Shares in London's main indices are in positive territory in morning trading despite ongoing political intrigue around Brexit with the FTSE100 leading the way, boosted by a weakening in sterling's value. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
PZ Cussons (PZC) has agreed to sell its Greek food subsidiary Minerva and its Polish personal care brand Luksja. Minerva is being sold to Mirties Enterprises for £41m in cash, while Luksja is being sold to Athens-based personal care company, Sarantis Group - its sale price is undisclosed. Sell.
Life insurance and pension consolidator Chesnara (CSN) weathered adjustments to its capital requirements to post a 3 per cent rise in economic value to 430.4p a share. However, new business profits from Sweden and the Netherlands – the group’s two open markets – fell, while seller valuations for insurance books in all of Chesnara’s markets are apparently on the rise. Encouragingly, for income seekers at least, the interim dividend has again been raised. We remain buyers.
KEY STORIES:
Shares in Micro Focus (MCRO) plunged by almost 30 per cent this morning, after the software group warned that it doesn’t expect to meet its constant-currency revenue guidance of minus 4 to minus 6 per cent for the year to October 2019, compared to the year to October 2018. On top of weak sales execution, it has endured a worsening macro-environment – leading to longer decision-making cycles among its customers. Management has revised down its guidance for the full year to minus 6 to minus 8 per cent, and has decided to accelerate a strategic review of Micro Focus’s operations.
Canaccord has updated its sell note on Burford Capital (BUR), downgrading its price target for the litigation funder from 1,240p to 570p. The brokerage made no mention to the Muddy Waters short-selling report which precipitated a crash in Burford’s shares this month, instead re-iterating its view that cash flow is probably insufficient to meet funding commitments and grow the investment portfolio. Canaccord also materially downgraded its return on invested capital and pre-tax profit forecasts, and argued that a price-to-tangible NAV multiple of 1.2 represents fair value for the stock.
Shares in Amigo Holdings (AMGO) are down a third today, after the guarantor loans group used a third quarter earnings release to announce a re-orienting of its business, just one year after floating. In the three months to June, customer numbers and revenue increased by 17.3 and 13.7 per cent, respectively, though impairments and the cost-to-income ratio are both moving in the wrong direction. Most importantly, however, Amigo has clearly read the signs from the Financial Conduct Authority and decided that pre-emptive action – in the shape of tighter credit standards, higher spending on operations and compliance, and a prioritisation of new customer lending rather than repeat business – is the best course of action.
OTHER COMPANY NEWS:
Full year results from Hays (HAS) indicate a 6 per cent like-for-like increase in net fees to £1.13bn in the twelve months to 30 June. In the largest market, Germany, a 9 per cent jump in net fees hit a record £300m, although growth rates slowed across the year as increased client cost control and slower decision making hit the manufacturing and automotive sectors. Some £15.1m in exceptional costs have weighed on statutory earnings, with pre-tax profit down 3 per cent to £231m. The increasingly tough global macroeconomic backdrop is continuing to dampen business confidence in the current financial year. Shares are down over 3 per cent this morning.
In its second acquisition announced this week, Diversified Gas and Oil (DGOC) has secured a $50m buyout of the bankrupt EdgeMarc Energy’s natural gas assets in Ohio. The deal was already public but DGO now has the signoff from the US Bankruptcy Court. The assets include 12 unconventional wells and rights to prospective land. On Tuesday, DGO said it had bought up 1,700 miles of pipelines in West Virginia and Pennsylvania for $7.5m.
Churchill China (CHH) revenues lifted 17 per cent at its first half off the back of strong growth in hospitality ceramics export turnover, as well as the inclusion of £2m in revenues from its recent Furlong Mills acquisition for four months of the period.
Natural resources investor Reabold Resources (RBD) is up 16 per cent to 1.45p on news its West Newton onshore field in the UK is an oil and gas discovery rather than just a gas prospect. It owns 24 per cent of the project through a stake in private operator Rathlin Energy. The company said the extended well test of West Newton A-2 had been suspended following identification of a gross hydrocarbon column of 65m, pending a review of the well design.
