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News & Tips: Persimmon, Quilter, MJ Gleeson & more

UK shares continue to edge forward
July 4, 2019

Another storming performance from Wall Street overnight has led to further, more modest, gains in London by mid-morning. Click here for The Trader Nicole Elliott's latest thoughts on the markets. 

IC TIP UPDATES: 

Persimmon (PSN) reported a 4.5 per cent reduction in revenue for the first-half, following a 6 per cent fall in legal completions as the housebuilder tried to improve the quality of its buildings by taking a more targeted approach to the timing of new home sales releases on certain sites and plots. As a result, the average number of active sales outlets was down around 8 per cent to 345 sites. Management guided towards an underlying operating margin of 30.8 per cent for the period, in line with the prior year. Sell

Following media speculation, wealth management group Quilter (QLT) has confirmed it is reviewing options for its Old Mutual Wealth life assurance business – also known as Heritage – including the possible disposal. The FTSE 250 group, which was spun out of Old Mutual last year, said no decision had yet been taken, and that there can be no certainty of a transaction. Buy

MJ Gleeson (GLE) reported its largest annual volume growth for the year to June 30, selling 1,529, up a quarter on the prior year. The pipeline of owned and conditionally purchased plots rose 5.6 per cent to 13,575 plots. Gleeson Strategic Land sold nine land interests with the potential to deliver 1,755 plots for housing development. Buy

McKay Securities (MCKS) reported reduced investment volumes in its industrial, office and logistics markets during the three months March. However, it exchanged contracts for the freehold disposal of Station Plaza, Theale (41,420 sq ft) for £8.23m and The London and South East-focused commercial developer and landlord also extended its banking facilities by £55m shortly after the year end. It also completed four open market lettings achieved at March 2019 estimated rental values, with a combined contracted rent of £0.15m. Buy.

C&C Group (CCR) chief executive Stephen Glancey said that the drinks maker is aiming to deliver EPS growth in a mid to high single digit range for the 2020 financial year. This is on the back of what Mr Glancey called a “transformational” FY19 for the drinks maker, as the acquisition of Matthew Clark & Bibendum contributed to earnings growth of over 20 per cent. Following from the acquisition of Matthew Clark and Bibendum, a majority of the Group’s revenues, earnings and activities are now derived in and from the UK, and so C&C is looking to drop its Euronext Dublin listing in order to facilitate the entry into the FTSE UK Index Series. Shares were up 4 per cent in early trading. Buy.

KEY STORIES: 

Energean Oil & Gas (ENOG) will expand its portfolio aggressively through the $750m (£596m) debt- and equity-funded takeover of Edison E&P. The company said the move would up its 2P reserves by a third and give it producing assets in the Mediterranean and North Sea and development projects in Egypt, Italy and Norway. The deal has to be voted through by shareholders but the company already has 53 per cent support. Energean’s share price climbed 10 per cent on the news, to 925p. The company will fund the deal through a $265m equity raise and $600m in debt. There is another $100m due when first gas is reached at the Cassiopea development off the coast of Sicily, but Energean this would be funded through a combination of cash flow and borrowings. Panmure Gordon said the sale price was “highly favourable” at 2.8 times Edison E&P’s 2018 cash flow. 

The Financial Conduct Authority has proposed banning the sale of cryptocurrency derivatives to retail customers, arguing home traders “cannot reliably assess the value and risks of derivatives or ETNs” for popular digital currencies like bitcoin, ethereum and litecoin. The regulator says the volatile nature of the underlying assets provides “no reliable basis for valuation”, making them impossible to understand and ill-suited as investments. Trading in crypto-CFDs (contracts for difference) is offered by spread-betting firms including IG Group (IGG) CMC Capital Markets (CMCX) and Plus500 (PLUS), and the FCA has suggested a ban could save consumers between £75m and £234m a year. The proposals follow last year’s introduction of rules reducing spread-betters’ leverage, which has hammered shares in the sector.  

The Takeover Panel has announced that an auction process for KCOM (KCOM) will commence at 5pm on Sunday 7th July. Neither of the group’s two takeover offerors has declared its offer final, and a competitive situation continues to exist. To re-cap, on 24th April, ‘Humber Bidco’ – a wholly-owned indirect subsidiary of Universities Superannuation Scheme Limited – made a £504m recommended takeover offer for KCOM. On 3 June, KCOM transferred its recommendation to a £563m takeover offer from ‘MEIF 6 Fibre Limited’ – a wholly-owned indirect subsidiary of an investment fund managed by Macquarie Infrastructure and Real Assets (Europe). 

Great Portland Estates (GPOR) signed nine new lettings during the three months to June, in line with March 2019 estimated rental values. Seven rent reviews were settled, at a 17.2 per cent premium to passing rents, generating reversionary potential of 7.5 per cent. The vacancy rate remained low at 4.2 per cent, down on 4.8 per cent the same time the prior year. 

OTHER COMPANY NEWS:

Wealth management and employee benefits group Mattioli Woods (MTW) navigated “poor investment sentiment” in its financial year to May, resulting in “strong growth” in adjusted pre-tax profits. Chief executive Ian Mattioli said the last few months had shown signs of “some positive momentum”, increasing inflows and greater client activity. Organic revenue and profit growth in the current year are both expected, though acquisitions remain a priority. Client costs have been lowered, though the cash profit margin held above a 20 per cent target and the period ended with £23m of cash.

Associated British Foods (ABF) reported a 3 per cent increase in group revenue at constant currency for the 40 weeks to June, or 2 per cent at actual exchange rates. Exclude tough trading in sugar and sales were up 4 per cent. Total sales at Primark were up 4 per cent, but this was driven by an increase in selling space and was “partially offset” by a decline in like-for-like sales. Management said like-for-like sales were held back in may due to unseasonable weather, but have improved in June. Encouragingly, operating margin of 11.7 per cent was ahead of 9.8 per cent during the same period last year. Shares were flat in early trading.