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News & Tips: Barclays, GVC, Kier & more

Markets are being roiled by coronavirus fears
February 24, 2020

There is only so long that markets were willing to shrug off concerns around the coronavirus and weekend reports of a spike in cases outside China, with particular concerns around cases in Italy and South Korea, equities in London have slumped in morning trading. By mid-morning the FTSE100 and FTSE250 had both shed more than 10 per cent of their value. Click here for The Trader Nicole Elliott's latest take on the global markets. 

IC TIP UPDATES: 

Barclays (BARC) is among the biggest fallers in a bad day for banking stocks, following reports that chief executive Jes Staley could leave the group by the end of 2021. Mr Staley – whose characterisation of his relationship with the convicted paedophile Jeffrey Epstein to the bank’s board is currently the subject of an FCA investigation – has been with the bank since the end of 2015, but could stand down at next year’s AGM. A Sky News report that JP Morgan Chase is about to pursue an entry into UK retail banking is unlikely to have helped matters. Under review

Shares in GVC (GVC) are down 4 per cent this morning after hedge fund Citadel increased its short position against the gambling group. News emerged over the weekend that the hedge fund’s position was now equivalent to 1.83 per cent of the group’s issued share capital, according to data from Short Tracker. In all, short positions against the group are equivalent to 3.34 per cent of its shares. Buy.

According to The Sunday Telegraph, the government has hired advisers from Deloitte to monitor the financial health of key outsourcers such as Kier (KIE). The closer supervision follows accusations of a lack of government oversight of its contractors in the wake of Carillion’s collapse in 2018 and Interserve falling into administration last year. It also precedes an anticipated ramp up in infrastructure spending. The Cabinet Office is said to be looking at corporate resolution plans and living wills as a contingency for key strategic suppliers. Meanwhile, it is also being reported that Kier may need to secure fresh funding from its lenders in the coming weeks. While its shares have rallied post-election and with the greenlighting of HS2, we remain wary of its debt troubles. Sell.

Anglo Pacific Group (APF) says it has formalised its focus on greener materials, with the Narrabri thermal coal royalty its last that does not “support a more sustainable world”. The royalty and streaming company, which gets its revenue from stakes in production of coal, iron ore, vanadium and copper, also said it would strengthen its environmental, social and governance criteria before buying new royalties. In the first half of 2019, Anglo got two-thirds of its revenue from the Kestrel metallurgical coal mine. Buy. 

Countrywide (CWD) and LSL Property Services (LSL) have confirmed press speculation that they are in talks over an all-share merger. Shares in the former troubled estate agency services group - which had agreed the sale of its commercial business in November - were down 4 per cent in early trading. Move to hold

On a down day for equity markets, shares in Tristel (TSTL) are up by 7 per cent, after the infection prevention specialist posted a strong rise in its half-year revenues, profits, margins and dividend. Management has been careful not to paint the Aim-listed group as a play on the coronavirus, but suggested that the outbreak “will be a powerful influence on global healthcare systems for greater investment in infection prevention and control”. Nonetheless, fast-tracked orders from the Chinese military and stockpiling by UK hospitals suggest this year could see a swell in sales. Buy.

KEY STORIES: 

Judges Scientific (JDG) shares fell 6 per cent after the acquirer of scientific instrument companies confirmed that the earnings impact of coronavirus would be limited provided that the outbreak does not last more than three months and remains largely within China, as Judges Scientific operates with an average three-month order book. The group said that only one of its subsidiaries has significant supply chain exposure to China.

OTHER COMPANY NEWS: 

Amid challenging macroeconomic conditions, Bunzl (BNZL) saw like-for-like revenue grow at just 1 per cent at constant currencies to £9.3bn in 2019. Adjusted operating profit on this basis rose 1.5 per cent to £631m on a stable margin of 6.8 per cent. North America is the largest market and revenue declined by 0.1 per cent to £5.5bn on the back of lower sales to its largest grocery customer. With a committed acquisition spend of £124m, the group completed four acquisitions during the year – fewer than in recent years – bringing annualised revenues of £300m. It has also announced two purchases post-period – healthcare products supplier Medcorp in Brazil, and personal protection equipment distributor ICM in Denmark. 

Publishing group Reach (RCH) saw like-for-like revenue fall by 5.3 per cent to £703m in 2019, slightly ahead of Numis’ projection of a 5.5 per cent decline and an improvement from the 6.6 per cent dip experienced in 2018. The group swung from a £120m statutory pre-tax loss in 2018 to a £121m profit. The owner of the Mirror and Express newspapers described circulation revenue as “resilient” with the decline slowing from 5.1 per cent to 4.5 per cent. Meanwhile digital revenues grew 13.2 per cent and average worldwide monthly page views jumped by a quarter year-on-year to 1.3bn. Benefitting from £12m in efficiency savings and £16m in acquisition synergies, adjusted operating profit for the year came in 5.4 per cent higher at £153m on a margin of 21.8 per cent.

Finsbury Food Group (FIF) posted a 5% increase in group revenue in its first half ended 28 December, which chief executive John Duffy attributed to organic performance in the UK bakery division, new business wins and the first full six-month contribution from its “Free From” business. Operating profit in its UK bakery division increased by 4%, though this was partly offset by a 7% decline in its overseas business. Mr Duffy said in a statement that “the macroeconomic pressures affecting the industry look set to continue” in the second half, but kept the company’s full year prospects in line with expectations. 

Oxford Instruments (OXIG) has sold its US-based OI Healthcare business to MXR Imaging for $15m (£11.5m).

Shares in Ascential (ASCL) are up 3 per cent this morning after the information, data and analytics group released results ahead of expectations for 2019. The group achieved organic sales growth across all of its segments, with marketing and digital commerce leading the way with 9 per cent each. The full-year dividend is flat on last year at 5.8p, and management has announced a £120m share buyback.