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News & Tips: Sainsbury, Greggs, Sirius Minerals & more

Equities are reacting with caution to events in the Middle East
January 8, 2020

London shares are in the red in mid-morning trading as traders react to yet more worrying events in the Middle East as the US stand off with Iran threatens to intensify. Click here for The Trader Nicole Elliott's latest thoughts on the markets. 

IC TIP UPDATES: 

As more of the supermarkets report Christmas trading, we are seeing a familiar picture emerge. J Sainsbury (SBRY) this morning unveiled a like-for-like sales decline of 0.7 per cent in the 15 weeks to 2020. However, it was not without bright spots. Grocery sales were up 0.4 per cent in the period, with online up 7.3 per cent - a clear vindication of the group’s investments in its digital offering. However, the difficulties in general merchandise only worsened, with a 3.9 per cent drop. Sell.

Gregg’s (GRG) vegan sausage roll was a surprise hit last year, helping the food-on-the-go retailer to accelerate sales growth to 13.5 per cent for the year. Management has now guided to profits for 2019 to come in ahead of previous analyst expectations. Early indications are that the group’s latest vegan offerings - a steak bake and doughnut - are being similarly well-received. Buy.

Anglo American (AAL) is in advanced discussions regarding a possible all-cash takeover of Sirius Minerals (SXX) at 5.5p a share. The proposal represents a 34.1 per cent premium to Sirius’ closing price the day before the announcement was made, valuing the potash mine developer at around £386m. Anglo says it has been interested in Sirius’ North Yorkshire polyhalite project for some time given its “scale, resource life, operating cost profile and the nature and quality of its product”. It has until close of business on 5 February to extend a formal offer which Sirius has said it would recommend to shareholders at the current price. Buy

Lok’n Store (LOK) has exchanged contracts with Lidl subject to planning on the shared use of our freehold site in Cheshunt, Hertfordshire, which is slated to open in 2021. The self-storage specialist has also secured two further pipeline sites, in Chester and Oldbury, taking the total number of pipeline stores to 15. Buy

Net inflows to Impax Asset Management (IPX) remain strong, as new mandates saw commitments of £771m in the period. In turn, that pushed assets up by 7 per cent to £16.1bn at the end of December, suggesting allocations to ESG-themed investments continues to rise. The shares have rocketed in recent weeks, and now sit on an enterprise value-to-operating profits ratio of 23, based on Peel Hunt’s forecasts. Under review.

Shoe Zone’s (SHOE) share price has dropped following the group’s full-year results for the year to October 5. In spite of a 0.9 per cent growth in sales and gross margins holding steady at 62.7 per cent, climbing business rates have weighed heavily on the group, now accounting for 6 per cent of sales. Management said if rates had held at the same proportion of rents paid throughout the period, it would have led to an additional £55m in pre-tax profits. Under review

KEY STORIES: 

Communications regulator Ofcom has launched its “Wholesale Fixed Telecoms Market Review 2021-26”, mapping out how Ofcom will regulate BT (BT.A) for the respective five-year period. As part of this, the regulator has outlined plans to “supercharge” investment in fibre broadband. BT’s chief executive Philip Jansen said that “we welcome the direction of today’s consultation from Ofcom, which is a significant step forward towards a widely shared ambition to fibre up the whole of the UK”. He added, “we were also really encouraged by the new Government’s £5bn commitment to facilitate the build of gigabit-capable networks to the hardest to reach parts of the country. We will continue our discussions with Government, Ofcom and the industry […]”. Shares in BT were up by around 3 per cent this morning.

Finablr (FIN) gave an update this morning on the status of the investigation and remediation measures taken in relation to a cyber incident at its Travelex business. Travelex confirmed yesterday that a software virus detected on 31 December is a ransomware known as “Sodinokibi”, or REvil. Travelex has contained the spread of the ransomware and confirmed that while there has been some data encryption, there’s no evidence that structured personal customer data has been encrypted or that data has been exfiltrated. Finablr’s other six brands aren’t affected. Still, the group’s shares plummeted by over 15 per cent this morning – hit by the news of a $72m share sale by two major shareholders, done to reduce “outstanding indebtedness of themselves and other corporate entities owned by them under borrowings […]”.

To the point above, the respective shareholders -  Saeed Mohamed Butti Mohamed Khalfan Al Qebaisi, and Khaleefa Butti Omair Yousif Ahmed Al Muhairi – have also sold 31.2m shares in NMC Health (NMC), raising gross proceeds of around $493m. The share sale, implemented at £12 per share, represented around 15 per cent of NMC’s issued and outstanding share capital. NMC said this morning that “the motivation for the transaction, as made clear in the launch statement of 7 January 2020, pertains only to the means of financing the investors' shareholdings and not to the company's operating performance nor long-term prospects”. NMC has been hit in recent weeks by a short report by Muddy Waters. Its shares were down by around 15 per cent this morning. 

OTHER COMPANY NEWS:

S4 Capital (SFOR) has announced that its global content practice – built around MediaMonks – has agreed to merge with the fully integrated digital agency Circus Marketing, which is headquartered in Mexico City. It said that with Circus “on board”, S4 will strengthen its content expertise and position in the Latin America region through the addition of projected revenues of $38m and gross profit of $20m in 2019 (up 21 per cent and 25 per cent respectively on 2018). The consideration for this deal will be just over half in cash and the remainder in S4 shares, with customary lock-ups. S4 also confirmed that its trading for the first 11 months and expectations for December continue in line with market expectations.

Shares in currency risk management firm Alpha FX (AFX) have been on a tear in recent months, and a trading update out this morning helps to explain why. Revenues for 2019 are now expected to exceed £35m, thanks to further growth in clients and client nerves around the general election and Brexit. The pre-tax profit margin has also held firm, despite a spate of hiring activity and investments.