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News & Tips: Reckitt Benckiser, Whitbread, Just Eat & more

London's blue chips are up
October 22, 2019

The FTSE100 is up a little this morning on hopes of progress in US-China trade talks but the more domestically focused FTSE250 and Aim markets are flat as eyes are focused on Westminster. Click here for The Trader Nicole Elliott's latest thoughts on the markets/ 

IC TIP UPDATES: 

Reckitt Benckiser (RB.) cut its full year net revenue growth target to between flat and 2 per cent following a “disappointing” performance in the third quarter, with the full-year adjusted operating margin expected to see a “modest decline”. Chief executive Laxman Narasimhan said this performance is a reflection of an extended period of significant change and disruption at the company, and said he would prioritise operational performance “as a matter of urgency”. Shares fell more than 2 per cent in early trading. Our buy tip is under review.

Whitbread (WTB) reported an 8.1 per cent decline in profit to £172m during the first half of its financial year, with cash generated from operations down from £455m last year to £275m. Chief executive Alison Brittain called the performance “resilient” despite challenging market conditions in the UK, with a like-for-like decline in accommodation sales of 3.6 per cent. Encouragingly, expansion plans in Germany are so far on target. Buy.

Forterra (FORT) has announced that trading in relation to distributors and non-residential applications has slowed since the start of July. UK national brick sales volumes, construction output, new housing starts, housing transactions and consumer confidence also point to further uncertainty in macroeconomic conditions, management said. As a result, the board now expects pre-tax profit to be below last year's £64.8m.We place our buy recommendation under review. 

KEY STORIES: 

Shares in takeaway food platform Just Eat (JE.) have surged by almost a quarter on news that the group’s board have rejected a hostile all-cash takeover offer from Prosus worth 710p a share or £4.9bn. Just Eat has already committed to a merger with Dutch peer Takeaway.com which valued Just Eat’s shares at 731p each although a decline in share prices since the deal was announced in the summer has seen the value of the deal fall. Prosus is the Dutch-listed investment vehicle of South African group Naspers, which has made its name with internet-based investments.

Though its retention rate has dropped by 20 basis points, wealth management firm St. James’ Place (STJ) saw positive movements in its funds under management in the three months to September. Gross inflows came in at £3.74bn, slightly shy of the £3.83bn in the same period in 2018, while net inflows hit £2.11bn, versus £2.47bn in the previous period. 

With ongoing mixed macroeconomic and market conditions, Bunzl (BNZL) saw just 0.5 per cent revenue growth at constant currencies during the third quarter. Whilst acquisitions drove 1.5 per cent growth, underlying revenue declined by 1 per cent as the previously announced fall in sales to a large North American grocery customer continue to bite. The total committed spend on acquisitions so far this year is around £100m. Shares are down over 4 per cent this morning. 

Ofgem is proposing new financial checks and tests for existing energy suppliers to ensure more responsible industry behaviour. The new rules would allow the regulator to request an independent audit of supplier’s customer service operations and financial status and introduce new checks on growing suppliers before they hit certain thresholds of customer numbers. If suppliers fail these checks, they would be prevented from taking further customers on. The watchdog believes the move will “drive up customer service standards, reduce the risk of supplier failure and strengthen the safety net”.

A half year trading update from Mind Gym (MIND) indicates a 24 per cent increase in revenue to around £23.9m, although pre-tax profit is expected to remain broadly flat. The group anticipates full year revenue will be slightly ahead of expectations. Focusing on deepening key client relationships, an increasing proportion of revenue is being derived from the top 25 accounts and a higher share of repeat revenue has come from existing clients. 

Sports Direct (SPD) has announced it has no intention to bid for Goals Soccer Centres. The group holds an 18.9 per cent stake in the pitch operator, but has frequently complained of “lack of engagement” from its management. In a statement released yesterday evening, the group said its takeover offer had yielded it only “limited and fitful access and cooperation” from the board.

Pendragon (PDG) returned to profit in the three months to the end of September. The group saw its shares dive after a profit warning in June, but process improvements and cost control helped push underlying profits up to £3m. Management, however, still expects the group to be lossmaking in the full year.

GoCo (GOCO) has completed the refinancing of its bank facilities with a group of existing and new banks. The new facilities will comprise a four-year revolving credit facility (RCF) of £105m and a four-year term loan of £15m, both with an option to extend for a further year. 

Airtel Africa (AAF) and Finablr (FIN) have entered into a global partnership whereby the former’s mobile money operations will be integrated with Finablr’s technology platform and global network to facilitate inward and outbound cross-border payments. The services are expected to be launched market-by-market, with the first country going live by the year-end. 

DNEG – a leading digital visual effects, animation and stereo conversion company for feature films and TV – has confirmed its intention to float on the London Stock Exchange. The final offer price of the IPO will be determined following a book-building process, with admission expected in November 2019. The offer will comprise new shares issued by the company (to raise expected gross proceeds of £150m) and existing shares expected to be sold by certain existing shareholders, directors and company employees. In its ‘expected intention to float’ announcement on 15 October, the company cited adjusted cash profits for the year to March 2019 of $69.6m.

Devro (DVO) reported an improvement in sales momentum during the third quarter with volumes up 1 per cent in collagen casings, thanks to improved trading in North America and China. Management continues to expect a modest acceleration in volume growth during the fourth quarter, with full-year volume growth expected to be around 1 per cent, adding that the cost savings programme is on track to achieve £7m in savings.

Blue Prism (PRSM) has announced that Dr Jason Kingdon has reassumed the role of full-time executive chairman. This is a role he previously held prior to the group’s IPO in 2016. Dr Kingdon will assume direct reporting and leadership responsibility for Blue Prism’s go-to market and product functions. Alastair Bathgate will remain as chief executive, focusing most of his time on customer relationships, the promotion of the Blue Prism brand and strategic programmes. The shares were up by around 5 per cent this morning. 

Management at On The Beach (OTB) expect full-year results to be in line with its previously revised expectations. In August the company warned that currency-related troubles would cause it to miss previous full-year guidance. The company has begun to increase its marketing spend both online and offline to attract new customers following the collapse of Thomas Cook.