Shares in London are in the red again. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
easyJet (EZH) has poached Ryanair (RYA) chief commercial officer Peter Bellew, where he had been in place since December 2017. Mr Bellew will also be easyJet’s COO. easyJet held its full-year outlook this morning in a third quarter trading update, reporting an 11 per cent increase in revenue while costs per seat excluding fuel at constant currency fell 4 per cent, owing to significantly reduced cancellations and delays. Buy.
De La Rue (DLAR) is coming under pressure from activist investor Crystal Amber Fund who is demanding that chairman Philip Rogerson step down either at or before this month’s AGM. The group’s largest shareholder is threatening to requisition an extraordinary general meeting to replace him with their preferred alternative candidate. De La Rue is urging shareholders to vote in favour of all AGM resolutions claiming the fund’s proposals are “precipitous and destabilising”. With the latest drama only adding to the group’s woes, we remain sellers.
Moneysupermarket’s (MONY) revenues for the first half to June grew by 15 per cent to £199m, buoyed by exceptional energy switching, the acquisition of Decision Tech last August and improvements to customer experience. By business segment, home services enjoyed revenue growth of more than a half to £34.2m. Money grew by 5 per cent to £46.5m. Insurance was up 3 per cent to £96.1m. Overall, adjusted cash profits were in line with expectations, up 15 per cent (if adjusting the prior year’s numbers for new accounting rules pertaining to leases), reaching £72.9m. Operating cash generation rose by a fifth to £51.4m.
Management at Reach (RCH) has noted recent media speculation and confirmed that the group is in the early stages of discussions around acquiring certain of JPI Media’s assets. JPI Media owns titles including The Scotsman and The Yorkshire Post. The shares were up by around 4 per cent at the time of writing. Sell.
After a run of poor operational results, Centamin (CEY) has upped production at the Sukari mine in Egypt in the first six months of the year. The company produced 234,096 ounces (oz) of gold in the period, an 8 per cent increase on last year’s difficult first half. Centamin said it would make full-year guidance of 490,000-520,000oz on the back of higher second half gold production. The underground grade at the mine, which also has an open pit, dropped 24 per cent between the first and second quarters this year, to 4.83 grams per tonnes (g/t), although an overall pickup in throughput kept production stable. Buy.
Ofwat has published its draft determinations for the 2019 price review. As expected, the weighted average cost of capital (WACC) has been reduced to 2.1 per cent whilst the cost of equity has declined by 0.57 percentage points to 1.34 per cent (in retail price index terms). Meanwhile, the cost of debt has only increased by 0.2 percentage points to 1.34 per cent. According to RBC Capital Markets, this equates to a £20m fall per year in the allowed return for Severn Trent (SVT) and United Utilities (UU.) and a £10m decline for Pennon (PNN). Severn notes the allowed cost base for its Welsh business, Hafren Dyfrdwy, has been increased by £100m for the next five years and believes it will be in a net neutral position over AMP7. With final determinations due in December, for now, we remain buyers in both Severn and Pennon.
KEY STORIES:
Shares in Asos (ASC) plunged this morning after the online retailer warned on full-year profits, pointing to operational issues with its warehouse programmes in the EU and US. It said that embedding the change from the overhaul of infrastructure and technology in its US and European warehouses has taken longer than anticipated, impacting stock availability, sales and costs in these regions. Elsewhere, sales in the UK and Rest of World were “robust”. Management now anticipates full year sales growth broadly in line with the year to date, and pre-tax profits of £30m-£35m after around £47m in transition costs (previously around £35m) and around £3.5m in restructuring costs. Capital expenditure guidance is unchanged at around £200m and year-end net debt is expected to come in at around £100m.
Ei Group (EIG) shares soared nearly 40 per cent after it agreed a £3bn all-cash deal to be acquired by Stonegate Pub Company, owner of the Slug & Lettuce. Shareholders will receive 285p per share, an offer that represents a premium of 38.5 per cent to yesterday’s closing price of 205.8p. Stonegate has invested over £350m into its estate since 2010, spending £71m last year. EIG chairman Rob Walker said: “The acquisition delivers the future value of the strategy for our shareholders and secures an exciting future for our tenants and employees by creating the leading managed and tenanted pub company in the industry.”
Vodafone’s (VOD) €18.4bn acquisition of Liberty Global’s operations in Germany, the Czech Republic, Hungary and Romania has been cleared by the European commission. Post-completion, Vodafone will be Europe’s leading converged operator, with 116.3m mobile customers and 24.2m broadband customers, as well as 22.1m TV customers across 13 European countries. The transaction is expected to bring cost and capital-expenditure synergies with a net present value of over €6bn after integration costs, and revenue synergies with a net present value exceeding €1.5bn from cross-selling to a combined customer base. The group says that together with the standalone growth potential of the acquired assets, these synergies support double-digit free cash flow per share accretion (before integration costs) from the third year post completion.
OTHER COMPANY NEWS:
Aircraft leasing group Voyager Air has elected to postpone its initial public offering “in light of unfavourable market conditions”. The group had aimed for a placing and offer to take place on 18 July 2019 to raise up to $194m, with admission to the specialist fund section of the main market occurring on 24 July. The initial issue price would be $1 per share. The group will return applications received so far under the offer for subscription, and intends to resume the IPO process at a later date.
The Royal Bank of Cyprus has approved the proposed change in control of Safecharge Limited by Nuvei – the company acquiring it. The relevant condition to the acquisition has now been satisfied. Safecharge (SCH) has confirmed that the court hearing for the consideration and sanction of the takeover scheme document will take place in Guernsey on 31 July 2019. The last day of dealings in SafeCharge shares on Aim is expected to be 31 July 2019, and it’s intended that dealings in SafeCharge shares will be suspended on 1 August.
A trading update from SSE (SSE) indicates renewable energy output was around 20 per cent lower than forecast in the first quarter. The shortfall is equivalent to less than 4 per cent of the annual forecast total. Gas generation has also declined by 28 per cent to 3,810 GWh year-on-year. The group reiterated its intention to list or sell the energy services business by the second half of FY2020. Full year outlook remains unchanged.
Kin and Carta (KCT) has announced the appointment of John Kerr as non-executive chairman effective 22 July. He will succeed Richard Stillwell as chairman at the group’s AGM in November. Shares are up over 2 per cent in early trading.
Boku (BOKU) said that revenues and adjusted cash profits are on track to meet full-year expectations. Group revenues for the first half are expected to be in the range of $22.5m to $23m, representing growth of more than 33 per cent compared to the first half of 2018. Mobile identity is expected to represent between 14 per cent and 16 per cent of group revenues in the first half. Total payment volumes of $2.3bn was 49 per higher year-over-year. The group saw a 48 per cent increase in monthly active users to 15.3m.
Strix (KETL) has largely avoided the effects of the market turmoil wrought by the US-China trade war in its kettle safety controls business, which mainly trades between the Isle of Man and China. The division has achieved 2 per cent market growth according to a half-year trading update, with strong performance in the United States and the Far East. The water filtration business is exposed to a 7 per cent UK market decline though, owing to Brexit and price rises which have seen consumer confidence falter.
