Shares in London picked up where they left off on Friday with further gains, supported by a bounce in US sentiment after the US and Mexico settled their differences on trade. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Ferguson (FERG) announced that it is initiating a $500m share buyback, which it will complete over the next 12 months. The world’s largest trade distributor of plumbing and heating products delivered mixed third quarter figures, as revenues grew 6.2 per cent while trading profit rose 2.3 per cent. But organic revenue growth slowed to 2.7 per cent from 6.5 per cent at the half year, below previous guidance of between 3 and 5 per cent. Not a strong start to our tip, as shares fell 5 per cent in morning trading. The US housing market will struggle for a while yet, it seems, but we retain our confidence in the quality of the Ferguson business model, which has built a potent balance sheet that has supported growth through a range of bolt-on acquisitions. Buy.
MJ Gleeson (GLE) chief executive Jolyon Harrison has stepped down from the board and left the company with immediate effect after discussions over his remuneration and succession planning resulted in a failure to agree a “mutually acceptable” way for him to continue in his position. James Thomson, formerly chief executive of Keepmoat Homes, will take up the position on an interim basis. The shares were down by around 10 per cent in early trading. We place our buy recommendation under review.
Ideagen (IDEA) has acquired Redland Solutions for a net consideration of £15.8m. The consideration will be funded from an extended revolving credit facility with NatWest Bank. Redland is a fast-growing, profitable “RegTec” (regulation technology) software-as-a-service company, which supples software to the financial industry. Its current annual recurring revenue is around £3m – up by a half since April 2018. The transaction is immediately earnings enhancing. Buy.
KEY STORIES:
Scapa (SCPA) chief executive Heejae Chae has reversed his decision to stand down from his role, as the adhesive products specialist pursues legal action against ConvaTec (CTEC) after it exited a “material” supply deal with its healthcare arm. ConvaTec cancelled its agreement last month in response to Scapa’s acquisition of Systagenix Wound Management, a ConvaTec competitor, a move that the medical technology group deemed in breach of its deal, which Scapa denies. Scapa has taken measures to reduce the estimated impact on revenues and trading profit in FY20. After a reduction in direct labour, while assuming no further mitigating actions at present, its estimated exposure to revenue and trading profit in FY20 could be around £28m and £13m respectively. This includes the impact on other facilities which provide materials for ConvaTec products in Knoxville. Scapa shares rose 16 per cent in morning trading.
Helical (HLCL) confirmed press reports that it had previously received more than one takeover offer from different parties, but that it had declined the offers on the basis they were below the company’s adjusted net asset value and so undervalued its fair value. Shares were up 9 per cent in early trading.
Chris Hill, the chief executive of Hargreaves Lansdown (HL) reached out to the investor platform’s customers yesterday to apologise for the impact of “the recent problems with the Woodford Equity Income Fund”. However, Mr Hill defended the Wealth 50 list, on which both of Mr Woodford’s equity funds were listed until a week ago, arguing that “the shortcomings of one fund should not detract” from the list’s benefits. At the same time, he said Hargreaves would be reviewing its specific situation to “ensure we learn from it”. That hasn’t prevented shares in the investor platform group from dropping another 3 per cent in early trading.
Thomas Cook (TCG) confirmed media reports that it is in discussions with Chinese investment company Fosun International over a takeover approach for its tour operator business.
On Friday, it was announced that Millennium & Copthorne Hotels (MLC) is set to be taken private by Singaporean real estate company City Developments in a £2.2bn deal. CDL confirmed that it had received “irrevocable” guarantees to acquire the remaining 43.58 per cent in the hotel group that it does not already own. Shareholders will receive 685p in cash per share. The bid represents an increase on a previous £1.8bn offer made by City in October 2017.
Codemasters (CDM) results came in ahead of expectations for the year to March 2019. Cash profits were up 60 per cent to £18.7m, driven by a continuing shift towards digitally downloaded games. Digital channels now account for 59.2 per cent of the group’s revenues. Post period end, the group has been boosted by the news its GRID racing game will be one of the launch titles for Stadia, Google’s (US: GOOGL) game streaming service due to launch later this year.
OTHER COMPANY NEWS:
John Menzies (MNZS) has been awarded a new long-term ground handling contract at London Luton Airport by EasyJet (EZJ). The contract will see Menzies handle over 24,000 “turns” – loading, unloading and servicing aircraft – annually at the airline’s home base. Shares are up over 1 per cent this morning.
Avesoro Resources’ (ASO) share price has fallen by half after the gold producer cut guidance for the year and revealed widespread discontent at its operations. Miners have downed tools in protest at cost-cutting moves at the Youga gold operation in Burkina Faso and the New Liberty mine in Liberia. Avesoro now says it will produce 180,000-200,000 ounces of gold overall, down from 210,000-230,000oz. Grade issues have also hit production, with Youga running at a mill feed grade of 1.87 grams per tonne (g/t), compared to the budgeted 2.94g/t. The little-traded company’s share price is down 55 per cent to 42p.
James Fisher (FSJ) has applied to the London Stock Exchange to list an additional 50,000 ordinary shares at 25p each.
