The Times 13/03/19 - Vox Markets | Vox Markets

The Times 13/03/19

Standard Life Aberdeen (SLA) is ditching its structure of having two chief executives and has put Keith Skeoch solely in charge of the struggling asset manager. Martin Gilbert, who had been co-chief executive alongside Mr Skeoch, will focus specifically on winning new business and is taking on the title of chairman of Aberdeen Standard Investments. Mr Gilbert, 63, will continue to be an executive director and sit on the board. The change is effective from today. In further changes, Bill Rattray, the company’s chief financial officer, will step down, as will Richard Mully as a non-executive. Both had come from the Aberdeen side of the business. The management changes are likely to be seen by observers as a strengthening of the grip by the Standard Life side on the overall business after a period of divisions between the two camps.

Morrison (Wm) Supermarkets (MRW) has reported another year of rising sales and profits and awarded a further special dividend to shareholders in a sign that its recovery is well on track. The Bradford-based grocer, which only a few years ago was desperately fighting for its survival, said that its underlying pre-tax profit rose by 8.6% to £406 million on revenue that rose by 2.7% to £17.7 billion in the year to December 31. In a key sign of its recovery the group’s like for like sales, excluding fuel and VAT — a key benchmark in the industry — rose by 4.8%. Morrisons has also rewarded shareholders with another special dividend of 4p, taking the full-year special dividend to 6p. Including its ordinary dividend the total payout for investors is 12.6p, up 24.9% on a year earlier.

Non-Standard Finance (NSF)Provident Financial (PFG), the doorstep lender that is trying to fight off a £1.3 billion hostile bid, has claimed that its turnaround plan is bearing fruit after it swung back into profit and restored its shareholder payout. The company posted pre-tax profits of £90.7 million for 2018, reversing the £147.9 million loss it suffered a year earlier, and declared a final dividend of 10p a share. The dividend was scrapped in 2017 when Provident Financial was plunged into turmoil following the botched overhaul of its doorstep lending business and the revelation that the Financial Conduct Authority was investigating the mis-selling of a credit card product offered by its banking arm Vanquis.

A surge in profits at Gem Diamonds Ltd. (DI) (GEMD) failed to put a sparkle into its share price performance as the miner opted not to pay a dividend. Last year it produced a record haul of 15 diamonds greater than 100 carats, including the 910-carat “Lesotho Legend”, the fifth-largest gem diamond ever recorded, which sold for $40 million. The discoveries helped it to deliver a 25% increase in revenues to $267.3 million for 2018 and pre-tax profit of $73 million, more than double the $30.3 million it reported in 2017. The board has opted not to pay a dividend, however, blaming tough market conditions with prices for smaller stones dropping amid ample production globally, as well as the emergence of “more competition from the man-made diamond sector”.

Hikma Pharmaceuticals (HIK) was among the heaviest fallers in the blue-chip index after its full-year results fell came in just shy of expectations. Revenues of $2.1 billion were about 1% below analysts’ expectations, while operating profits were also below consensus forecasts, according to analysts at Peel Hunt.

The sell-off at GVC Holdings (GVC), owner of Ladbrokes, continued in the wake of last week’s share sales by its chairman and chief executive, who unnerved investors by offloading almost three million of their own shares at 666p.

Petrofac Ltd. (PFC) boss Ayman Asfari loses legal case in Italy. The boss of Petrofac has lost his appeal against an insider trading fine imposed by Italy’s financial regulator. After a court in Rome upheld the penalty, Ayman Asfari said that he planned to appeal to a higher court. A spokesman said that the ruling had been “a total surprise and hugely disappointing”. Mr Asfari, 60, has been trying to clear his name since 2017, when he was ordered to pay more than €600,000 by the Italian regulator, known as Consob. The case relates to dealings by Mr Asfari in 2012, when he made €300,000 by betting on a share price fall at Saipem, an Italian rival, hours before Pietro Franco Tali, its chief executive, resigned over a corruption inquiry. Consob concluded that Mr Asfari had been tipped off by Mr Tali about his departure, a claim denied by both men.

G4S (GFS) ready to cash in with unit sale. A struggling outsourcer has received bid interest in its cash-handling business, with contact coming from both private equity firms and rival companies. G4S launched a review of its cash business in December amid pressure to turn itself around. In an update alongside its full-year results yesterday, it said that it had received “expressions of interest” to acquire the unit, but added that it was too early to know whether they would lead to a deal and that it continued to “pursue all strategic options”. The potential suitors were not named. Analysts at Jefferies, the investment bank, estimated that the cash business could be worth up to £1.9 billion. G4S’s overall market valuation is about £3.2 billion.

Mothercare (MTC) eases its worries by letting toy business fly the nest. The Early Learning Centre toy business has been sold by Mothercare to The Entertainer group as part of a restructuring of the struggling maternity and baby retailer. Mothercare said that it had agreed to sell its toy business to Teal Brands, holding company of The Entertainer’s businesses, for up to £13.5 million. It will be paid £6 million in cash on completion of the deal, plus £5.5 million for stock within a few months of completion. A further £2 million in fees based on future performance could be generated over the next two years. Mothercare said that the proceeds would be used to meet its target of becoming debt-free with its banks by the end of the year. The retailer also has agreed a long-term partnership with The Entertainer to supply toys to its British stores and to Early Learning Centre franchise outlets overseas.

Franchise disputes hold back Domino’s expansion. Domino’s Pizza Group (DOM) admitted yesterday that the number of new stores being opened in Britain would fall this year as a result of “tensions” with its franchisees. Britain’s biggest pizza delivery company said that it had endured “a mixed year”, with one analyst calling the 2018 results “a rather soggy concoction”. It reported a 9% year-on-year increase in group sales to £1.26 billion, with like-for-like sales in the UK up 4.6%. However, underlying pre-tax profits fell 1.1% to £93.4 million and on a statutory basis by 22.2% to £61.9 million. Domino’s booked exceptional charges of £31.5 million, including impairments on the international business and changes to the British supply chain.

Staffline Group (STAF) underpaid workers for years, says auditor PWC. A listed recruitment company has identified underpayments to workers going back years after a whistleblower tipped off its auditors. Staffline said yesterday that it was working with HM Revenue & Customs on the issue and had extended a £20 million provision for associated costs by £3.5 million. It also lifted a suspension on trading of its Aim-listed shares, which had been frozen since January 30. They promptly surged by nearly 30%. Trading in the stock had been suspended after auditors at PWC received an anonymous email that made allegations about Staffline’s invoicing and payroll practices. The tip-off, which included a claim about compliance with national minimum wage rules, arrived the night before the accounting giant had been due to sign off on the recruiter’s accounts. PWC immediately delayed its audit and the company warned that it would postpone its annual results.

Lender to help dig Sirius out of a hole. The developer seeking to build a big fertiliser mine beneath the North York Moors is in talks with a lender over a new funding model. Sirius Minerals (SXX) has been in negotiations with potential lenders for months to try to secure the $3 billion of debt financing it needs, along with a further $600 million, to proceed with the project near Whitby. Sirius said yesterday that it had “received a conditional proposal from a major global financial institution”, which it believed may offer “a more flexible and attractive solution”. It said that it was pausing talks with other parties to pursue the new proposal, for which it hoped to secure firm commitments by next month. It offered few details, but it is believed that the new proposal would not be dependent on securing government loan guarantees, which were crucial for its original funding plan.

Black is back in fashion as retailer makes profit. French Connection Group (FCCN) is back in the black for the first time in seven years, but its sales in Britain have continued to drop amid difficult trading conditions. The fashion retailer said yesterday that it had generated an underlying operating profit of £100,000 in the year to January 31, compared with a loss of £2.1 million a year earlier. It returned to profit despite like-for-like sales in Britain falling by 6.8%. It announced the improvement at a time when Stephen Marks, 73, its founder and chief executive, is trying to sell his 42% stake in the retailer. Given the size of his holding, any deal is likely to trigger a takeover offer for the company.

Mass market is big bet in 888’s play for customers. Tougher regulation and higher taxes in Britain, its key market, could not prevent 888 Holdings (888) from generating record underlying earnings last year. Although the UK remained important, the online gambling operator said that it was reducing its reliance on its domestic market. It has been launched recently in Sweden and Portugal. It said that trading in Britain had started to improve towards the end of last year and that those positive trends had continued into the first quarter of this year, with revenues up 10% at constant currency rates.

EnQuest (ENQ) sinks after Cairn Energy (CNE) cuts estimate of North Sea field’s reserves. A dispute has broken out between two North Sea companies over how much oil can be produced from a field they co-own. Shares in Enquest fell sharply after Cairn Energy cut its estimate of reserves at the Kraken field by almost a fifth and cut the value of its holding in the project by $166 million. Enquest, the operator and majority owner of the field, said, however, that its estimates of reserves remained “materially unchanged” and that it did not intend to write down the value of its own stake.

It’s all plain sailing for Global Ports. After a loss of $10.5 million in 2017, Global Ports Holding (GPH) has swung back to the black with a 182% jump in annual pre-tax profit to $8.6 million. The company’s cruise division achieved a record performance, with a revenue rise of 9.2% to $54.9 million. Revenue at the commercial unit rose by 5.8% to $69.9 million.

Quilter PLC (QLT) was among the biggest mid-cap gainers after unveiling rising profits in its first set of annual results as a listed company. Adjusted annual profits before tax rose 11% to £233 million and it recommended a final dividend of 3.3p per share. Analysts at UBS were upbeat, maintaining a “buy” rating and a price target of 170p per share. Paul Feeney, Quilter’s chief executive, said that the business had “performed well in 2018 despite increasingly challenging market conditions as the year progressed”. However, the news was not all good for Quilte. Deteriorating investor sentiment hit net client cashflows, and assets under management dropped by £7.8 billion, or 4%. The company is also cautious about the rest of 2019, with Brexit and market uncertainty continuing to have an effect. “Recent quarters have seen reduced levels of investor confidence and this could deteriorate further, potentially materially further, under various scenarios related to the UK leaving the EU,” it said.

Equiniti Group (EQN), the payment services provider, fell by 8.3%, or 16¾p, to 186¼p after it warned of a delay in the separation of its North American business from Wells Fargo and reported a drop in annual pre-tax profits. It is now expecting to be separated from its former parent in June at a cost of £45 million.

 

Tempus – Ashtead Group (AHT): Buy. Highly diverse business locked in to US growth whose shares look very good value

Tempus – Alfa Financial Software Holdings (ALFA): Buy. A speculative play but will reward if it delivers

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Mentioned in this post

AHT
Ashtead Group
ALFA
Alfa Financial Software Holdings
CNE
Cairn Energy
DOM
Domino\'s Pizza Group
ENQ
EnQuest
EQN
Equiniti Group
FCCN
French Connection Group
GEMD
Gem Diamonds Ltd. (DI)
GFS
G4S
GPH
Global Ports Holding
GVC
GVC Holdings
HIK
Hikma Pharmaceuticals
MRW
Morrison (Wm) Supermarkets
MTC
Mothercare
NSF
Non-Standard Finance
PFC
Petrofac Ltd.
PFG
Provident Financial
QLT
Quilter PLC
SLA
Standard Life Aberdeen
STAF
Staffline Group
SXX
Sirius Minerals