With the US and China expected to reveal details of the first stage of their trade deal later today, trading in London equities is muted with the FTSE100 up marginally and the mid cap FTSE250 down a little.
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Tullow Oil (TLW) has had another setback, this time writing off $1.5bn (£1.15bn) from its 2019 results after exploration failures and a shift in its long-term oil price forecast.
The company’s share price plunged in December when it cut its production guidance out to 2022, and chief executive Paul McDade left with the board’s agreement immediately.
The company was already struggling after finds in Guyana turned out to be far less promising than previously thought. Tullow said on Wednesday it had cut its long-term oil price forecast from $75 a barrel to $65. A reduction in 2P reserves at the Enyenra field at the TEN project in Ghana also contributed to the write-off. Tullow has also pushed back its final results announcement from February to March, to match its peers and allow it to finish a review of the business. Sell.
Persimmon (PSN) reported a 4 per cent decline in legal completions during 2019, which resulted in a 2.4 per cent reduction in revenue, as the group held back houses in a bid to improve build quality. Total forward sales were also down 3 per cent and cash balances reduced to £844m, from 1.05bn, after shareholder returns. The housebuilder’s average selling price was also flat. Sell.
Frontier Developments (FDEV) saw sales growth of 28 per cent for the six months to November 2019, but the real growth looks likely to come in the second half of the year. The game developer launched Planet Zoo on 5 November, meaning just 26 days of its sales are included in the trading update, but strong pre-orders also contributed. This morning the game was the 14th best-selling game on the Steam online store. Buy.
True to management’s word, Ten Entertainment (TEG) has installed ‘Pins and Strings’ technology in 70 per cent of its bowling alleys, massively improving the efficiency of the lanes. Like-for-like sales growth accelerated in the second half of the year as a result, ending the year up 8 per cent. The group is continuing its strategy of expanding its network and refurbishing sites - four were overhauled in the year. Buy.
Knights (KGH) saw a 32 per cent increase in revenue to £32m in the six months to 31 October, including 12.6 per cent organic growth. Underlying pre-tax profit rose by 24 per cent to £4.2m. The legal and professional services group added net 43 new fee earners in the first half, almost as many as were recruited in the entire 2019 financial year. It now has 633 fee earners in total. Net debt (excluding £19.8m in lease liabilities) has increased by over a fifth since the year end to £17.1m. Knights made two acquisitions post-period, marking the group’s entry into Birmingham and expanding its regional footprint. It will be opening a new office in York later this month. Buy.
‘Emerging-market’-focused investment group Ashmore (ASHM) posted a 7.1 per cent increase in assets under management in the three months to December, as net inflows of $3.3bn eclipsed strong investment performance of $3.2bn. Mandates which saw positive inflows included local currency, blended debt, overlay/liquidity and equities themes, while corporate and external debt both saw net outflows. Chief executive Mark Coombs cited relative valuations, diverse investment opportunities, better growth and yield, and current positioning as reasons to remain positive on capital flows to the developing world in 2020. Buy.
Despite a flat-lining in GDP growth last autumn, Secure Trust Bank (STB) managed to grow both revenues and loans in the second half of 2019, and is likely to meet market expectations. Citing a positive post-election purchasing manager index survey result, the challenger lender is “looking ahead to 2020 with cautious optimism”, and has left guidance unchanged. Analysts at Canaccord Genuity responded by lifting their target price to 1,959p – 17 per cent ahead of the current market value. Buy.
Gamma Communications (GAMA) is to report a financial performance for 2019 “significantly ahead” of 2018, with adjusted cash profits and adjusted EPS expected to be slightly ahead of consensus, and revenues growing in line with market consensus expectations. This reflects ongoing strong demand in the UK and Dutch business markets for Gamma’s product and service portfolio. Net cash at the year-end was £53.8m versus £35.5m. Buy.
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Michelmersh (MBH) revealed that it expects to report a net debt figure above market expectations at the end of December, thanks to a better-than-anticipated cash performance during the second half of last year. Otherwise the brick manufacturer expects to report trading in line with consensus forecasts.
High-cost credit provider Provident Financial (PFG) said trading was in line with its internal plans in the three months to December, as “favourable delinquency and tight cost control” led to a better-than-expected result from core credit card subsidiary Vanquis Bank modestly. However, higher impairments at car finance division Moneybarn means full-year profits are likely to be in line with market expectations. Shares in the group are up 6 per cent in early trading.
