Shares in London's main indices have started the week positively. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Shares in William Hill (WMH) are up this morning after the gambling group said adjusted operating profit for the full-year 2019 is expected to be ahead of market and management expectations, in the £143-148m range compared with Bloomberg consensus estimates of £130m. Post-remodelling, the retail business benefitted from a run of favourable sporting results to finish the year, and the US business grew faster than expected, with management now expecting it to have reached breakeven in 2019, compared with previous expectations for losses of up to $20m (£15.4m). Buy.
Shares in Pennon (PNN) are up 9 per cent this morning after a report in The Sunday Telegraph indicated that the group is preparing to put its waste management business, Viridor, up for sale. According to the story, a bid from US private equity fund KKR was rejected early last year. Pennon initiated a strategic review back in September and is said to be seeking £4bn from the sale. RBC Capital Markets values Viridor at around £3.5bn and believes the divestment could produce a 10 per cent upside to Pennon’s share price. Estimating net proceeds from a potential sale of up to £2bn, analyst Alexander Wheeler believes a special dividend for shareholders is likely. Buy.
Management at Quartix (QTX) expects to report revenue, profit and free cash flow slightly ahead of current market forecasts for the year to December 2019. Management’s current estimates for revenue and free cash flow are £25.6m and £5.9m respectively. Its estimate for adjusted cash profits is £7m. Following a previously cited review of commission structures, this figure includes an expected uplift of £0.3m pertaining to an accounting policy change. The group has “made excellent progress” in its main fleet business in the UK, France and US. The ongoing shift away from its lower-margin insurance business meant that total group revenues were broadly in line with the prior year. The shares were up 3 per cent this morning. Buy.
Spirent (SPT) expects to exceed the market’s profit expectations for the year to December 2019. In a trading update, the telecoms testing group said that good momentum had continued into the final quarter, with “a number of important contract wins” secured. Its customers continue to invest in 5G related infrastructure. For 2019 as a whole, revenues rose by 5.5 per cent to $503m and the group now expects to deliver adjusted operating profits between $91-93m, up from $77.1m in 2018. Management said that it has entered the new year with a strong order book. The shares were up by 15 per cent this morning. But this follows on from a sharp fall last week, ostensibly after two brokers (Investec and Goldman Sachs) moved their ratings to ‘sell’. Under review.
XP Power (XPP) shares rose 4 per cent on a fourth quarter trading update that revealed an acceleration in orders across its business, with the electronics group’s order intake for the period up 30 per cent to £58.6m on last year’s final quarter - 8 per cent ahead of Peel Hunt forecasts. Revenue of £47.7m was also 8 per cent above analyst expectations. XP Power shares are up 65 per cent on our August tip. Buy.
Augean (AUG) expects to report an adjusted pre-tax profit for the 2019 financial year at least in line with company-compiled expectations of £18.4m. The hazardous waste specialist recorded an adjusted pre-tax profit of £11.4m in 2018. Buy.
Though the board of City Pub Group (CPC) is “pleased with the overall performance” of the pubco in 2019, a trading update reveals a bevy of issues in the final quarter. These include a weaker-than-expected Rugby World Cup, “political uncertainty culminating in the December election”, “unhelpful weather”, refurbishment delays, rail disruption, and tough like-for-like figures from the 2018 festive period. “Today’s profit warning reads like an attempt to play excuse bingo,” surmised AJ Bell investment director Russ Mould, though the forecast hit to adjusted Ebitda looks slight. Under review.
KEY STORIES:
Savills (SVS) defied political unrest in Hong Kong and a weak UK property market during 2019 and anticipates underlying results for the year to be at the upper-end of board expectations. The real estate services group’s performance was bolstered by strong trading from the investment management division and in the US, particularly in the occupier services business. Shares were up around 5 per cent in early trading.
West Africa gold company Resolute Mining (RSG) missed its 2019 production forecast of 400,000 ounces (oz) after technical issues at the Syama mine in Mali at the end of the year. Total production was 384,731oz. All-in sustaining costs were also 7 per cent higher than expected because of the crack in the roaster at Syama at $1,090 an oz. Resolute says everything has been repaired and has set 2020 guidance at 500,000oz. Despite gold cracking $1,600 (£1,234) an oz this month, the miner is trading just below its June 2019 London listing price of 66p, after almost reaching 120p in August.
Just Eat’s (JE.) shareholders have voted in favour of Takeaway.com’s takeover offer, snubbing Naspers’ pitch to buy them out. The offer reached an acceptance level of 80.4 per cent. The completion date for the deal has not been announced yet, but Investors Chronicle understands it is due to be in the first quarter of 2020.
Clipper Logistics (CLG) has announced a new five-year contract to provide logistics services for Joules (JOUL) from early 2020. Fulfilling orders for the retailer’s e-commerce and wholesale customers, there will be a multi-million pound investment programme into the operation over the next two years to expand capacity, drive efficiency and modernise the facilities.
