Shares across the London markets are in the red in mid-morning trading with small caps taking the biggest hit. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
According to a report in The Sunday Telegraph, Capita (CPI) is looking to sell its ‘specialist services’ division - which includes events management and translation - for at least £200m. This comes as the group is seeking to streamline its operations and boost margins, shifting away from lower value, labour-intensive contracts to more digital and software-based services. While such non-core disposals would be positive, we’d like to see more progress in its turnaround before changing our recommendation. Sell.
BAE Systems (BA.) announced a $1.9bn acquisition of Collins Aerospace's Military Global Positioning System business and an agreement to buy Raytheon’s Airborne Tactical Radios business for $275m. The opportunity to take on these assets arose from the merger of Raytheon and UTC. BAE shares rose 3 per cent in early trading. Under review.
Wealth-management firm consolidator AFH Financial (AFHP) reported “steady progress” in its five-year goals today, as it reported results for the 12 months to October 2019. Funds under management climbed 40 per cent to £6.2bn, and earnings per share are up 59 per cent to 25.4p. Since the period end, cash conversion has also improved thanks to changes in the group’s protection division. Buy.
Warehouse Reit (WHR) has increased its third quarterly dividend for the year ending March 2020 by 6.7 per cent to 1.6p a share. The industrial landlord completed 24 new lettings and 20 lease renewals at 6.4 per cent ahead of 30 September 2019 estimated rental values. The portfolio's total occupancy increased to 92.6 per cent, from 91.5 per cent, with a further 1.3 per cent of space under offer. Buy.
KEY STORIES:
Shares in Fevertree Drinks (FEVR) pulled back sharply after the mixer specialist revealed that UK revenue had fallen by 1 per cent through 2019. Sales in its other locales have held up, but the domestic decline will raise questions as to whether Fevertree has achieved market saturation in the UK. The company has continued to market the brand in its growth markets, but it means that margins have ended the year behind expectations, leading to a 5 per cent fall when compared to 2018. Recommendation under review.
The board of prospective potash miner Sirius Minerals (SXX) has agreed to recommend a rescue takeover offer from Anglo American (AAL) at 5.5p a share, claiming a lack of alternative options for investors. After the board's own financing plans unraveled last year, the sheer scale of the required funding to turn the dream of the Woodsmith polyhalite mine in North Yorkshire into reality has weighed on sentiment towards the company, leaving its share price in the mire. Management has said that Anglo's scale and deep pockets could still make the mine a reality and that the offer, which is worth £405m, is 'the only feasible option' for shareholders now. (Click here for our full story on the takeover offer).
Intu (INTU) has confirmed that it is in talks with shareholders and potential new investors over an equity raise alongside the release of its 2019 results at the end of February. The beleaguered shopping centre landlord said footfall was flat in the UK last year, compared with 2018, and 0.3 per cent ahead including Spain.
OTHER COMPANY NEWS:
The government’s official review of HS2 is set to warn that the cost of the high-speed rail project could reach as high as £106bn. According to the final draft of the unpublished Oakervee report - as seen by the Financial Times - the scheme’s price tag could rise by up to 20 per cent beyond the £81-88bn range identified by HS2 chairman Allan Cook last year. While the review concludes “on balance” that HS2 should proceed, it recommends changes be made to curb costs - this includes increasing private sector funding for stations. The National Audit Office is scheduled to release the results of its investigation into the project by the end of the month and a government decision is said to be due shortly.
Renewi (RWI) expects to deliver full year results for the 12 months to 31 March in line with expectations. Amid Dutch regulatory uncertainty, the commercial division has experienced lower volumes of construction and demolition waste and the group has continued to increase prices for waste producers as recyclate prices remain low. Meanwhile in hazardous waste, with the Netherlands lifting the ban on thermally treated soil, production is expected to progressively increase. With a Dutch tax on imported burnable waste and expected haulage and tariff costs from Brexit, Renewi’s East London Waste Authority municipal contract is now considered onerous, translating to a €25.5m (£21.8m) exceptional charge in the full year results. Net debt was below 3 times adjusted cash profits (Ebitda) at the end of December.
Beleaguered advertising group M&C Saatchi (SAA) anticipates that underlying pre-tax profits will be in line with management’s expectations outlined on 4 December 2019. Net cash for 2019 is expected to be at least £15m, “substantially ahead of expectations” after improved cash collection processes. The group plans to confirm the appointment of new independent non-executive directors “in the near future”.
Shares in Aptitude Software (APTD) – formerly known as Microgen – were down by more than a tenth this morning after the group said that delays with a small number of sales opportunities for its ‘Aptitude Insurance Calculation Engine’ had suppressed annual recurring revenue (ARR) growth as at December 2019. Still, the delays – which came after speculation that new insurance accounting standards may be deferred – had minimal impact on 2019 recognised revenue. The group expects to report results for the year in line with management’s expectations. ARR rose by 22 per cent at constant currencies to £28.6m. The board’s revenue growth expectations for 2020 are unchanged, but with planned investments and the impact of foreign exchange, it anticipates adjusted operating profits marginally ahead of those anticipated for 2019.
The Competition and Markets Authority (CMA) is considering whether it may be the case that Future’s (FUTR) £140m acquisition of TI Media (announced last October) could be expected to result in a substantial lessening of competition. The CMA has invited comments on the transaction from any interested party. TI Media is a UK-based print-led consumer magazine and digital publisher, whose 41 brands include Country Life and Woman & Home.
