Today's Market Overview 

News & Tips: Thomas Cook, Sports Direct, OneSavings Bank & more

News & Tips: Thomas Cook, Sports Direct, OneSavings Bank & more

Click here to read The Trader Nicole Elliott's take on this morning trade.

IC TIP UPDATES: 

Keystone Law (KEYS) shares edged down just shy of 3 per cent in early trading following the release of the platform legal business’s half-year results. The law firm continues to recruit self-employed lawyers to its platform and revenues were up 15 per cent, although its gross margin dropped slightly from 27 per cent to 26.9 per cent. Buy.

Shares in Marks & Spencer (MKS) have dropped 4 per cent this morning after the group announced finance director Humphrey Singer was due to leave the business. A departure date has not been set, but Mr Singer’s short stint in the role – he joined in July 2018 – is likely to raise eyebrows among investors. Sell.

 

KEY STORIES: 

The Financial Conduct Authority and Prudential Regulation Authority have given their clearance to OneSavings Bank’s (OSB) acquisition of Charter Court Financial Services (CCFS), paving the way for court sanction of the merger’s scheme of arrangement. That is expected to become effective on 4 October.

Similarly, the European Commission has given CBRE clearance for its acquisition of Telford Homes (TEF), meaning shares in the Aim-listed group will be suspended from 1 October, and cancelled the following day.

Shares in Thomas Cook Group (TCG) have been suspended at 3.5p after the holiday company announced that it would go into compulsory liquidation with immediate effect after talks over the weekend to secure final terms on the recapitalisation and reorganisation of the business ultimately failed. Although a deal had largely been agreed regarding the terms of the £900m funding, the additional £200m it confirmed on Friday that was needed to get through the winter season “presented a challenge that ultimately proved insurmountable,'' according to chief executive Peter Fankhauser. Shares in competitor Tui (TUI) were up more than 6 per cent in early trading, while shares in On The Beach (OTB) were up nearly 4 per cent. Click here to read our latest update on Thomas Cook.

Shares in XLMedia (XLM) fell by over a fifth this morning after the group warned that “regulatory headwinds” have continued to create trading uncertainty, driving weaker-than-expected performance in July and August. This performance and the slowdown in the group’s acquisition activity, as well as reviewing all strategic investments, means that management has revised down its guidance for 2019 as a whole. It now expects revenues of around $80m and adjusted cash profits of around $34m. Last year, these figures came in at $118m and $43.9m. For the first half, sales dipped from $47.2m to $42.5m, and adjusted cash profits declined from $21.6m to $18.6m. We also learnt that chief financial officer Yehuda Dahan is stepping down.

 

OTHER COMPANY NEWS: 

Microfinance specialist ASA International (ASAI) trumpeted “solid operational progress” in the six months to 30 June, as client numbers, branches, outstanding loans and net profit all climbed. However, the percentage of loans in arrears has risen sharply from 0.4 to 1 per cent year-on-year, as adverse currency movements and low growth hampered the financial performance in West Africa and South Asia.

Miton Group (MGR), the fund management firm on the cusp of takeover by Premier Asset Management (PAM), is out with half-year results today. These detail an 8 per cent rise in assets under management (though down 0.8 per cent post-period), thanks to both positive market movements and investment performance, which contributed to a pre-tax profit of £3.9m, down slightly year on year.

In its latest bid to win back the shareholder trust lost in the short-selling note by hedge fund Muddy Waters, Burford Capital (BUR) has released a briefing paper. Subjects covered include further detail on the litigation finance outfit’s fair value accounting, an “individual comprehensive fair value history of every concluded investment” above $1m, computation on its return on invested capital and internal rates of return, and receivables and non-cash recoveries.

An AGM statement from Northgate (NTG) has announced a strategic review of the company’s growth options under recently appointed non-executive chair Avril Palmer-Baunack. The group has also increased its committed bank facilities to £557.5 million, comprising a £477.5 million multi-currency revolving credit facility due in November 2023, and an £80 million term loan due in November 2022. Trading is said to be “in line with management’s expectations”, but ongoing Brexit-related uncertainty is driving a cautious outlook. Shares are up over 3 per cent this morning.

Kosmos Energy (KOS) has announced that its Yakaar-2 appraisal well off the coast of Senegal has encountered approximately 30 metres of net gas pay. Around 9 kilometres away from the Yakaar-1 discovery well, these results underpin the group’s view that the Yakaar-Teranga resource base is “world-scale”, with potential to support a project that “provides significant volumes of natural gas to both domestic and export markets”. Shares are up 6 per cent this morning. 

Back in August, Connect Group (CNCT) revealed that the proposed sale and leaseback of up to 16 Tuffnells properties was unlikely to take place by the end of FY2019. The group has since decided to split this process up into smaller tranches, announcing today the disposal of six distribution depots to Urban Logistics REIT (SHED) for a cash consideration of up to £9.9m (excluding VAT). These properties will be leased back to Connect for a period of 20 years with an aggregate net rent of around £0.7m (plus VAT) per year. The cash proceeds will be used to reduce net debt, repaying part of its revolving loan facility. 

Sports Direct (SPD) is at it again. This morning the group announced a 5p-a-share takeover bid for Goals Soccer Centres (GOAL). Goals’ shares are currently suspended from trading on AIM following an accounting scandal and, without the suspension being extended, will cease trading on the 30th of September. Sports Direct said the offer would “provide shareholders with an exit and allow them to determine what is fair value and in their best interests”.

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