London's main indices are all in positive territory in mid-morning trading as investors react favourably to news of an interest rate cut overnight in the US. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Diageo (DGE) expects organic net sales growth to be in the middle of its 4 per cent to 6 per cent range for the current financial year and organic operating profit profit growth is expected to be in-line with or slightly behind organic net sales growth due to a particularly strong performance last year. Chief executive Ivan Menezes said the company “would not be immune from significant changes to global trade policy” and that management “continue to monitor this closely”. Buy.
Following a “difficult year”, Kier (KIE) has swung to a £245m statutory pre-tax loss for FY2019, down from the £106m profit reported in 2018. This comes amid £341m in exceptional charges, including £56m in restructuring costs, £50m of contract losses and £172m related to preparing businesses for sale and closure. The adjusted operating profit margin has contracted by 1.3 percentage points to 4.1 per cent. Whilst net debt has been reduced by 10 per cent to £167m, average month-end net debt has jumped by 13 per cent to £422m. The final dividend has been suspended and there will be no payout in 2020. Shares are down 6 per cent this morning. Sell.
Ecuador’s constitutional court has rejected a petition seeking to prohibit mining activities in the southern province of Azuay, home to SolGold’s (SOLG) fully-owned Sharug project. This follows a similar ruling relating to the north of the country back in June, where the group’s 85 per cent owned Cascabel project is situated. Shares are up 4 per cent this morning. Buy.
The Competition and Markets Authority has voiced concerns that JD Sports Fashion’s (JD.) acquisition of Footasylum “could lead to higher prices, less choice and a worse shopping experience for customers”. The CMA intends to refer the deal for a phase two investigation. JD executive chairman Peter Cowgill said the group was still in discussion with the authority to see if acceptable remedies could be found. Buy.
Clinigen (CLIN) reported a jump in revenue of a fifth for the year to June, although that was due to acquisitions - on an organic basis that metric was down 4 per cent. Those acquisitions included CSM, a specialist provider of packaging, labelling, warehousing and distribution services, and the US and rest of world rights to cancer drug Proleuki, although associated amortisation costs contributed to a 66 per cent decline in pre-tax profits. Oc an adjusted basis, those were up more than a quarter. Buy.
Insolvency practitioner Begbies Traynor (BEG) today said that each of its divisions have performed well in the first quarter of its financial year, and that national corporate insolvency appointments have increased 9 per cent in the first half of 2019. Executive chairman Ric Traynor said revenue and profit growth “is in line with our expectations”, and comprised both organic growth and the impact of recent acquisitions. Buy.
An AGM statement from Gateley Holdings (GTLY) indicates that momentum has continued since the update provided alongside full year results in July, leaving the group “well placed at this stage of the current financial year”. Headcount breached the 1,000-employee mark this month. We remain buyers.
Shares in City Pub Group (CPC) fell 9 per cent in early trading after the pub company announced that it would rein in its expansion plans until there is more certainty regarding Brexit and the UK economy. Chief executive Clive Watson said the company will focus instead on “getting our development sites trading, developing our existing estate, reducing our debt and improving our dividends for shareholders”.Revenue was up 36 per cent to £27.1m, but operating profit fell 7 per cent to £1.03m due to higher administrative expenses. Buy.
Spectris (SXS) announced that it has sold BTG Group, part of the company’s industrial solutions segment, to Voith GmbH & Co for €319m (£283m). Management said the deal was in line with the company’s strategy to “simplify and focus our portfolio and to concentrate on developing our presence in specific high-growth end markets”. The sale is expected to complete in the fourth quarter, and proceeds will be used to strengthen Spectis’ balance sheet.Shares were up more than 3 per cent in early trading. Buy.
KEY STORIES:
Shares in Charles Taylor (CTR) have jumped 37 per cent this morning after the group announced that its board has agreed to a £261m takeover bid by private equity firm Lovell Minnick Partners. The offer of 315p per share represents a 34 per cent premium to the group’s closing price of 235p on 18 September. Described as “fair and reasonable”, the directors are recommending unanimously that shareholders accept the deal. The interim dividend of 3.65p announced at the time of half year results will still be paid.
Shares in Next (NXT) are down 4 per cent this morning, after the group reported sales from its retail stores down 5.5 per cent in the first half of the year. The retailer’s online business made up for the shortfall, however, growing by 12.6 per cent, overtaking the bricks-and-mortar business in revenue terms for the first time. Management are guiding for profits to be roughly flat in the year to January, despite expected sales growth of 3.6 per cent.
OTHER COMPANY NEWS:
The board of Just Group (JUST) has appointed David Richardson as chief executive on a full-time basis, having served as interim since his predecessor Rodney Cook stepped down earlier this year. Chris Gibson Smith, chairman of the retirement benefits group, called the move a “natural step for us to take”, and said Mr Richardson’s leadership was “already transforming the group”.
Shares in IG Group (IGG) are up 8 per cent this morning, after the derivatives trading outfit said “favourable market conditions” in August and a rise in active client numbers meant first quarter revenues were flat year-on-year. That might not sound impressive, but just one month in the comparative period was affected by the introduction of new ESMA regulations on the sale of over-the-counter CFDs. Separately, IG said a preferred candidate “has been identified” for a new chairman, and that non-executive Jonathan Moulds will be appointed on an interim basis after current chair Andy Green steps down at today’s AGM.
Helios Towers has confirmed its intention to float on the London Stock Exchange. The final offer price in respect of its IPO will be determined following a book-building process, with admission expected to occur in October 2019. The company expects to raise gross proceeds of $125m from the allotment and issuance of new shares. Existing shareholders are also selling shares. It is targeting a free float of at least 25 per cent.
