Poor sentiment remains around London's equity markets with shares across the board in the red once more. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
A trading update from Kier (KIE) indicates that revenue for FY2019 will be broadly in line with 2018, whilst underlying operating profit will likely fall short of expectations by around £25m. The group expects to report a net debt position with an adverse impact on average month-end net debt. Net costs associated with the future proofing Kier programme are expected to be around £15m higher than previously forecast. Despite double digit growth in its orderbook, revenue growth in the buildings business will be lower than previously projected and the group continues to experience volume pressures in highways, utilities and housing maintenance. The conclusions of the strategic review announced in April are due on 30 July. Sell.
Shares in sell tip Dignity (DTY) have fallen 5 per cent this morning after HM Treasury announced plans to regulate the pre-paid funeral sector and end “high pressure and misleading tactics” in the sale of pre-paid plans. The Financial Conduct Authority will now oversee regulation of the sector, and consumers will have access to the Financial Ombudsman Service. Dignity accounted for 33 per cent of the pre-sold market in 2018, and broker Peel Hunt said that while little will change initially, there is a risk oversight will become increasingly onerous and the number of plans sold will fall. Sell.
AstraZeneca (AZN) announced that its Lynparza cancer drug, which is being co-developed with US outfit Merck & Co, has delivered “unprecedented” results in testing. The pharmaceutical giant claimed that the drug almost doubled the period patients lived without disease progression, with 22 per cent of patients remaining free of progression for two years, versus 10 per cent of those on placebo. Positive news, for sure, but we remain concerned about the regulatory environment and the group’s debt burden. Sell.
Sirius Real Estate (SRE) grew funds from operations by more than a quarter during the year to March, which precipitated a 6.3 per cent rise in the annual dividend to 3.36c a share. Annual like-for-like rent roll was up 7.1 per cent and a further three non-core assets located in Bremen were sold for €25.6m. The German-focused landlord also entered a strategic partnership with Axa Investment Management. Buy.
KEY STORIES:
Scapa Group (SCPA) shares nearly halved as it announced that it was preparing legal action, after ConvaTec Group (CTEC) informed the adhesive products specialist that it was pulling out of a five year supply deal with Scapa Tapes North America. “Neither the company nor Scapa Tapes North America LLC accept that ConvaTec has any grounds to terminate the five year supply agreement in respect of which a three year term remains,” Scapa said this morning. The contract is worth $30m (£23.8m) a year.
KCom’s (KCOM) board has withdrawn its recommendation of the takeover offer made by Humber Bidco Limited – a wholly-owned indirect subsidiary of the Universities Superannuation Scheme Limited (USS). It is now recommending a £563m offer, announced today, from ‘MEIF 6 Fibre’ – a wholly-owned indirect subsidiary of the investment fund Macquarie European Infrastructure Fund 6 SCSp. Under the terms of this deal, KCom shareholders would receive 108p per share; a premium of 49 per cent to its shares’ closing price on 23 April 2019 (the business day prior to USS’s offer being announced), and an 11 per cent premium to USS’s offer of 97p per share. KCom’s board is proposing the adjournment of the USS scheme meeting scheduled for 5 June.
OTHER COMPANY NEWS:
In the latest spate of investor rebellions, almost 33 per cent of shareholders at Mears (MER) voted against the approval of the remuneration report at the AGM last week. Around 30 per cent also voted against the re-election of many directors including chairman Kieran Murphy, chief executive David Miles and finance director Andrew Smith. In a move spearheaded by PrimeStone Capital (who own a 13.5 per cent stake in the group), just under 50 per cent of shareholders defied the recommendation of the board, voting in favour of appointing independent directors Andrew Coppel and Ian Lawson.
Another Glencore (GLEN) unit boss has stepped down. The mining and trading giant’s head of oil, Alex Beard, will retire at the end of June. This comes after agriculture chief Chris Mahoney announced his departure last month and long-time copper boss Aristotelis Mistakidis left last year. Beard has been at the company since 1995, the year after management bought out Marc Rich and changed its name to Glencore. Beard’s division is one of those under scrutiny from the US Department of Justice for its dealings in Venezuela and Nigeria.
