Equities in London sold off sharply in morning trading today as concerns about the spread of Coronavirus, a SARs-like illness, in Asia after the first human-to-human transmission was confirmed by Chinese authorities. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
TalkTalk (TALK) has agreed to sell FibreNation to CityFibre for a cash consideration of £200m, conditional on shareholder approval. The group will also be repaid, up to an agreed capped amount, the increase in the amount of intercompany indebtedness between the group and the fibre assets from and including 15 November 2019 up to and including completion. The sale is underpinned by a long-term wholesale agreement with TalkTalk for residential and business products in the areas where CityFibre builds, while allowing TalkTalk to partner with other network providers. TalkTalk intends to use the sale’s proceeds to strengthen its balance sheet. It has received commitments from shareholders holding, in total, 57.5 per cent of its share capital to vote in favour of the sale. On balance, we’re still negative. Sell.
Mears (MER) is guiding that its 2019 underlying pre-tax profit will be in line with expectations with a 16 per cent increase in revenue from continuing activities to over £900m. As it exits standalone care, the group is in an “advanced stage” in the sale of its England and Wales domiciliary care business and intends to dispose of its Scottish counterpart in 2020. Net debt is set to come in at around £52m with average daily net debt of £114m adversely impacted by the mobilisation of the asylum accommodation and support contract (AASC). The AASC is now fully operational and has delivered revenues of approximately £45m. With contracts up for renewal, the adjusted order book stands at £2.5bn, down from £3bn in 2018. Sell.
IntegraFin (IHP), the group behind the financial adviser-focused Transact investment platform, saw its funds under direction (FuD) climb by 4 per cent in the last three months of 2019, to £39.3bn. Net flows of £959m were complemented by £561m in positive market movements, meaning FuD ended the calendar year up 24 per cent. Buy.
Camellia (CAM) has warned that its 2019 full year profit will be “significantly below” expectations, guiding to revenue of £294m. In 2018, the group recorded £310m of sales. Amid global overproduction, tea prices failed to improve in the second half of the year and were substantially less than the group anticipated during its critical November and December trading period, and were. £9.7m has been released from a provision relating to wage settlements in India and Kenya – higher than the £8m previously declared – although a further provision may be required as Bangladesh introduces new legislation requiring companies to contribute to “workers profit participation funds”. The group has also disclosed it is investigating allegations of “serious assault, harassment and sexual misconduct” at two of its subsidiaries’ African operations. Sell.
Shares in Learning Technologies (LTG) rose by more than a tenth this morning after the group revealed that profit and cash would be “comfortably ahead of expectations” for 2019. Management expects revenues to be up by 38 per cent to around £130m, with recurring revenues increasing to around 73 per cent (up from 68 per cent) – fuelled by ongoing performance in the software and platforms business, a full year contribution from PeopleFluent and Watershed, and the acquisition of BreezyHR last April. PeopleFluent’s revenues came in at around $93m, ahead of previously announced expectations of around $91m. Adjusted operating profits are expected to land at £41m – up by around 58 per cent. Year-end net cash was £3.8m, thanks to “substantial” cash generation in the second half. Buy.
Harworth (HWG) expects its financial performance in 2019 to be in line with expectations, despite planning challenges reported during the first half of the year. The brownfield regeneration specialist purchased 33 acres adjacent to two of its major developments for a combined consideration of £6.25m during the final quarter of the year, as well as acquiring two industrial units at Brighouse and Sherburn-in-Elmet for £12.8m, equivalent to a blended initial yield of 8.8 per cent. Buy.
SDL (SDL) expects 2019 revenue and adjusted operating profits to be significantly ahead of 2018 and in line with market expectations. Net cash as at December was £26.4m (up from £14.4m). Buy.
Dotdigital (DOTD) said it saw a strong first half, with continuing organic revenues up by around 15 per cent to £23.1m – fuelled by good direct sales to new and existing customers. Adjusted cash profits and adjusted pre-tax profits from continuing operations are expected to be in line with market expectations. Operating profits from discontinued operations landed at breakeven post completion of the group’s restructure. Cash landed at £22.5m at the year-end, up from £16.6m. Buy.
Shares in IG Design (IGR) are up more than 7 per cent this morning, after the group raised £120m through a placing to fund an £89.7m acquisition in the US. The consumer gift packaging group announced the deal to acquire CSS Industries yesterday afternoon. The deal strengthens IG’s proposition in the “everyday” and floral decorative packaging sectors, and is expected to be earnings enhancing from the first full year of the acquisition. Buy.
KEY STORIES:
The BP (BP.) C-suite will see even more change this year, with CFO Brian Gilvary standing down on June 30. Mr Gilvary has been in the job for eight years. The retirement announcement comes as chief executive Bob Dudley reaches his last weeks in the job, with upstream boss Bernard Looney taking over in February. Upstream CFO Murray Auchincloss has been promoted to group finance chief. Panmure Gordon analyst Colin Smith said Mr Gilvary was leaving “earlier than anticipated” and linked it to the confusion over the dividend possibly being increased in the December quarter and the failure of planned buybacks to cover all scrip issued since 2017 by the end of last year.
easyJet (EZJ) shares lifted 5 per cent after a strong first quarter pushed up the airline’s guidance for its half-year period. A combination of self-help and the reduction in capacity following the collapse of Thomas Cook has helped drive up revenues for the quarter to 31 December by 9.9 per cent to £1.4bn. First half revenues per seat are now expected to lift by by mid to high single digits, compared to previous expectations of an 'increase by low to mid single digits'.
Spread-betting firm IG Group (IGG) has maintained its medium-term targets for 3-5 per cent annual revenue growth and to boost revenue from new markets to £160m by 2022. All else in its half-year numbers, out today, was already known; though client numbers rose in the six months to November, revenues dipped 6 per cent as the effects of European regulatory changes washed through the income statement. Separately, chief financial officer Paul Mainwaring has signalled his plans to retire after 20 years as a UK plc finance director.
In a trading update, Zotefoams (ZTF) announced that it has experienced a full-year decline of around 10 per cent in polyolefin sales, owing to difficult market conditions. The foams specialist’s profitability for its final quarter was also hampered by adverse foreign exchange movements.
