The blue chip FTSE100 has started the week with a solid gain and the FTSE250 is following suit but small caps are struggling for traction. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Ryanair (RYA) trimmed its full-year guidance for post-tax profits to a new range of €800m to €900m, as the airline highlighted the impact of rising fuel costs and higher-than-expected losses in its Lauda airline. Ryanair also announced that it expected to receive only 20 of the currently-grounded Boeing 737 Max-200 jets (previously 58), which will hamper its growth rate and postpone expected cost savings. Sell.
International Consolidated Airlines (IAG) announced that it has agreed to buy Spanish airline Air Europa for €1bn, in a deal that will boost the importance of the group’s Madrid hub. The acquisition will be funded by external debt and add to IAG’s net debt to cash profits multiple by 0.3 times, compared to 1.2 times last reported at the end of its 2019 third quarter. In 2018, Air Europa generated revenue of €2.1bn and an operating profit of €100m. Sell.
According to a report in The Sunday Telegraph, Kier’s (KIE) lenders are attempting to offload the company’s loans to distressed debt specialists amid growing fears the group will face the same fate as Carillion. Aiming to limit their losses, lenders such as HSBC (HSBA) are reportedly marketing the debt for as little as 70p in the pound. With a higher appetite for risk, hedge funds are said to be circling the sale with the aim of using the debt to take control of the embattled contractor. Shares are down 7 per cent this morning. Sell.
Investors in listed venture capital firm Draper Esprit (GROW) have a lot to digest today. For a start, chief executive and co-founder Simon Cook has moved to the position of chief investment officer, making way for former Kames Capital boss Martin Davis, who is now in the top job. Second, ahead of the publication of full-year results at the end of this month, Draper calculates that its gross portfolio value increased 15 per cent in the six months to 30 September, thanks to £42m-worth of investments, £70m in positive re-valuation movements, and £23m banked in realisations. Buy.
Lok’nStore (LOK) reported an 11 per cent rise in operating profit, excluding exceptional items, during the year to July. The self-storage group was boosted by a 6 per cent increase in unit occupancy and a marginal uplift to pricing. The loan-to-value ratio of the portfolio also declined to 16.1 per cent, from 19 per cent, as net debt fell 9 per cent. Buy.
Tanzanian miner Shanta Gold (SHG) has received part of its long-awaited VAT refund from the government. The government of John Magufuli still owes the miner $26.6m (£20.6m) but the $1.4m refund is a positive step, as it is the first payment in two years. The company’s chief executive Eric Zurrin has said previously the government would likely begin handing back the money once the separate Acacia Mining issues were resolved. Last month, Acacia owner Barrick Gold said this had happened through a $300m payment and a plan to split “future economic benefits” from its mines in the country on a 50/50 basis with the government. Buy.
Knights Group Holdings (KGH) has acquired Emms Gilmore Liberson (EGL), a full-service independent law firm in Birmingham, for a total consideration of £4.7m. Expected to enhance earnings immediately, the acquisition expands Knights footprint to nine offices outside of London, adding 28 fee earners. The deal comprises an initial consideration of £3.034m, made up of £1.367m in cash and £1.667m in 515,057 new ordinary shares in Knights. A deferred cash consideration of £1.667m will be paid over two years, subject to certain conditions being met. Upon completion, EGL’s four salaried partners will be issued 30,904 new shares as restricted stock awards which will vest if they remain in Knights’ employment for one year. Buy.
Shares in video game developer Team 17 (TM17) are up 5 per cent this morning, after management said sales and cash profits were expected to come in ahead of market expectations for the year. The outperformance has been driven by strong sales from both the new and established titles. Buy.
After a strong first half, organic sales growth has remained robust for 4imprint (FOUR). The marketing group has reported growth in both new and existing customer orders, similar to what it reported in the first half. Management now expects full-year sales growth of 16 per cent, in line with what it reported in the first half of the year. Buy.
KEY STORIES:
Hiscox (HSX) reported a 7 per cent increase in gross written premiums during the third quarter, with chief executive Bronek Masojada pointing to positive pricing momentum in the London market and reinsurance. However, the insurer reserved $165m for claims relating to Hurricane Dorian, Typhoon Faxai, and Typhoon Hagibis, which is “materially in excess” of the group's catastrophe budget for the second half. As a result, management expects the full-year combined loss ratio for Hiscox Retail to be between 97 and 99 per cent.
In its latest effort to reduce debt and dispose “non-core assets”, Marston’s (MARS) is to sell 137 of its smaller, wet-led leased, tenanted and franchised pubs to Admiral Taverns. Between them, the pubs generated an operating profit of £3.7m in the year to 28 September, and have a book value of £62.6m, though the sale price has been agreed at £44.9m.
Following similar arrangements for its businesses in Japan and Taiwan earlier this year, IWG (IWG) is to divest its workspace business in Switzerland to J. Safra Group and the P. Peress Group for a gross consideration of CHF120m (£94m) in cash. The deal is expected to complete at the end of November. The swiss subsidiaries had 38 flexible co-working locations as at 30 September and under a long-term master franchise agreement these centres will continue to operate under IWG’s brands. In return for an ongoing service fee, IWG will provide access to its brand portfolio, sales and marketing platform and operational infrastructure and technology. Shares are up 3 per cent this morning.
Equiniti (EQN) has acquired Corporate Stock Transfer Inc. (CST), a US provider of stock transfer services to companies with a market cap between $50m and $300m (£39m and £232m). CST maintains records for over 700 clients, with its activities including record keeping and escrow and annual meeting services. As well as providing cost synergies, the deal extends Equiniti’s footprint in North America and the micro and small-cap client space is a new growth area for the business. The group will now also serve its first Chinese clients.
S4 Capital (SFOR) has updated on its trading for the three months to the end of September. Sales were up almost 54 per cent on an organic basis to £56.6m, while gross profit were up almost as much to £42.1m. The group has been highly acquisitive in the period, and megers with Firewood, CovnergenceWorks and Datalicious Korea have all completed since the period end. The merger with BizTech is expected to be completed early this month.
