3.15pm: Liberum remains a fan of MITIE despite downbeat trading update from the outsourcer
The MITIE Group PLC (LON:MTO) revival continues to sputter.
The outsourcing giant said it expects its full-year operating profit to be “flat to slightly down” and that its order book had declined in recent months.
The company, which received a boost earlier this year when the Financial Conduct Authority’s investigation into the timeliness of a profit warning announced in September 2016 was discontinued, said its profit had been dented by a soft performance in its social housing unit, an unfavourable contract mix in its cleaning business and the write-off of some mobilisation costs in its care and custody division.
That was not exactly a profit warning but it did send the shares 9.3% lower to 139.7p.
Mitie’s debt rises after supply chain finance cut https://t.co/Zi8uqhzmpr pic.twitter.com/TsVvQbAXqU
— Construction (@construct1on) September 26, 2018
Broker Liberum remains a buyer, however, saying that the trading statement guides to an in-line full-year performance, albeit one that will be weighted more to the second half than usual.
The broker has increased its full-year net debt forecast to £193mln from £165mln.
“The order book has fallen from the FY 18 level of £4.5bn to £4.2bn,” the broker acknowledged but added, “There is a strong pipeline and more focus on growing the order book”.
“At Catering sales are slightly weaker in H1 due to contract losses. Professional Services is performing well with higher margins. Care and Custody profits hit by Home Office Escorting mobilisation costs. We expect Property Management is break-even after central costs. We expect to profits fall in Cleaning after high margin contacts roll-off. At Security we expect profit growth. Engineering Services profits are ahead,”the broker continued as it stuck with a punchy 240p target price.
2.00pm: Imaginatik plummets as hopes of an equity injection fade
An equity injection that was in the works at innovation software specialist Imaginatik Plc (LON:IMTK) has fallen through.
In July, the company said that Vin Murria, the former chief executive of Advanced Computer Software (which bought out by private equity in 2014), was contemplating buying a controlling investment in the company.
Today, the company said that it is no longer in talks with Murria; furthermore, its nominated advisor (nomad), finnCap, has indicated it would cease to be the company’s nomad from the close of business tonight. Should the company not find a replacement nomad by the close of business today, it will be suspended from trading with effect from 07:30am tomorrow. The race would then be on to find a new nomad before the company's AIM listing is cancelled.
The shares plummeted 67% to 2.875p.
12.30pm: Mobile Streams taps into the Indian and Argentinean mobile games market
Mobile Streams PLC (LON:MOS), which recently became the ten-billionth company [Are you sure? - Ed] to launch a cryptocurrency, was on more familiar territory today.
The global mobile content retailer announced the launch of a third mobile games store in India and Argentina, to augment the live HTML5 and Android subscription services.
$MOS Mobile Streams teams up for Electroneum cryptocurrency launch https://t.co/N2rAJTltMK via @proactive_uk @MobileStreams #MOS #brighterir #AndrewScottTV #CapitalNetwork1
— Mobile Streams (@MobileStreams) September 13, 2018
The shares rose 20% to 0.96p, although long-suffering shareholders won’t get too excited; at the beginning of 2018, the shares were valued at around 2.75p.
The store will feature a subscription section, featuring more than 300 HTML5 titles from CoolGames, which recently reached the notable landmark of its six millionth customer.
Simon Buckingham, the chief executive of Mobile Streams, said the launch would enable the company to work with mobile device manufacturers directly thus reaching an increased pool of customers.
10.30am: Directa Plus on the right road but the AA hits a pothole
Directa Plus PLC (LON:DCTA) sounds like a variation on “business class” travel but the company is, in fact, a producer of graphene-based products.
It travelled further along the road to success this morning after it announced the world’s first road has been resurfaced with a super-modifier containing the company’s graphene.
The road surface is on a section of Rome’s Strada Provinciale Ardeatina. It is part of a commercial test of Ecopave, which is based on Directa’s Graphene Plus graphene product, BP.
Perhaps the AA, which this morning moaned about an “epidemic of potholes” for disappointing results, should petition for the use of Ecopave in the UK.
Shares in Directa were up 7p at 47p.
Investors say “oh-oh” as the AA disappoints
Talking of AA PLC (LON:AA.), the roadside recovery firm’s shares were the worst performers among FTSE 250 stocks this morning.
“AA itself has needed some assistance in the recent past and this update shows signs of slow but steady progress,” quipped Richard Hunter, the head of markets at interactive investor.
“In terms of its balance sheet, the refinancing which it has organised and the notable reduction in the pension deficit are positive, although net debt remains stubbornly high at some £2.7 billion. The previously announced difficulties arising from a severe bout of cold weather, which led to a 15 year high in the number of breakdowns, led to a sharp increase in costs.
"As such, operating profit has fallen 35%, whilst the earnings per share metric has slumped 64%. Another casualty of the recovery plan has been the dividend reduction which, whilst prudent, removes the incentive for investors who are not being paid to wait as the transformation unfolds,” Hunter noted.
Two days ago we had Thomas Cook blaming the hot weather for poor results and today we have the AA blaming the cold weather for poor results. Global warming eh!!!
— Pringo (@pringo69) September 26, 2018
“The initial float price of 250p in June 2014 (let alone the subsequent high of 432p in March 2015) is a distant memory and the last year has provided further volatility, during which time the shares have fallen 29%, as compared to a 5% hike in the wider FTSE250. Within that time-frame, the shares have spiked 49% over the last six months, which is indicative of the progress the company is attempting to deliver. In all, however, opinion is fairly evenly split on recovery prospects, with the market consensus of the shares continuing to come in at a hold,” he added.
Opinions may be evenly split over the medium-term but over the short-term – i.e. today – the opinion is fairly unanimous: sell.
The shares were down 9.5% at 108.1p.
“Though profit fell sharply in the first half results, the extremely negative share price reaction facing roadside assistance provider AA likely reflects a build-up of shareholder frustration with the group’s patchy track record since its 2014 IPO,” suggested Russ Mould, the investment director at AJ Bell.
“If the share price remains weak the company could be vulnerable to a bid from private equity, which might be more comfortable with the level of indebtedness,” Mould suggested.
Then again, many private equity companies like to take over cash-generative companies, load them up with debt and extract their pound of flesh before fobbing them off on the market, so maybe the AA is not such an enticing prospect for private equity.
9.00am: Boohoo starts the day with a smile
The boohoo group PLC (LON:BOO) was one of the top risers in early trading after another impressive trading update.
The online fashion firm recently revealed it would be abandoning its slightly unusual joint-CEO approach after it poached John Lyttle, the chief operating officer of high street fashion firm Primark, to take over next March as the chief executive officer.
READ: Boohoo's poaching of Primark COO signals awareness of internationalisation challenges ahead
Lyttle looks like he will inherit a business that is firing on all cylinders.
Group revenue growth for the year to 28 February 2019 is expected to be 38% to 43%, up from boohoo’s previous guidance of 35% to 40%.
The adjusted underlying earnings (EBITDA) margin is expected to be between 9% and 10%.
The six months to August 31 saw the group deliver record sales and profits.
Revenue rose 50% to £395.3mln from £262.9mln the year before, while adjusted profit before tax surged 43% to £35.8mln from £25.1mln.
“The high-flying Boohoo share price took a bit of a knock over the summer, on worries about the big warehouse move of Pretty Little Thing (the fastest-growing subsidiary of the group), but it has begun to recover recently and it should get a further boost from today’s stronger than expected interims (for the 6 months to Aug 31st),” said independent retail analyst, Nick Bubb.
“Attention now turns to next year’s automated distribution centre extension in Burnley and this will no doubt get lots of focus at the 9.30am analysts meeting (although hopefully in less detail than the presentation by Simon Wolfson at Next yesterday …),” Bubb added.
Shares in boohoo were up 8.7% in the first hour of trading at 208.2p.