London shares are holding up reasonably well as the glow of the G20 summit fades and UK economic data continues to show worrying signs of stagnation. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Continuing its woeful start to life in public markets, peer-to-peer marketplace Funding Circle (FCL) used a first half trading update to downgrade full-year revenue projections by half to just 20 per cent. The group blamed an “increasing uncertain economic outlook” for reducing demand for loans, though it acknowledged it had also tightened lending criteria to higher risk businesses, a move it said would impact origination volumes but protect net returns for investors on its platform. There’s no sign of the pathway to profitability, either. All Funding Circle could offer was an expectation that the adjusted losses before interest, tax, depreciation and amortisation would be at a lower margin than 2018. The shares, which were falling steadily over the past week before crashing 20 per cent today, are under review.
Shares in Jupiter Fund Management (JUP) are off 5 per cent this morning, after the group confirmed that the outgoing manager of its prestigious £5.5bn European and £2.4bn European growth funds is to set up his own investment management business. Alexander Darwall, who will be succeeded by Mark Nichols later this year, has made an application to the Financial Conduct Authority to seek regulatory approval. Jupiter said that following “constructive and collaborative engagement” and in a bid to protect “clients’ best interests”, Mr Darwall has agreed not to compete with Jupiter in the UCITS markets for two years. Sell.
Last night, in response to press speculation, WPP (WPP) confirmed that – as part of its previously announced process for the sale of a majority stake in Kantar – it has entered into exclusive discussions with Bain Capital. This is for the sale of a majority shareholding in Kantar with a headline enterprise value (for 100 per cent) of around $4bn. Bain Capital’s proposal is subject to negotiation, and WPP notes that there isn’t any certainty that the discussions will lead to a transaction. Buy.
St Modwen Properties (SMP) reported a 2 per cent rise in adjusted net asset value during the first-half, after a 1 per cent valuation uplift in its portfolio. The regeneration specialist agreed the disposal of a further £18m in non-core retail assets, reinvesting proceeds of those already made in industrial and urban logistics and residential home development. The interim dividend was also raised by 16.1 per cent to 3.6p a share. Buy.
Assura (AGR) disposed of 12 properties at a small premium to book value during the first quarter, generating cash proceeds of £17m. Two acquisitions were made for £5.5m, while one development was completed and a further two moved on site. The current portfolio stands at 554 properties, with an immediate development pipeline of £77m. Buy.
Shares in Johnson Service (JSG) are up 4 per cent this morning following a positive pre-close trading update for the six months to 30 June. With “strong” trading and encouraging levels of organic growth, FY2019 results are expected to be slightly ahead of expectations. Planned capital investment to increase capacity and productivity for the busy summer months is ongoing. The construction of the new Leeds hotel linen site remains on schedule and within budget and is expected to be operational in the second quarter of 2020. Half-year results are due in early September. Buy.
IMImobile’s (IMO) revenues climbed by 28 per cent to £143m for the year to March, with 17 per cent organic growth. The cloud communications software group enjoyed 43 per cent gross profit growth within its Europe and Americas businesses, with this collective region contributing over 70 per cent of total gross profits. Overall, gross profit growth was 23 per cent – tempered by a decline of 19 per cent within the Middle East and Africa, because of external factors affecting a specific client – MTN. Total adjusted cash profits rose by 35 per cent to £18m. Statutory operating profits came in at £1m, down from £2.7m, after contingent consideration related expenses, acquisition costs and amortisation. Recommendation under review.
Wizz Air (WIZZ) increased its capacity by 17 per cent to 3.8m seats during June, with a 19 per cent increase in passengers to 3.6m giving load factor of 95 per cent. This brings the increase in capacity over the rolling 12 months to June to a 14.9 per cent increase to nearly 40m seats, with passenger numbers up 16.9 per cent to 36.3m. The airline recently announced that it intends to expand its fleet further with the purchase of 20 aircraft from Airbus, set to be delivered from 2023 onwards. Shares were up nearly 1 per cent in early trading. Buy.
Ryanair (RYA) carried 13 per cent more passengers during June at 14.2m, with 97 per cent of seats filled. The airline operated almost 78,000 scheduled flights in June. Over the rolling 12 months passenger numbers are up 10 per cent to 146.5m with a load factor of 96 per cent. Shares were flat in early trading. Sell.
KEY STORIES:
Dialight (DIA) shares tumbled around 30 per cent in early trading after the LED lighting manufacturer warned underlying operating profits for 2019 would be between £10m and £13m, down on the £15.1m previously forecast by house broker Investec. Management reported a weakening order intake during the second quarter for its signals and components business and high levels of inventory in the distribution channel, associated with the exit from its Sanmina facility. Chief executive Martin Rapp will also step down to resume his retirement, replaced in the interim by chief financial officer Fariyal Khanbabi.
Spread-betting firm Plus500 (PLUS) says it is pleased with overall performance in the first half of its financial year, as revenues in the three months to June climbed to $94m from the $53.9m booked in the first quarter. The Israel-headquartered business said “signs of reduced levels of marketing” among competitors had also resulted in an uptick in new customer recruitment and a drop in the average cost of acquisition. Shares are up 6 per cent in early trading.
OTHER COMPANY NEWS:
Following last week’s profit warning, a capital markets event from Costain (COST) will see recently-appointed chief executive Alex Vaughn set out his “Leading Edge” strategy today. The group will seek to place greater emphasis on leveraging its blue-chip client relationships, accelerating the deployment of higher margin services such as future-shaping consultancy and advisory, asset optimisation and digital technology solutions. Over the medium-term, the group is targeting a blended divisional margin of 6-7 per cent, deriving over half its business from higher margin services.
National Grid (NG.) has submitted its draft RIIO T2 business plans for electricity and gas transmission. For electricity, the group is proposing average annual total expenditure of £1.5bn in 2018/19 prices (an increase from current levels of around £1.3bn) and for gas, an average annual totex of £0.6bn (up from £0.4bn). Customer bills are expected to be maintained or reduced slightly in real terms. The group continues to propose a cost of equity of 5.5 per cent versus Ofgem’s current proposal for 4.3 per cent. This first draft precedes a formal submission to Ofgem at the end of 2019, ahead of a draft determination in mid-2020.
Regulatory disclosures have added further colour to last Thursday’s 40 per cent drop in the shares of XPS Pensions Group (XPS) on the release of its full-year results. Blue chip investor Blackrock informed the pensions consultancy it has since reduced its holding from 8.72 to 4.95 per cent, though Schroders appears to have bought the dip alongside new investor Norges Bank.
Listed venture capital group Augmentum Fintech (AUGM) has successfully completed an equity placing, raising £25m net of fees at 112p, or a 2.2 per cent premium to March’s net asset value per share. The group, which had been seeking to raise £30m and even flagged its hope of expanding the offering to as much as £50m, will use the funds to invest in early stage technology companies focused on financial services.
