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News & Tips: Costain, Versarien, BT & more

Attention shifts to the G20 summit
June 28, 2019

Shares in London were mixed in mid morning trading as attention shifts to the east where the G20 are convening in Japan amid ongoing rumblings over tariffs and trade. Click here for The Trader Nicole Elliott's latest thought on the markets. 

IC TIP UPDATES: 

A half-year trading update from Costain (COST) has sent shares plummeting by 37 per cent this morning. The group has announced that revenue for FY2019 will be lower than previously anticipated and underlying profit is expected to be between £38m and £42m. This is due to a number of delays to contracts start dates and new awards – projects affected include the M6 “smart motorway” and southern section of HS2. Additionally, the M4 corridor around Newport project was cancelled earlier this month. Half-year results will also include a one-off £9.8m charge relating to the cost of previously completed remedial works. The expected average month-end net cash balance of around £65m would be 28 per cent lower than the first half of 2018. Under review.

Versarien (VRS) shares rose as much as 10 per cent in morning trading after the engineering outfit announced its first US graphene order. An unnamed US oil and gas company has ordered 12kg of high purity graphene nano platelets integrated into a polymer masterbatch by Versarien, which will be used in down-hole drilling components. Yesterday afternoon, Versarien announced that its vice president of North American operations Patrick Abbott had been replaced by Brian Berney, a former executive at a Chinese speciality battery manufacturer, who will be president of North American operations as of 1 July. Mr Abbott, who has left the company, has been embroiled in a long-running legal saga and was charged with securities fraud in a Texas court earlier this month. He maintains his innocence against all charges. The news of a US order is encouraging, but with no guidance available on the value of the deal, we’ll have to wait for more detail at next month’s results before we can read much more into it. Sell.

After market-close yesterday, BT (BT) said that Orange has announced its intention to offer around 248m shares in BT to institutional investors by means of an accelerated bookbuild offering. The offering represents around 2.5 per cent of BT’s issued share capital.  BT said that it had committed to take part in the offering. This morning, Orange said it has completed the sale of its stake in BT – with around 41m shares acquired by the latter. Buy.

John Laing (JLG) faced operational performance issues in Europe over its first half, largely driven by low level of wind activity on some legacy assets in Germany and Ireland. The infrastructure projects specialist also hit problems in Australia, where it experienced transmission issues relating to ‘marginal loss factors’, which are defined as the portion of energy lost when electricity is transmitted across the transmission and distribution networks, owing to resistance. Europe and Australia counted for 18.5 per cent of John Laing’s investment portfolio as of 31 December 2018. The news is unsettling, given the company’s ongoing shift from the UK, although the shares were flat in morning trading. Under review.

KEY STORIES: 

Craneware’s (CRW) shares plummeted by a third this morning, after it said sales in the second half of the year to June have been lower than anticipated, as the market processed the launches of three new products on its cloud-based Trisus platform. Craneware now expects full-year revenue growth of around 6 per cent, with adjusted cash profits up 10 per cent. House broker Peel Hunt had previously anticipated growth of 18.2 per cent and 18.5 per cent respectively. As Craneware previously flagged, capitalised research and development has increased. This will be around $9m – up from $4.7m in FY2018. The cash profits figure has also been adjusted for $1.5m in exceptional costs tied to professional fees for an acquisition opportunity that the group didn’t ultimately pursue. 

Airtel Africa said this morning that the offer price for its IPO has been set at 80p per share; the bottom end of the 80p to 100p range announced on 17 June. This gives it a market capitalisation of around £3.1bn. The group said the offer was oversubscribed with strong interest from various reputed global investors. It also came with a secondary listing on the Nigeria Stock Exchange. Conditional dealings in the shares began at 8am today on the London Stock Exchange, open to institutional investors who applied for and were allocated shares in the global offer. UK admission is expected to become effective, and unconditional dealings are expected to begin, on 3 July.

Almost 40 people died at a Glencore (GLEN) copper mine in the Democratic Republic of Congo yesterday, according to reports. The company’s share price fell 7.5 per cent to 255p after the tragedy, before recovering to 269p this morning. Those killed when a gallery collapsed were “illegal artisanal miners”, Glencore said, among the 2,000 people who enter the Kamoto mine site every day. The company said 19 people had died as of Thursday afternoon, while Reuters said the number was “at least 36”. Glencore said its mine team was helping with the search and rescue effort. 

Shares in Merlin Entertainments (MERL) were up 14 per cent in early trading after it was revealed that the leisure company has received a takeover offer from a consortium of investors made up of the Danish billionaire family that controls Lego, private equity firm Blackstone, and a Canadian pension fund. The deal values Merlin at £6bn, or 455p per share. This represents a 15.2 per cent premium to the share price on the day prior to the announcement, or a 31 per cent premium to the undisturbed six-month volume weighted average. Merlin directors deemed the offer “fair and reasonable”, and have unanimously recommended that shareholders vote in favour. 

OTHER COMPANY NEWS: 

Savannah Petroleum (SAVP) has missed another deadline to complete its takeover of the struggling Seven Energy for its oil and gas assets in Nigeria. The explorer, which has a valuation of £165m, has given shareholders several deadlines for completion including December 31, March 31 and June 30, but is still waiting on the Nigeria government to sign off on the deal. The company’s share price is down 2.6 per cent on the news, to an all-time low of 16.9p. 

Shares in CVS (CVSG) are up 7 per cent this morning, after a trading update from the veterinary services group. Management reported like-for-like sales growth of 5.4 per cent in the 11 months to June. Results are due to come in in line with consensus expectations. Peel Hunt notes that the group recently suspended its acquisition activity, leaving more time to focus on the core business.