has slapped a massive tax bill on Acacia and blocked exports of gold concentrate since 2017. Under UK takeover law, it’s possible Barrick will not be able to vote its shares so minority shareholders would have the full say on the deal. Berenberg said there seemed “little alternative to the Barrick offer” because of Tanzania’s refusal to deal with Acacia. One anonymous shareholder has already told the Financial Times the Acacia valuation is “absurdly low”. Acacia shares were off 5 per cent on the news.

Marks and Spencer (MKS) has unveiled details of its proposed rights issue. The group aims to raise £601m through the issue, which will go towards its joint venture with food delivery service Ocado (OCDO). Sales and profits were down at the supermarket, but management said the “green shoots” were starting to show in its mammoth turnaround plan. Indeed, net debt fell 15 per cent in the period, to £1.55bn, and pre-tax profits rose by more than a quarter. Early reactions have been negative, however, with investors marking the shares down 4 per cent in early trading.

 

OTHER COMPANY NEWS:

Marlowe (MRL) has announced it has entered into a conditional agreement to acquire Clearwater Group Limited for a total enterprise value of £11m on a cash and debt free basis. Expected to be at least 10 per cent earnings accretive by FY2021, the addition will strengthen the group’s position as a major player in the water treatment and hygiene market, broaden its technical capabilities and enhance national route density. Marlowe’s enlarged business is expected to have run-rate revenues in the water services market of around £75m.

ContourGlobal (GLO) has announced that adjusted cash profits from the first quarter of 2019 increased by 23.5 per cent to $147.0m (£116m), primarily driven by the acquisition of the 250 MW concentrated solar power (CSP) facilities in Spain in May 2018 and improved wind resource and availability. Funds from operations were also boosted by the Spanish CSP business, surging by 37 per cent to $69.0m. The acquisition of natural-gas fired cogeneration plants in Mexico from Alpek is now expected to close in the third quarter with an anticipated adjusted cash profit contribution of $110m in its first full year of operations. Group adjusted cash profit guidance for FY2019 remains unchanged at $720-770m.

Shares in Intermediate Capital (ICP)  are up seven per cent in early trading, after the specialist asset manager posted a 32 per cent rise in third-party fee income, a 65 per cent jump in adjusted pre-tax profits, and a 67 per cent increase in its final dividend for the year to March. After a strong year of demand for the group’s investment strategies, management reports a strong outlook, backed by “good visibility on future fundraising” and growth in institutional clients.

News today that cross-border payments start-up TransferWise has been valued at $3.5bn is a welcome development for Draper Esprit (GROW), which has seen the value of its stake more than double between September 2018 and March. Today, the venture capital fund announced it has sold part of its stake in the business, while retaining a £12m holding in its core portfolio.

Despite subdued client activity in March and April, a pick-up in market volatility in the first three weeks of May “have been favourable” to IG Group (IGG), as clients have taken opportunities to trade. The online trading outfit now reckons revenue in its current quarter will hit £115m, up from £108m in the three months to February, though net trading revenue is still expected to fall 17 per cent year-on-year. And while operating costs are expected to decline, this is largely due to a dip in expected variable remuneration. Operating profits are therefore likely to come in at £190m, 32 per cent down on FY2018, though with the shares nine per cent to the good in early trading, this was probably better than many in the market were expecting.

Boku (BOKU) is holding its capital markets day today. After this, it will hold its AGM at the same venue. In a trading update this morning, it said that trading since the results for 2018 – delivered in March 2019 – continues to be in line with management’s expectations. Anticipated continued growth in the payments business and investment in identity gives the board confidence that Boku will reach at least their revenue projection of $52m for 2019. In other news this morning, the group announced that it has entered a global partnership with DAZN, the world’s first pure-sport live and on-demand streaming service – allowing subscribers to pay for the service on their mobile phone, broadband and pay TV accounts.

A report from the small business commissioner, Paul Uppal, has criticised G4S’s (GFS) payment practices following an investigation into a complaint from one of its small suppliers. It found evidence of “persistent late payment” over an 18-month period. Citing a “responsibility to lead” given its status as the largest UK outsourcer and a strategic government supplier, the findings indicate that the group has “further steps to take to ensure they are consistently compliant in paying promptly”.