London's main indices are in positive territory but the mood remains circumspect as coronavirus fears remain heightened, see our latest analysis for the effect the outbreak is having on airline, hotel and retail stocks, particularly those with exposure to Asia. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Net client flows for asset manager Quilter (QLT) came to £0.5bn in the final three months of 2019, as strong platform-led flows offset a tricky period for the group’s advice and wealth management arm. Encouragingly, the platform transformation programme is running to plan, with migration planned for the fourth weekend of February. Once that happens, chief executive Paul Feeney is confident that net flows will pick up, though he made no mention of potential interest from private equity group Warburg Pincus. Buy.
Renew (RNWH) has announced that trading for the first quarter of the year has been in line with its expectations. The order book stood at £651m as at 31 December, a 14 per cent year-on-year increase. The engineering services order book has expanded by 5 per cent to £549m. Buy.
FDM (FDM) expects its financial performance for the 12 months to December 2019 to be in line with expectations. The group ended the year with 3,924 ‘Mounties’ placed on client sites, an increase of 5 per cent. Revenues landed at £272m, up by 11 per cent, and said that contractor revenue is no longer material. UK and Ireland saw Mounties deployed fall by 5 per cent, amidst reduced demand from UK government departments ahead of Brexit clarity and political leadership changes – but there was growth in the group’s other geographies. FDM ended the year with £37m in cash, up from £34m, and no debt. Management said that 2020 had begun promisingly. Buy.
Shares in Avast (AVST) were down 5 per cent at the time of writing. A joint investigation by PCMag and Motherboard alleges that Avast’s subsidiary Jumpshot sold “de-identified” browser history data to third parties, which could potentially be linked back to individual users. In a statement, cyber-security group Avast said, “in December 2019, we acted quickly to meet browser store standards and are now compliant with browser extension requirements for our online security extensions. At the same time, we completely discontinued the practice of using any data from the browser extensions for any other purpose than the core security engine, including sharing with our subsidiary Jumpshot. We ensure that Jumpshot does not acquire personal identification information, including name, email address or contact details”. Broker Jefferies reckons any financial impact is likely to be limited. Avast sold a 35 per cent stake in Jumpshot to Ascential last July. Under review.
Despite a lift in the final quarter of last year, Fresnillo (FRES) has seen annual silver and gold production fall in 2019, down 12 per cent and 5 per cent respectively. Total silver production dipped to 51.8m ounces on the back of the anticipated lower ore grade at the Saucito mine. Meanwhile gold production declined to 875,913 ounces as reduced volumes from Noche Buena and lower ore grade from San Julián Veins offset improvements elsewhere. Looking ahead to 2020, the miner expects to produce between 51-56m ounces of silver and 815,000-900,000 ounces of gold. Sell.
KEY STORIES:
David Nicol is to retire as chief executive of Brewin Dolphin (BRW) in June, after eight years with the wealth manager. He will be succeeded by Robin Beer, who currently heads the group’s intermediaries, charity, professional services and digital businesses. Separately, Brewin reported a 7.8 per cent rise in funds under management in the three months to December, comprising positive net flows of £0.2bn, £2.7bn of assets acquired with Investec’s Irish business, and a £0.6bn positive market performance.
Quixant (QXT), the computer system supplier for the gaming and broadcast industries, posted a profit warning this morning in its trading update. Management lowered its revenue expectations to $92.3m and adjusted profit before tax to $10.7m, which it attributes to softer demand from its gaming customers that is more pronounced than anticipated. It is worrying, especially given that in September the company announced its half-year results a week early to warn that weakness in orders had led to lower profits than the market expectation.
Shares in Pendragon (PDG) have fallen 4 per cent this morning, after the auto-retailer warned its underlying pre-tax profits for 2019 would come in at the bottom end of expectations. Management closed 22 underperforming locations in the period and said performance in the second half of the year set the group up for better performance in 2020.
Shares in Tremor International (TRMR) were up by over a tenth this morning after the group said it expects to report adjusted cash profits for 2019 in line with expectations at around $60m, achieved on revenues of around $325m. the group had a net cash position of more than $75m at the year-end, after its $25m share buyback programme and $5m of data pre-payments for 2020. The group called 2019 a transformational year, driven by its merger with Rhythmone in April, which marked its transition towards a focus to video brand advertising. Management is confident in the outlook for 2020 “and beyond”.
OTHER COMPANY NEWS:
Wizz Air (WIZZ) reported record third quarter net profits of €21.4m, driven by a 23 per cent rise in passenger growth. The airline lifted its full-year guidance for net profits to between €350m and €355m.
Oxford Instruments (OXIG) completed the sale of its 47 per cent stake in vacuum surface science joint venture Scienta Omicron to a group of the venture’s shareholders for SEK 147m (£11.7m).
United Utilities (UU.) has decided to accept Ofwat’s final determination for the next regulatory period, stretching from 2020-25. The group will target growing its dividends across AMP7 by the rate of the consumer price index including owner occupiers’ housing costs, also known as CPIH inflation. The total dividend for the 2020 financial year is expected to be 42.60 pence.
DWF (DWF) is to acquire legal and managed services business Mindcrest for $18.5m (£14.2m). The transaction is expected to complete over the next 4-6 weeks, comprising a combination of cash and shares. Mindcrest specialises in litigation support, contracts, compliance and legal analytics for large international corporate clients and is headquartered in Chicago. The purchase expands DWF’s manged services capabilities and will open up opportunities to win business in new areas such as document review and legal process outsourcing. Mindcrest is expected to generate $12.1m of revenue and $1.2m of adjusted cash profits (Ebitda) in 2019.
Sanne (SNN) expects full year revenue will increase by around 16 per cent, driven by double-digit growth in EMEA, Asia Pacific and Mauritius and North America. Full year annualised new business wins are expected to be around £24.5m, matching that achieved a year earlier. The group is guiding that the underlying operating profit margin will show “significant improvement” on the first half. Sanne has also announced the acquisition of fund administration platform Inbhear for a maximum consideration of €14.4m (£12.2m).
Biffa (BIFF) has opened its new polyethylene terephthalate (PET) plastic bottle recycling facility in Seaham, County Durham. The plant is capable of converting 57,000 tonnes of PET plastic per year (equivalent to 1.3bn plastic bottles) into high-purity pellets that can be sold onto drink makers and other manufacturers. The facility is expected to generate annual revenues of £40m. Over the next 12 months Biffa will also invest £7m in a new plastic tub and tray recycling facility in North East England.
