London equities have taken fright as the first coronavirus case in the capital city has been recorded alongside a fresh surge in numbers infected in China. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Today, shareholders in Barclays (BARC) should be cautiously greeting full-year results, which show an improvement in the lender’s adjusted return on tangible equity to 9 per cent. As ever, ‘adjusted’ here excludes litigation and conduct matters, the latter of which suddenly has a new focus: chief executive Jes Staley’s characterisation of his relationship with Jeffrey Epstein. Last year, amid heightened media scrutiny with Mr Staley’s past dealings with the convicted paedophile, the US banker told Barclays’ board he had had “no contact whatsoever with Mr Epstein” at any time since taking up his role as chief executive. But the Financial Conduct Authority and the Prudential Regulation Authority are not yet apparently satisfied by the explanation. Under review.
Indivior (INDV) registered a 21 per cent loss in net revenue in 2019, as the pharmaceutical company continues to grapple with an indictment from the US Department of Justice over its painkiller addiction treatment, Suboxone Film. US net revenue declined by 25 per cent. Chief executive Shaun Thaxter said in a statement that the company recognises “the legal uncertainties” and is “working to manage these risks”. The group reported an operating loss in its fourth quarter of $42m and forecasts net income at a loss of $20-50m this year. Shares were down as much as 20 per cent in morning trading. Sell.
Centrica (CNA) swung from a £987m statutory operating profit to an £849m loss in 2019, adversely impacted by the price cap on UK household energy bills, weaker commodity prices and nuclear power station outages. The group booked £1.1bn in net exceptional charges before tax, including a £476m impairment on its exploration and production assets and £356m in restructuring costs. UK customer accounts were up 3 per cent, benefitting from growth in services, but a net 286,000 energy supply customers were still lost during the period. Looking to 2020, growth in the core customer-facing businesses is expected to be “broadly offset” by weakness in upstream activities. Implying flat adjusted EPS versus consensus expectations of 8.9p, RBC Capital markets says this is “essentially yet another profit warning”. Shares are down 16 per cent this morning. Sell.
Haynes Publishing (HYNS) has received a £114.5m takeover from Infopro Digital, bringing a happy conclusion to the formal sale process that it launched last November. Shares in the group soared by almost 60 per cent on the news. Under the terms of the deal – which has been recommended by Haynes’ board – Infopro will pay 700p for each Haynes share, representing a premium of 62 per cent to yesterday’s closing price. So far, the bidder has received irrevocable undertakings and letters of intent to vote in favour of the takeover in relation to more than 80 per cent of the shares (including those held by Haynes family members). Accept.
Active fund manager Polar Capital (POLR) is to acquire a specialist equity team from Los- Angeles-based First Pacific Advisors, in a bid to branch out from its UK and European wholesale franchises and build a “significant US-based international and global equity franchise”. The team, which manages around $1bn of assets across three pooled vehicles and three institutional segregated accounts, is expected to move over in the second half of the year. Buy.
Shares in Bank of Georgia (BGEO) are up 4 per cent in early trading, after the lender posted an 8.5 per cent quarter-on-quarter rise in operating income for the final three months of 2019. Total equity also grew 5.9 per cent in the final quarter, thanks to a 29.9 per cent return on average equity, thanks to what chief executive Archil Gachechiladze described as “excellent customer franchise growth [and] good cost management”. Despite rising inflation in the second half of the year – leading interest rates to rise from 6.5 to 9 per cent – the bank remains “very positive on the Georgian economy”, thanks to and a drop in corporate income taxes and strong business confidence. Buy.
Grainger (GRI) has announced plans to place up to 61.2m new shares, representing 9.99 per cent of the group’s issued share capital, in the hope of raising gross proceeds of £185m. Including additional debt of around £120m based on the group’s target loan-to-value range, this will generate aggregate funding capacity of approximately £305m. The funds will give the private rented sector specialist a further £246m of new acquisitions into its secured pipeline and £305m to pursue a further £59m of projects currently in the planning and legal pipeline. Buy.
Relx’s (REL) revenues rose by 5 per cent to £7.8bn during 2019, with operating profits up 7 per cent to £2.1bn. The group reported a net-debt-to-cash-profits multiple of 2.5 times. Relx said that key business trends in the early part of 2020 are consistent with recent years; it is confident about achieving another year of underlying sales and adjusted operating profit growth. It did, however, say that the extent to which coronavirus will impact its exhibitions business in China, or other regions, is uncertain. The exhibitions division makes up 16 per cent of Relx’s overall top line and China constitutes 5 per cent of that. Relx announced separately that Anthony Habgood is to retire from the board. Buy.
MJ Gleeson (GLE) reported an 11 per cent decline in revenue during the first half of the financial year, which reflected the £30m sale of strategic land the same time the prior year. Revenue from the housebuilding business rose almost a fifth after unit sales were up 17 per cent. The average selling price increased 1.2 per cent, although gross margins declined 150 basis points to 30.1 per cent. Buy.
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Great Portland Estates (GPOR) completed 12 new lettings generating £3.7m in annual rent during the final quarter of last year. The lettings were completed at 1.4 per cent ahead of March estimated rental values. Seven lettings were under offer totalling £9.2m a year of rent and equivalent to 6.9 per cent ahead of March 2019 ERV. It sold 24/25 Britton Street, EC1, sold in January for £64.5m, reflecting net initial yield of 4.07 per cent.
