Shares in London's FTSE100 are up on the back of signals of further stimulus from the European Central Bank but small and mid caps are more mixed. Click here for The Trader Nicole Elliott's latest thought on the markets.
IC TIP UPDATES:
Full year results from Ashtead (AHT) indicate a 19 per cent increase in revenue to £4.5bn whilst statutory pre-tax profit has risen by a fifth to £1.06bn on a constant currency basis. Accounting for 85 per cent of group turnover, Sunbelt US revenue increased by 20 per cent to £3.82bn. The UK was comparatively subdued with revenue growth of just 0.7 per cent to £475m. Continuing its strategy of supplementing organic growth with acquisitions, the group invested £1.6bn in capital and spent £622m on 24 bolt-on acquisitions. Net debt has swelled by 38 per cent to £3.75bn, increasing to 1.8 times adjusted cash profits. The group intends to spend a minimum of £500m on share buybacks in FY2020. We remain buyers.
Frontier Developments (FDEV) has more than doubled sales in the 12 months to May 2019. The game developer expects to report revenues of £89m for the period, compared with £34.2m in the prior period. Jurassic World Evolution drove the growth, proving popular with gamers since its launch in June last year. The group’s margin has enjoyed a similar expansion, reaching 21 per cent in the year, from 8 per cent last year. Buy.
Telecom Plus’s (TEP) revenues rose by 1.5 per cent to £804m over the year to March 2019. This was attributed to a number of factors, including a rise in the total number of services it is supplying – offset by a greater proportion of its members using its most competitive tariffs, a reduction in average energy usage, and the effects of regulator Ofgem’s price cap during the fourth quarter. Still, notwithstanding record numbers of households switching energy suppliers, Telecom Plus’s churn rate sits at around half the average rate across the industry. Pre-tax profits were up 4.9 per cent to £43m, and the group has lifted its dividend by 4 per cent to 52p. Buy.
Team17’s (TM17) shares have risen 9 per cent this morning after it upgraded expectations for both revenues and profits for the current financial year. Management reported good traction from both new and established games in the year, and a growing proportion of sales coming from licensing income. The group has a number of game launches approaching, including several arising from partnerships with other game companies. Buy.
Castleton Technology’s (CTP) revenues rose by 13 per cent to £26.4m over the year to March 2019, with 7 per cent organic growth. Adjusted cash profits increased by 24 per cent to £6.3m. On a reported basis, pre-tax profits sunk by 35 per cent to £1.2m, after higher administrative expenses, and exceptional credits of just £11,000 – down from £1.4m in FY2018. Adjusted operating cash conversion was 103 per cent, or 97 per cent post-exceptionals, and the group proposed a maiden dividend of 1p. While Castleton’s Australian operation didn’t meet its expectations – having a “slight impact” on next year’s outlook – it has taken steps to address this. Buy.
KEY STORIES:
Safestore (SAFE) reported 5.9 per cent like-for-like revenue growth during the first-half, with the less mature Paris market slightly outperforming the UK. Closing occupancy was 74.3 per cent, up from 72.1 per cent the prior year for the self storage specialist. A lower revaluation surplus
Though a rapprochement seemed unlikely after last month’s suspension, the board of Old Mutual (OMU) today formally sacked chief executive Peter Moyo. The pan-African investment, savings and insurance outfit gave further details on the fall-out: dividends paid out to a private equity group founded by Mr Moyo, which Old Mutual said were in breach of its rights as a preference shareholder. Terms of separation between the board and Mr Moyo could not be reached, a detail which nonetheless appears to have satisfied shareholders, who have pushed the shares up b two per cent in early trading.
OTHER COMPANY NEWS:
Meggitt (MGGT) has been awarded a multi-million dollar contract with American industrial conglomerate Textron to provide fire protection systems for its Cessna Denali and Skycourier jets. Deliveries are scheduled to begin later this year.
First Derivatives (FDP) has completed the acquisition of the minority shareholdings in Kx Systems, in line with the terms outlined on 2 July 2018. This takes First Derivatives’ ownership of Kx Systems to 100 per cent, for $53.8m in cash.
Shares in Marlowe (MRL) are up almost 3 per cent this morning as the group announced that revenue for FY2019 jumped by 59 per cent to £129m whilst statutory pre-tax profit has swung positive to £2m. Around 20 per cent of revenue is now derived from customers receiving more than one service, increasing to 37 per cent for the top 1,000 customers. Eight acquisitions were made during the year, including William Martin through which the group has secured a market-leading position in the property related health and safety risk management sector.
Mortgage Advice Bureau (MAB1) is to acquire an 80 per cent stake in Scotland-focused independent mortgage brokers First Mortgage, in an earnings-accretive deal which values the group at £20.6m, and is expected to bring “significant growth opportunities”. However, the transaction requires a new £12m revolving credit facility with Natwest, and a shift in the dividend policy – to pay out 75 per cent of post-tax profits, rather than 90 per cent. That change comes into effect for the December year-end, and likely explains the small dip in the shares this morning.
