Shares in London are mixed with the FTSE100 off marginally but mid caps on better form as trader digest yesterday's sharp bounce. Our Trader writer Neil Wilson says: 'Risk on resumes? Wall Street enjoyed one of its best days this year as hopes grew for a Covid-19 vaccine. The Dow rallied 900 points, up almost 4 per cent, while the S&P 500 rose 90 points, or 3.15 per cent, to 2953, closing at its highest since March 6th. The close was just a little shy of the 2954 peak on Apr 29th, the most recent swing high. European shares were firmer at the open before losing steam quickly. The FTSE 100 added to yesterday’s gains to trade above 6100 again on the open but then followed Frankfurt and Paris. US futures were off their highs. Asian markets were green across the board.' For Neil's full article, click here.
IC TIP UPDATES:
Antofagasta (ANTO) has cut its dividend months after first seeing the impact of Covid-19 on the copper price and the initial government response in Chile. The miner will now hand over 7.1c (5.8p) to investors, instead of the 23.4c proposed in its 2019 results in March. Antofagasta said the decision had come after a new spike in cases in Chile and further restrictions for the capital Santiago. This decision will save $161m. The ex-dividend date has already passed, and the dividend will be paid on 22 May. We have kept Antofagasta on a buy rating because of its low-cost operations.
Energean Oil and Gas (ENOG) will try and negotiate a change to its $750m (£615m) deal with Edison after Neptune Energy pulled out of buying the North Sea assets once the acquisition was completed. This was a significant part of the arrangement, with Neptune set to pay $280m for the assets. It will now pay a $5m break fee. Energean has pushed out the expected completion date of the deal to the end of September from the end of June, although this could be delayed again if Edison does not agree to sell the UK North Sea assets while holding on to those in Norway. It said last year the deal was done in order to move it out of a “highly volatile and capital-intensive segment”. Buy.
N Brown (BWNG) shares rose 12 per cent after a trading update revealed that the online retailer’s home and gift sales had soared 74 per cent in the last six weeks, supported by the launch of new brand ‘Home Essentials’. N Brown expects its cash collection to fall, however, after offering customers in April the option to defer payments for three months. Sell.
Renew Holdings (RNWH) saw revenue from engineering services rise by 4 per cent to £293m in the six months to 31 March, benefitting from emergency work in response to rail landslips and storms Ciara and Dennis. Adjusted operating profit from the largest division increased by 7 per cent to £20.5m with January’s acquisition of highways engineering specialist Carnell helping bolster the margin by 0.2 percentage points to 7 per cent. The purchase has pushed up net debt from £10.2m at the September year-end to £16.1m (excluding lease liabilities). Despite the Covid-19 pandemic, 80 per cent of its activities have continued thanks to the focus on essential infrastructure work. Buy.
Avon Rubber (AVON) saw revenue increase by 9.7 per cent at constant currencies to £94.7m in the six months to 31 March. Adjusted pre-tax profit jumped by more than a third to £14.7m, benefitting from the acquisition of 3M’s (US:MMM) ballistic protection business. The purchase has almost doubled the size of the order book for the group’s protection division to £111m. On a statutory basis, pre-tax profit halved to £1.7m thanks to higher administrative costs and depreciation and amortisation charges. Still, the group has hiked its interim dividend by 30 per cent to 9.02p. With only minor disruption from Covid-19 to the protection and ‘milkrite’ businesses, Avon Rubber is confident of meeting expectations for the current financial year. Buy.
Ideagen (IDEA) expects to report revenue up by more than a fifth to approximately £56.6 million in its financial year ended in April, compared to £46.7 million last year. Annual recurring revenue (ARR) recognised during the year is expected to be around £43m, an increase to 76 per cent of total sales from 67 per cent in the year prior. However the software company does not expect to formally report its results until September, due to practical difficulties surrounding coronavirus on the audit process.The group said that it intends to pay a dividend, which it expects to declare alongside its full year results.
KEY STORIES:
Shares in Imperial Brands (IMB) tumbled by about 7 per cent this morning after the tobacco giant slashed its dividend by a third to 41.7p, in a bid to reduce debt. The group said that uncertainties caused by the coronavirus pandemic, as well as the regulatory focus on tobacco, “further reinforces the importance of a strong balance sheet to underscore the defensive characteristics of our business.” For the first half, Imperial’s tobacco net revenues were flat at £3.5bn. Revenues for ‘next generation products’ were down by more than 40 per cent to £83m. Total adjusted operating profits sat at £1.5bn – down 9.3 per cent.
On another brutal day for dividend hunters, one blue-chip stock has announced an increase in its final pay-out. Since the Covid-19 pandemic struck, sales and marketing conglomerate DCC (DCC) has seen both spikes and declines in demand for its products, though a liquid and debt-light balance sheet has given management confidence to boost the second half shareholder distribution by 2.6 per cent to 95.8p per share. Comments from chief executive Donal Murphy are also among the most bullish we have seen from a blue-chip company this year.
Beazley (BEZ) has raised £247m in a placing of new shares at 315p, a 5 per cent discount to yesterday’s closing price. Like fellow Lloyd’s syndicate manager Hiscox, which last week tapped investors for £375m, Beazley spun the fundraising as a chance to “position the business for future growth opportunities as well as providing further strength to the balance sheet in light of the continued uncertainty from Covid-19”. Despite this, management estimates claims from the pandemic will amount to just $170m, though the shares’ 36 per cent decline so far this year - alongside the doubling and further drawdown of a credit facility - paint a more pessimistic picture.
Analysts at Peel Hunt today suggested there were “no major surprises” in First Derivatives’ (FDP) full year results. Nonetheless, the shares are off 9 per cent on a broadly solid day for markets, following the axing of the group’s final dividend. The capital markets analytics software group also warned that while the pandemic is yet to have a financial impact, sales cycles have lengthened and “it remains too early to determine the probable impact on our full year performance”.
OTHER COMPANY NEWS:
Topps Tiles (TPT) interim results revealed that the tiling specialist has dipped into pre-tax loss of £4m from a profit of £5.2m in the prior year. Like-for-like sales fell 6.1 per cent including a spell when all of Topps’ stores were closed due to coronavirus.
UDG Healthcare (UDG) interim pre-tax profits more than doubled to $62.3m for its six months to March, although the Dublin-based healthcare group cautioned that it expects “lower activity levels than previously anticipated” in its second half. Operating profits in UDG’s two divisions, Ashfield and Sharp, both lifted 24 per cent on a constant currency basis, while Sharp added to its US commercial packaging capacity with the acquisition of a facility this month.
Micro Focus (MCRO) expects its revenues to drop by more than a tenth in the six months ended April 2020 on a constant currency basis. The software group has experienced a disruption to new sales due to coronavirus, leading to the deferral of some projects involving new licence and services revenues as well as maintenance renewals. Management anticipates that this will have at least a 2 per cent impact on revenues in the period. It shied away from providing forward guidance, although it said it is braced for continued disruption to new sales activity and timing pressure on renewals.
Convenience food manufacturer Greencore’s (GNC) revenue nudged up 1.6 per cent in its first half, held back by the impact of coronavirus on food to go categories towards the end of the period. Management noted that in the first weeks of its second half, weekly demand in its food to go categories declined by up to 70 per cent and currently stands two-thirds less than the same point last year. The group said that it has recently seen demand patterns beginning to stabilise - nonetheless it has temporarily ceased production at its Bow, Atherstone and Heathrow facilities and rationalised production at its Northampton site. The company will not be paying out its final 2020 dividend or its interim dividend for its 2021 financial year.
