The FTSE100 and FTSE250 continue to record gains although smaller company investors appear a little more circumspect today as we await the coronation of the next prime minister of the UK. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Managers at PZ Cussons (PZC) have decided to rationalise the group’s interests in Nigeria and hive off non-core brands as they don’t envisage any significant near-term economic improvement in its key markets. Adjusted pre-tax profits fell 13 per cent to £69.8m, in line with guidance given at the profit warning, which excluded non-cash impairments on intangible assets. Debt came down from FY2018, but the personal care group may have to undergo a painful transition. Sell.
Paragon (PAG) has completed £1.19bn in new lending so far this year, down on £1.58bn the same time last year. The buy-to-let pipeline rose by £22m during the three months to June, although redemptions of 8.6 per cent were down on the 10.7 per cent the prior year. Lending volume guidance remains unchanged, with full year volumes in the mortgages division still anticipated to be approximately £1.6 billion and commercial lending volumes expected to exceed £0.9 billion. Management also expects the net interest margin for the year to be above the 2.24 per cent level at the half-year stage. Buy.
Mondi (MNDI) shares rose nearly 4 per cent in early trading after the packaging company signalled that it expects year-on-year improvement in its half-year results, which will be published on 1 August. Basic earnings per share are expected to rise between 28 per cent and 37 per cent to between 93 and 99 euro cents. Underlying cash profits, meanwhile, are expected to exceed last year’s level of €852m. Buy.
dotdigital (DOTD) revenues rose by around 19 per cent to £51.3m over the year to June, with continuing organic revenues up by around 15 per cent to £42.5m. Adjusted cash profits and operating profits are expected to be slightly ahead of market expectations. A cash balance of £19.3m was ahead of consensus thanks to “effective cash conversion”. Recurring revenues as a percentage of the top line edged up from 85 per cent to 86 per cent. Management is confident about its 2020 expectations. Buy.
Rockhopper Exploration (RKH) has sold off its Egyptian business for US$16m (£12.9m) to minnow United Oil and Gas. Rockhopper is focused on getting the Sea Lion project to production in the North Falkland Basin with Premier Oil as a partner, but the Egyptian assets had been covering its G&A costs. United will hand over $11m in cash and $5m in a mix of cash and shares based on how much the £14m explorer can raise. BP has provided an $8m loan for the deal. Sell.
Interim results from FDM (FDM) indicate revenue has increased by 14 per cent to £134m whilst adjusted operating profit has risen by 7 per cent to £27m. Revenue from so-called ‘Mounties’ (IT and business consultants) jumped by 16 per cent to £133m with headcount and sales growing across all four operating regions. The utilisation rate has dipped slightly to 96.1 per cent (from 97.2 per cent). Securing 40 new clients globally during the period, 68 per cent are from non-financial services, with a growing presence in energy and resources. The managed decline in non-core contractors continues with a 44 per cent drop in revenue to £1.8m. Shares are down almost 3 per cent. Under review.
Integrafin (IHP) increased funds under management by 5.7 per cent over the three months to June and 9.8 per cent on an annual basis to £36.4bn. That represented an outperformance of the FTSE All Share index, which rose by 1.9 per cent. Net inflows were £796m and market movements boosted funds by £1.18bn. Buy.
KEY STORIES:
IG Group (IGG) reported a 16 per cent decline in net trading revenue during the year to May, reflecting the impact of new restrictions on the marketing and sale of contracts for difference products to EU retail customers and weaker market conditions during the second half of the year. Active clients within the affected region declined by almost a fifth, while revenue per client there was down 14 per cent. Within that region professional clients accounted for two-thirds of revenue. Group profit declined by almost a third despite a stronger performance in emerging markets.
Fevertree (FEVR) revenues slumped 8 per cent in early trading as first-half growth moderated. The drinks company said that “the poor weather in the past quarter has had a dampening effect”, while it has also struggled against its strong performance in summer 2018. Gross margins were down to 51.9 per cent from 53.2 per cent, although pre-tax profits edged up slightly from £32.7m to £35m. Management maintains that it has strengthened its foothold in the UK and is increasing its footprint overseas.
Beazley’s (BEZ) combined ratio rose to 100 per cent during the first-half, from 95 per cent, due to claims inflation in the marine and reinsurance divisions. However, net investment income of $107m, a substantial rise on the $8m gained the prior year, meant pre-tax profits more than doubled. Gross written premiums were also 12 per cent higher.
OTHER COMPANY NEWS:
Cohort (CHRT) had a mixed year to 30 April 2019, coming to the rescue at Gatwick Airport with its anti-drone technology while experiencing a drop in revenues within its EID business, a Portugal-based supplier of advanced communication electronics. Its December Chess acquisition, which helped to end days of chaos at Gatwick, swung the group into net debt, a position Cohort expects to exit by the end of its 2021 financial year. Reduced EID revenues were caused by lower naval activity and “slippage of deliveries on a major contract in its tactical division” - management expects improvement over the coming year.
Scapa (SCPA) shares were up 3 per cent in early trading after a first quarter update signalled growth in both its healthcare and industrial revenues. The adhesives specialist, which is locked in a legal dispute with ConvaTec (CTEC) over a cancelled supply contract, saw revenues in the affected healthcare division rise 3.5 per cent on an organic constant currencies basis, excluding ConvaTec and Systagenix revenues. The company is trading in line with board expectations.
Half-year results for Unite Group (UTG) indicate EPRA earnings (those calculated in accordance with the recommendations of the European Public Real Estate Association) are up 16 per cent to £61.2m for the six months to 30 June. Rental income has increased by 6 per cent to £108.3m with around 2 per cent organic growth. With 92 per cent of beds already reserved for the upcoming 2019/20 academic year, the group expects rental growth for the full year to be in the range of 3-3.5 per cent. The acquisition of Liberty Living is expected to create a combined portfolio of 75,000 beds across the UK with a gross asset value of around £7bn.
The Secretary of State for Digital, Culture, Media & Sport has issued a public interest intervention notice on the public interest ground of national security in relation to certain sections of the Enterprise Act 2002 in relation to the anticipated acquisition of Inmarsat (ISAT) by a private-equity led consortium. This means the Secretary of State will decide on whether this transaction operates or could operate against the public interest, and should be referred to a ‘phase 2’ assessment – taking into account competition and public interest issues. The Competition and Markets Authority (CMA) is required to submit a report to the Secretary of State on the transaction by 17 September 2019.
