London indices are positive across the board in mid-morning trading on the back of a sharp rebound in the US overnight which was fuelled by hopes of a rate cut. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
An AGM statement from the AA (AA.) indicates that trading is in line with expectations. The group believes it is well positioned to deliver trading cash profits growth and strong free cash flow generation in FY2020 and is on track to meet its medium-term growth targets to FY2023. We remain sellers.
Babcock International (BAB) has announced that it has combined its naval nuclear business with subsidiary Cavendish Nuclear to create a new nuclear division led the under single management of nuclear head Simon Bowen. Restated results illustrate the effect of removing naval nuclear from Babcock’s marine business, transferring revenues of £620.6m into nuclear. The announcement, which coincides with the defence outfit’s capital markets day today, sets out a raft of medium term targets which include £1.4bn of free cash flow over the next five years, and to sustain margins at around 11 per cent. Shares rose marginally in early trading, but we remain sellers for now. Sell.
GB Group’s (GBG) revenues rose by a fifth to £144m for the year to March, with underlying constant-currency organic growth of 11.5 per cent. Pre-tax profits climbed by a tenth to £14.7m. The group expanded its presence in North America and the Asia-Pacific region, with international sales constituting 45 per cent of the top line – up from 34 per cent. This was helped by two acquisitions: VIX Verify in Australia, and US-based IDology – its largest transaction to date, at $300m. These deals led GBG to swing to a net debt position of £66.3m, from net cash of £13.5m. Management said it remains confident about continuing to deliver double-digit organic growth. Recommendation under review.
Shareholders in Impax Asset Management (IPX) were aware of the group’s impressive track record of 14 consecutive quarters of positive net inflows before the specialist investor posted its half-year numbers today. The new information includes a rise in non-staff costs, which alongside the impact of the less profitable Pax business has clipped the operating margin to 23 per cent. However, Impax reports that based on its assets at the end of the period (which have since risen), annual revenues are tracking at £71.4m, against an operating margin of around 26 per cent. Buy.
Consultancy firm Alpha Financial Markets (AFM) saw its operating profit climb £12.6m in the year to March, as the capitalised on rising demand from asset and wealth management clients to navigate a changing industry, whilst investing in new hires and service lines. Consultant numbers increased by 19 per cent in the period to 362, though net cash still rose. Separately, Alpha announced the acquisition of Axxsys – a management consultancy focused on “technology implementation services” to investment managers – for £9m, to be paid in cash in four instalments over two years. Shares, flat in early trading, remain a buy.
Aviva’s (AV.) chief financial officer Tom Stoddard is to step down from the role after five years at the insurer, to be replaced by Aviva UK Insurance chief financial officer Jason Windsor. Group chief executive Maurice Tulloch described Mr Stoddard as “a tremendous leader [who] played a major role in delivering Aviva’s financial turnaround, significantly strengthening the group’s capital position”. Buy.
Like-for-like sales at Card Factory (CARD) were up 2.3 per cent in the three months to the end of April 2019, a stark improvement on the 0.4 per cent decline seen last year. Management said the weak comparator was a contributing factor in the improvements but allowed that the group had seen an “encouraging” start to the year. Caution remains, given the uncertain macroeconomic environment and challenging consumer conditions, but life-for-likes are expected to end the year “marginally positive”. Sell.
KEY STORIES:
Non-Standard Finance’s (NSF) hostile bid for Provident Financial (PFG) will tonight lapse, after the sub-prime lender determined the combined group “would not have sufficient regulatory capital on a consolidated basis at completion due to the expected level of minority interests at that point”. In other words, failure to secure backing from a sufficient proportion of Provident shareholders was a stumbling block after all. Interestingly, NSF said it had ensured a significant proportion of its deal-related costs, expected to exceed £10m, were structured on a success-only basis and can be met from existing resources. The news will come as another blow to Neil Woodford, who owns shares in both companies, and was one of three major investors to back NSF’s bid. NSF chief executive John van Kuffeler expressed his disappointment that despite the group’s “best efforts”, customers, employees and shareholders of both groups “will not now benefit from our transformation plan to build a brighter future by combining Provident with NSF”. The market seems to disagree with that verdict, and has pushed shares in Provident up 10 per cent on the news.
The Competition & Markets Authority has opened an investigation into the acquisition of Charter Court Financial Services (CCFS) by OneSavings Bank (OSB). The UK watchdog is proving whether the all-share merger of the specialist lenders could create “a substantial lessening of competition within any market or markets in the United Kingdom for goods or services. Comments are open until 19 June, and a decision is due by the end of July.
Hurricane Energy (HUR) has hit first oil at the Lancaster field on the UK continental shelf. Its fractured basement play is a first for the UK continental shelf. The company said the Aoka Mizu floating production storage and offloading vessel completed a 72-hour test, hitting a production rate of 20,000 barrels of oil per day. Hurricane chief executive Robert Trice said up to 12 months of stable production would be needed to “enable us to plan for associated full field development scenarios”. London investors agreed, with the company’s share price down 0.6 per cent on the news.
OTHER COMPANY NEWS:
Chemring (CHG) shares were flat on the news that it had returned to profit, following the release of its half-year results. In what is being viewed by some analysts as a transition year for the defence contractor, half-year revenues grew 5 per cent with strong Sensors & Information sector performance. Chemring expects a substantial second half bias for revenue, with around 95 per cent of expected H2 revenue either already in the order book or delivered to date.
Guarantor lender Amigo Holdings (AMGO) has increased the size of its securitisation facility to £300m, in order to pay down separate borrowings (including its outstanding bonds) and for general corporate purposes. The three-year facility is five percentage points cheaper than the current cost of the group’s senior secured notes, thereby lowering Amigo's overall average cost of capital.
Self-invested personal pension provider Curtis Banks (CBP) has appointed Dan Cowland as its new chief financial officer, placing current CFO Paul Tarran from July. Mr Cowland’s previous roles have included stints as finance director for WH Ireland and Shore Capital, as well as Macquarie Bank and Lehman Brothers.
Full year results from Biffa (BIFF) indicate modest revenue growth of 3.3 per cent to £1.09bn whilst statutory pre-tax profit has declined by 44 per cent to £21.5m. The municipal and resource recovery and treatment segments continue to be adversely impacted by ongoing waste import restrictions in China. By contrast, the industrial and commercial division saw 8 per cent revenue growth, driven by the 7 acquisitions completed during the year. Shares were up almost 2 per cent in early trading.
Applegreen (APGN) traded in line with expectations in the first five months of 2019, management announced in a pre-AGM statement this morning. Soft comparators notwithstanding, the group said its Irish business was performing well, while its British business’s performance was “satisfactory”. It has added nine sites to its portfolio since December last year.
