Babcock International Group (BAB) has reported a slump in profits after £120 million of writedowns. Profits dropped 64% to £65.1 million before tax in the six months to September after the impairment charges, including £80 million at its North Sea helicopter business. Revenue fell 2.7% to £2.25 billion. The company also warned that revenue at its nuclear decommissioning division would drop more than expected. Last year Babcock said that it would end its contract with the Nuclear Decommissioning Authority to clean up 12 Magnox reactor sites in August next year. Today it increased the resulting loss in revenue in 2020 from £100 million to £250 million and said that it expected a £20 million shortfall in operating profits.
Shares in SSP Group (SSPG), the travel food retailer, fell this morning after its acclaimed chief executive, Kate Swann, took investors by suprise by announcing her departure. The stock was the second largest faller in the FTSE 250, shedding more than 7% of its value, off 52p to 633p in late-morning trading. Ms Swann, a turnaround specialist who revived the fortunes of WH Smith before taking the top job at SSP, has been running the group for more than five years and has helped to substantially sharpen its performance. She will be replaced by Simon Smith, chief executive of SSP in the UK and Ireland, who will take charge at the beginning of June. The two will work closely together to ensure a smooth handover, the company said.
Energy and tech sell-off wipes out 2018 gains. Cash is good alternative to stocks, Goldman Sachs warns. Wall Street surrendered its 2018 gains last night as a sharp fall in the oil price prompted investors to dump energy companies and as big technology stocks suffered another day of heavy selling. The S&P 500 and Dow Jones industrial average fell into the red for the year as fears grew that a long-running bull market is nearing an end. All 30 Dow companies closed down. The S&P 500 closed at 2,641.89, a fall of 1.8% for the day and 1.2 per cent since January, while the Dow dropped by 2.2%, or 551.80 points to 24,465.64, down 1% on the year. The technology-focused Nasdaq index lost 1.7% to 6,908.82, flat on the year to date.
Indivior loses half its value as court backs copycat drug. Hundreds of millions of pounds were wiped off the value of a UK-listed pharmaceuticals company yesterday after an American court ruling allowed a rival to launch a key copycat product. In one of the biggest one-day sell-offs on the FTSE 250 index, shares in Indivior (INDV) slumped by almost half, closing down 46.7% at 110p in London. The collapse was triggered by the US court of appeals lifting a preliminary injunction blocking Dr Reddy’s Laboratories, an Indian rival, from selling a generic version of Indivior’s blockbuster treatment for opioid addiction.
Bumpy landing in Berlin takes chunk out of Easyjet’s annual profits. Losses from the takeover of Air Berlin’s operations in the German capital and IT and Brexit costs have hit earnings at easyJet (EZJ). Although it was still a highly profitable year for the short-haul airline — generating a dividend payout of almost £80 million for Stelios Haji-Ioannou, its billionaire founder and 33 per cent shareholder — its shares closed 5.5%, or 64½p, down at £11.10½ yesterday, making them the biggest fallers in the FTSE 100. The shares have fallen by more than a third since high summer, notably in the past month after the carrier warned that it expected revenues to fall by as much 5% over the winter on a like-for-like, per-seat basis. It has not changed that guidance.
Brussels adds its backing to Shire deal. One of the global pharmaceuticals industry’s biggest takeovers cleared another hurdle yesterday when officials in Brussels conditionally approved the multibillion-pound deal. Takeda struck a £46 billion agreement to acquire Shire Plc (SHP), the FTSE 100 drugs company, in May and has been seeking clearance from competition regulators. The Japanese company said yesterday that it had received clearance from the European Commission for the proposed cash-and-shares deal. As expected, Brussels made its approval conditional on Takeda and Shire divesting a compound in Shire’s portfolio that could overlap with Takeda’s product for inflammatory bowel disease.
Rival US firm makes offer for snake bite drugs group. The directors and biggest shareholders of BTG (BTG) have recommended a £3.3 billion takeover by a bigger American rival. The British healthcare company and Boston Scientific revealed that they had agreed terms on an all-cash offer, which values BTG’s shares at 840p. The offer represents a 36.6% premium to the stock’s closing price in London on Monday. Directors, who include Dame Louise Makin, BTG’s chief executive, hold 0.3% of the shares and have recommended the offer to shareholders. The deal also has been supported by BTG’s largest investors, Invesco Asset Management, Woodford Investment Management and Novo Holdings, which hold a third of the shares.
Investor stirs pot by stating opposition to Wagamama deal. One of Restaurant Group (RTN) biggest institutional investors has come out against the proposed £559 million acquisition of the Wagamama chain. James Thorne, UK equities fund manager at Columbia Threadneedle Investments, said that he would be using its 7.7% stake in the Frankie & Benny’s and Chiquito operator to vote against the deal at next week’s shareholder meeting. “The strategic appeal of combining two good businesses may be understandable, but the size and price of the deal at this point in the cycle throws up too many red flags,” he said. “The share price plunge reflects the depth of concern there is.” However, in a sign of how the deal is dividing opinion in the City, Glass Lewis, the proxy advisory group, recommended yesterday that shareholders vote in favour of both the proposed acquisition and the £315 million rights issue to fund it. Glass Lewis argues that the risks associated with the higher debt are “acceptable relative to the expected benefits of the transaction”. It deems the transaction and the rights issue to be “generally reasonable and in the interests of shareholders”.
Compass seeks alternative food supplies. The boss of the world’s biggest caterer has welcomed the prime minister’s Brexit agreement as “better than no deal” and confirmed that the company has contingency plans to cover “various scenarios”. Dominic Blakemore, chief executive of Compass Group (CPG), said that it sourced about 20% of its £700 million worth of food in the UK from the European Union, while about 10% of its workforce in the country, between 5,000 and 6,000 people, were from the bloc. Compass is also “looking at the possibility of securing residency status for our workers if that option is available”, Mr Blakemore said, depending on the final outcome of the Brexit negotiations. It also is doing a “little bit of inventory build”, or food stockpiling.
Counting the cost of a viewing revolution. The independent film and television producer best known for the Peppa Pig and PJ Masks childrens’ cartoons slumped into the red as viewers switched from DVDs to internet streaming more rapidly than expected. Entertainment One Limited (ETO) took a £57 million financial hit after the migration from physical ownership “accelerated at an unprecedented level”. The company wrote down the value of its home entertainment division by £23 million, and took a £17 million charge in its content business. The write-offs pushed Entertainment One to a £40 million pre-tax loss in the six months to the end of September, compared with a reported profit of £2.3 million a year ago. Its shares fell 18¾p to 365½p yesterday.
Shareholders to score again at pubs group. Britain’s biggest pub company yesterday unveiled its third share buyback in three years and hinted at a further return to shareholders. EI Group (EIG) said that it would buy back £20 million of shares on top of the £20 million buyback started a year ago and completed in March and an earlier £25 million buyback launched in March 2016 and completed the following January. Analysts are predicting that the former Enterprise Inns could return further funds to shareholders from the estimated £400 million of proceeds from the mooted sale of its commercial property division. In July it hired Rothschild to advise on options for the business and yesterday it confirmed that it had received indications of interest from potential buyers.
No alarms as Halma revenues rise. Strong growth in the United States has underpinned a 23% rise in pre-tax profits at Halma (HLMA). The specialist in fire alarm and security technology said that pre-tax profits had reached £94.5 million in the six months to September 30, while revenues had risen by 16% year-on-year to £586 million. The interim dividend was lifted from 5.71p a share to 6.11p. Halma shares rose 39p, or 3%, to £13.50 yesterday. The shares, which touched a peak of £15.04 last month, have doubled in less than three years and quadrupled over the past six years. It is trading on more than 28 times this year’s expected earnings.
AO World rues ‘challenges’ after six-month loss. An online electrical goods retailer warned yesterday that it was facing “challenging” trading conditions in its main markets of Britain and Germany as it reported first-half results that were worse than expected. AO World (AO.) made a pre-tax loss of £5.4 million for the six months to the end of September, while sales growth in the UK slowed to 5.7%. It had been at 8% in the first quarter and the rate of growth has more than halving in the most recent three months. “The pace of growth has slowed significantly in the second quarter, impacted by a tough macro environment that is unlikely to change whilst Brexit concerns dominate and competitors remain aggressive,” analysts at Jefferies, the investment bank, said.
Gold market laid bare in London. The true size of the City’s gold market has been revealed for the first time after the London Bullion Market Association published the most detailed information yet on the value of the precious metal traded in the capital. More than 30 million ounces of gold, valued at $36.9 billion, were traded each day by its members last week, making London the world’s second largest gold trading market after New York. Publication of the figures came after growing pressure from regulators for more transparency in the way gold is traded. London is one of the world’s main trading centres for gold, but the extent of the market is hard to gauge as the metal is traded directly between large institutions, such as banks and brokers.
Schneider’s extra spark in Aveva Group (AVV) results. Aveva was yesterday measuring the success of its merger with Schneider Electric, of France, in a notable boost to profit margins. The industrial software developer, whose tools are used by manufacturers, mine owners and ship designers, reported a 54% rise in adjusted pre-tax earnings to £60.5 million in the six months to the end of September. Revenues increased by 11% to £343 million over the period, with profit margins rising by almost five points after Aveva cut costs in the wake of this year’s £3 billion tie-up with Schneider. Craig Hayman, chief executive, said that the company was on track to achieve its merger targets. Growth was said to be strong across all regions.
Rarely have utility companies looked more appealing as investors, spooked by Brexit’s continuing game of deal or no deal, Italy’s budget face-off with Brussels and Wall Street’s sudden allergy over technology companies, spent yesterday seeking safe havens. Out went cyclical stocks, from construction to energy to financial services, and in came those companies seen as offering reliable dividend payments in times of trouble. That meant utilities. Thus National Grid (NG.) rose 21p to 846¾p, United Utilities Group (UU.), which provides water in northwestern England, gained 17¾p to 762½p and Severn Trent (SVT), the water company, added 34p to £18.89.
Scottish Mortgage Inv Trust (SMT), which has big interests in American companies such as Amazon and Netflix, was among the biggest fallers on the premier index, closing down 16½p at 458¼.
Dampened prospects of continued earnings growth at technology companies weighed on Electrocomponents (ECM), the FTSE 250 electronics distributor. Its shares fell 44½p to 567p, despite a 26.8% rise in reported first-half profit before tax on the back of a 10.7% jump in revenue to £911.8 million.
Mediclinic International (MDC) bounced 10¼p to 331¾p, off an all-time low, as investors found value in the private hospitals group. Its shares have fallen by 47.1% since the start of the year after a downturn in trading in Switzerland, which accounted for almost half of group revenue in 2017. Citi reiterated its “buy” rating for the company, with its analysts saying that the valuation looked attractive and that the Middle East market would drive growth.
Solgold (SOLG), an Australia-based miner, rose 1½p to 37½p after announcing that it had more than doubled its mineral resources estimate for its Alpala copper project in Ecuador. Drilling this year brought the overall resource to 15.4 million tonnes of copper. It means that Solgold, in which holds an 11.2% stake, is one of the world’s ten largest greenfield copper projects, according to Liberum, the research provider.
ClearStar Inc. (DI / REG S) (CLST) rose 2½p to 58p after it said that it had secured two new customers and contracts with a combined annual value of more than $1 million, starting next year. They include the first move into financial institution screening, with a contract for an unnamed global professional services company, to ensure compliance with tougher regulations in the United States.
Big Yellow Group (BYG) edged up 18p to 937½p after reporting a 9% rise in profit before tax to £33.3 million on the back of a 7% increase in like-for-like revenue, all this driven by growth in occupancy and rate. The average rate per sq ft in the six months to the end of September increased by 3.7% to £27.20, compared with rates that remained flat over the same period last year. Peel Hunt issued a “hold” rating on the stock and a target price of 950p. “The company looks to be tracking very marginally ahead of our forecasts in what is a relatively routine set of results,” it said.
Scapa Group (SCPA) lost more than a quarter of its market value yesterday after it reported falling revenues, contracting margins in its healthcare business and a 37% fall in pre-tax profit. Group revenue for the six months to the end of September fell by 3.4% to £140.7 million, which it said reflected adverse currency movements. Profit before tax fell to £9.7 million. In the healthcare division, revenue for the period rose by 0.2% to £57.8 million. However, margins fell to 14.2% from 16.1%. In the industrial division, revenue fell by 5.7% to £82.9 million, while margins rose from 11.5% to 13.3%. Scapa has bought the production assets of Systagenix from Acelity, a medical devices company, and agreed a five-year woundcare supply deal with Acelity. Heejae Chae, chief executive, said that profit for the year would be in line with expectations.
Tempus – CYBG (CYBG): Hold. If the Virgin transition is handled correctly, CYBG could emerge as a genuine challenger bank, but prospects are clouded by Brexit
Tempus – BTG (BTG): Hold. Investors can look forward to the 36.6% premium offer, paid in cash
