IC TIP UPDATES:
Components fell from a defective Rolls-Royce (RR.) Trent 1000 engine just after a Norwegian Air flight to Los Angeles took off on 10 August, plunging the aerospace engineer into a fresh crisis over its embattled engine programme. A report in The Times said that 25 cars and 12 houses were damaged after metal fragments fell from a Norwegian Boeing 787 Dreamliner’s Trent 1000 over the Roman suburb of Fiumicino just after take-off. A Norwegian Air spokesperson told the Investors Chronicle that the flight “experienced a technical issue a few minutes after take-off”. The airline is investigating the incident alongside Aeroporti di Roma and the Italian authorities. Sell.
Lok’nStore (LOK) unveiled an 8.7 per cent rise in self-storage revenue during the year to 31 July, as occupancy was up 6 per cent and and price per let sq ft was up 0.6 per cent. New stores were opened in Dover, Cardiff, Exeter and Ipswich and the group secured a new £75m five-year revolving credit facility to fund further acquisitions. Buy.
M&C Saatchi (SAA) has announced one-off exceptionals of £6.4m for its 2019 results, after uncovering accounting issues. The group began investigating potential issues after an independent auditor’s report raised concerns about accounting controls, echoing concerns raised by the audit committee. Management said it believes it has uncovered the full extent of the issues, but will set aside an additional £1.5m and appoint independent advisers to carry out a review “to be doubly sure”. The review is expected to conclude in November. Shares are down by a fifth on the news, and we are reviewing our buy recommendation.
Benchmark Holdings (BMK) shares were down almost a third in early trading after management revealed that it had continued to face challenging conditions in the global shrimp and Mediterranean seabass and bream market during the third quarter. That has impacted sales volumes in Advanced Nutrition, while the fish farming specialist has also experienced a reduced contribution from trials of certain pre-license pipeline products within Animal Health. Management said its expectations for revenue and profit mix had also changed – we place our buy recommendation under review.
KEY STORIES:
After posting its rebuttal to Muddy Waters’ short-selling report, Burford Capital (BUR) has evidently concluded that its next strategy is to attack. The litigation funder said a forensic examination of London Stock Exchange trading data since the day Muddy Waters first tweeted about an unidentified short target “discloses trading activity consistent with material illegal activity”. Burford claims to have uncovered evidence of spoofing (placing fake orders to force a movement in price) and layering (spoofing by placing high volumes deeper in the order book), techniques which it alleges coincided with Muddy Waters’ releases and therefore constitutes evidence of market manipulation. Buford has also retained three top law firms – the litigation-focused Quinn Emanuel Urquhart & Sullivan, long-standing counsel Freshfields Bruckhaus Deringer and US outfit Morrison & Foerster – to assist with what its engagement with “regulatory authorities and criminal prosecutors”. Separately, the group announced that chief investment officer Jonathan Molot acquired a further £2.91m-worth of shares on Friday, with the stock at £8.56. After initially rising 7 per cent this morning, the shares are again down.
Following the power outage on Friday that hit hundreds of thousands of households and caused chaos across the railway network, National Grid (NG.) is facing investigations from both the government and the regulator. Demanding an urgent detailed report as to what went wrong, Ofgem has warned its response could include enforcement action. The regulator has the power to fine energy companies up to 10 per cent of their turnover if they are found to be at fault – this would apply to the regulated part of the business. Business and Energy Secretary Andrea Leadsom has also said that she will be instructing the energy emergencies executive committee to investigate the incident. Shares were flat in early trading.
Shares in Thomas Cook Group (TCG) fell 16 per cent in early trading after the travel company and tour operator announced that it will require an additional £150m, on top of the previously announced £750m capital injection, to provide liquidity through the 2019-20 winter season, when less cash is generated. The group has been in discussions with Fosun Tourism Group, its largest shareholder, and lenders on the terms of refinancing, with final details yet to be announced. As part of the refinancing, a “significant amount” of the company’s £650m external bank debt and €1.15bn (£1.07bn) in bond debt will be converted into equity, which will significantly dilute existing shareholders.
OTHER COMPANY NEWS:
SSE (SSE) has confirmed that it is in discussions with Ovo over the possible sale of its energy services business, which supplies around 5.7m UK households. Currently held for disposal, the division saw its reported operating profit plummet by 84 per cent to £35.3m in FY2019. This latest development comes about eight months after the potential merger with npower collapsed in December and rumoured discussions with TalkTalk (TALK) also fizzled out. A potential deal would mark SSE’s exit from the challenging UK energy retail market.
Marlowe (MRL) has announced the acquisition of Quantum Compliance – a leading provider of health and safety consultancy services to commercial organisations – for an initial consideration of £4m and potentially a further £3.2m contingent on the achievement of certain targets. For the year to 30 June 2018, Quantum generated revenue of £4.5m and a statutory pre-tax profit of £0.5m. The acquisition will be funded by existing cash and debt facilities.
Staffline (STAF) has announced the resignation of its auditor PricewaterhouseCoopers, effective from 1 August. Following third-party allegations of historical non-compliance with national minimum wage regulations, PwC completed the extended audit of the group’s long-delayed FY2018 results. With Staffline due to undertake a competitive tender process for a new statutory auditor, it was mutually agreed that PwC would not participate. Half-year results for the six months to 30 June will be released on 17 September. Shares are down 7 per cent this morning.
Exports will restart from Acacia Mining’s (ACA) North Mara mine in Tanzania after the government dropped a ban put in place in July. The regulatory strife is not over for the company, however. Acacia, which is also soon to be taken over by 64 per cent shareholder Barrick Gold, said the government had ‘directed’ the company to submit a feasibility study and mine plan this week for approval. Acacia submitted these for approval to get its mining licence before starting production 2002. The company’s share price fell 1 per cent on the news but is up 35 per cent in the past month to 242p.
Shipping services provider Clarkson (CKN) reported a 10 per cent increase in revenue to £168m during the first half of its financial year, with reported pre-tax profits up 7 per cent to £19.2m. Chief executive Andi Case called this a “robust performance” for Clarkson despite suppressed investor appetite affecting financial markets. It’s expected that IMO 2020, regulation determining that marine sector emissions in international waters must be slashed, will cause market disruption in the second half as the supply of available vessels is impacted.
MediaMonks, the digital global content arm of Martin Sorrell’s S4 Capital (SFOR), has merged with influencer marketing company IMA. Sir Martin said the merger came as part of the group’s focus on top-line growth, citing the influencer marketing sector’s predicted doubling in size over the next three years.
