The FTSE100 and FTSE250 have built on their recent recovery, but small caps are out of favour in London this morning. Click here for The Trader Nicole Elliott's latest thoughts on the markets
IC TIP UPDATES:
Rolls-Royce (RR.) has completed the UK’s largest bulk annuity transaction, transferring £4.6bn in assets and £4.1bn in liabilities to Legal & General (LGEN). The transaction covers approximately a third of the scheme’s total assets, and the assets and liabilities concerning around 33,000 pensioners who are members of the Rolls-Royce UK Pension Fund, out of a total of 76,000 members. The deal will reduce net assets by £0.5bn, although funding levels remain unchanged. The aerospace engineer will make an exceptional cash contribution of £30m to the scheme as part of the arrangement. Rolls-Royce’s free cash flow guidance remains unchanged. Sell.
Inland Homes (INL) has gained planning permission for its Wilton Park site in Beaconsfield, Buckinghamshire, where the brownfield regeneration specialist plans to build 350 homes as well as commercial and community space, with an estimated gross development value of £350 million. To reflect the value of those planning decisions in its financial results, the group has decided to change its financial year-end from 30 June to 30 September. Buy.
Porvair (PRV) has grown revenues by 20 per cent for the six months to 31 May 2019, with profits and earnings per share expected to be ahead of the prior year, according to a trading update. Net cash was just over £3m, following investment of around £3m in capital expenditure and acquisitions. Buy.
Shares in Mitie (MTO) are up over 8 per cent this morning following the group’s announcement that FY2019 revenue increased by 9.4 per cent to £2.2bn whilst operating profit before “other items” exceeded guidance coming in at £88.2m. Boosted by the acquisition of Vision Security Group, the security division (which accounts for almost a quarter of group turnover) saw revenue increase by 24.2 per cent to £536.5m. Although the overall order book remained broadly flat at £4.1bn, in the group’s largest business, engineering services, the order book declined by 11.6 per cent. Benefitting from the disposal of the pest control and social housing businesses, net debt has fallen by 27 per cent to £140.7m. Recommendation under review.
In a bid to reduce its expenses by £300m a year by 2022, Aviva (AV.) is to cut 1,800 jobs from its 30,000 global workforce, the insurer announced in the latest move by new chief executive Maurice Tulloch. The group also said trading year-to-date is “broadly consistent with 2018”, as weaker performance in savings and asset management have been partly offset by growth in Europe and Asia, and a rebound in Canada. Buy.
Shares in Entertainment One (ETO) plunged late yesterday afternoon, closing down by around 17 per cent, after US publication Variety reported that Mark Gordon is in talks to leave his role at the company as president and chief content officer of film, TV and digital. The article said this came after “conflict” between Mr Gordon and managers at eOne. Producer Mr Gordon joined eOne in 2018, after the group acquired the remaining stake in The Mark Gordon Company. This morning, eOne issued a concise statement: “In response to recent press speculation, Entertainment One can confirm that Mark Gordon continues to be a part of the eOne team both now and into the future”. The shares climbed 15 per cent in reply. We remain positive; buy.
Shares in Joules (JOUL) have jumped 6 per cent this morning after the clothing brand announced pre-tax profits for the year to May 2019 would be at the top end of analyst expectations. The announcement marks the continued success of the group’s “total retail” model, which entails a multi-channel offering to sell to customers through retail stores, wholesaling and ecommerce. The consensus forecast range the group expects to top is for £14.8-£15.3m. Buy.
KEY STORIES:
Go-Ahead (GOG) shares soared 9 per cent in morning trading after the transport operator lifted its expectations for its London and international bus division, having secured revenue growth in all three of its business divisions. Customer satisfaction levels are high across the group owing to strong punctuality rates. Go-Ahead’s international bus operations in Singapore and Dublin are performing ahead of expectations, while its German rail contracts launch this weekend after a four-year mobilisation period.
Wealth manager St. James's Place (STJ) has terminated its mandate with Woodford Investment Management as manager of four of its funds: UK High Income Unit Trust, UK equity (Life and Pension), Income Distribution and SJPI UK High Income. Columbia Threadneedle and RWC Partners, whose investment managers Richard Colwell and Nick Purves already manage funds and client money on behalf of St James’s Place, have been appointed as replacements. The four above mandates were separate to the Equity Income Fund which Woodford suspended earlier this week, though the wealth manager said it had made the move to “ensure its clients’ investments continue to be managed effectively”.
OTHER COMPANY NEWS:
In a trading update for the half-year to May 2019, Amino Technologies (AMO) said that its full-year expectations remain unchanged. Its transformation programm announced in February 2019 completed on schedule in April, and is expected to deliver annualised cost savings of $5m. Revenues for the respective six months are expected to come in at around $35m, down from $41.2m, while net cash should land at $19.3m, up from $15m. The shares were up by around a tenth this morning.
John Menzies (MNZS) has announced that interim chief executive Giles Wilson is to take on the role permanently with immediate effect.
Investors in CMC Markets (CMCX) can’t have been expecting much from the trading platform’s full-year results. A regulatory crackdown on retail clients’ use of leverage in spread-betting, alongside fewer event-driven trading opportunities, were both well-anticipated, and help to explain an 88 per cent drop in earnings per share in the year to March 2019. After striking a white label deal with ANZ Bank, the group is also keen to trumpet the 81 per cent increase in its stockbroking business, though at £15.5m, this made up less than 12 per cent of last year’s income.
AB Dynamics (ABDP) confirmed that following an oversubscribed open offer, the automotive testing systems specialist raised gross proceeds of £5m.
