3.00pm: GCM gets boost from PowerChina (again)
The last couple of months have been fantastic for shareholders in GCM Resources PLC (LON:GCM) since it signed a memorandum of understanding with PowerChina.
PowerChina, or Power Construction Corporation of China (as its mother calls it), is a state-owned key enterprise of the People's Republic of China and is a world-leading integrated engineering construction group.
It hooked up with GCM in late November, since when the shares of the AIM-listed mining and energy firm have soared from 11.75p to 35.75p at last night’s close.
They shot up another 13.25p today to 49p after the two parties agreed on a joint venture enterprise and a definitive engineering, procurement and construction (EPC) contract for a 2x1,000 megawatt (MW) coal-fired power plant project at the site of GCM’s proposed coal mine in north-west Bangladesh.
The power plant is part of GCM's broader strategy to generate 6,000MW of low-cost electricity for the Bangladesh market using domestic coal, providing an estimated US$12.5 billion in foreign investment, GCM said.
GCM will be the lead party on the joint venture company that will own the power plant and will be responsible for obtaining the necessary approvals from the government of Bangladesh and overseeing the preparation of the environmental impact assessment.
PowerChina will be responsible for conducting a feasibility study and will facilitate the inclusion of the project as a “One Belt, One Road” initiative of the People's Republic of China.
Both companies will work on obtaining financing for the plant. The agreed initial cost is a cool US$3.5bn.
Subject to a mutually agreed valuation of the power plant and investment appraisal, GCM will own 80% of the plant and PowerChina the rest.
12.45pm: Browned off after a difficult Christmas trading period
Today’s third-quarter update from online fashion firm N Brown Group PLC (LON:BWNG) did not create a flattering picture.
To quote retail analyst Nick Bubb, it was “not the stuff of profit upgrades”, and the shares were off 8.5% at 92.31p.
N Brown Group Plc Q3 FY19 trading statement announced this morning. View the release herehttps://t.co/QQ4wLhbwma
— N Brown Group plc (@nbrownplc) January 17, 2019
The group, once best known as a catalogue-based retailer but now very much focused on online selling, said sales fell over the key Christmas trading period, led by a decline in its legacy offline business.
In the 18 weeks to January 5, the group’s fiscal third quarter, group sales dropped 1.6% as weaker product sales from stores offset growth in its financial services arm and online sales.
The group’s so-called power brands, including JD Williams, Simply Be and Jacamo, continued to outperform the rest of the business with a 0.1% increase in product sales and a 6.4% rise in online sales.
Primark outperforms market over Christmas | More from Game, N Brown Group, M&S and Cath Kidston >>https://t.co/TNQOTusYG9
— Retail Gazette (@retailgazette) January 17, 2019
Going the other way was Range Resources Limited (LON:RRL), the international company with oil and gas projects and oilfield service businesses in Trinidad and Indonesia, although no one seems to quite know why.
The shares spiked 20% higher to 0.04p on Thursday although, in a one-paragraph statement simply noting the recent rise, the company confirmed that it knows of no corporate or operational reason for this movement.
11.45am: Arena Events not exactly scaling the heights
The opening paragraphs of the trading statement from Arena Events Group PLC (LON:ARE) give no clue as to why the shares tanked this morning.
The provider of temporary physical structures, seating, ice rinks, furniture and interiors, said the group experienced strong revenue growth across the UK, US and Middle East divisions with acquisitions contributing as expected.
The US division exceeded expectations and the UK Structures and Scaffolding business raked in more revenue than anticipated.
Given the shares were off by more than a third in the morning session, there must have been a “but” coming, and here it is …
“Whilst the UK Structures and Scaffolding business exceeded revenue expectations, an increase in new and one-off projects resulted in the division experiencing operational issues, resulting in materially higher incremental costs to service these events to the Arena Standard,” the company said.
Wait, there’s more …
Cost synergies in relation to the integration of three warehouses in the UK have taken longer than anticipated and these are now expected to be realised during 2019.
Arena Events said the operational issues are now being addressed, including a number of senior management changes within the division; however, these issues have led to a material reduction in the overall profitability of the UK division.
So, round about paragraph four we get to the profit warning, with the group indicating adjusted underlying earnings (EBITDA) for the year just ended is likely to be around £12mln to £12.5mln.
“The shares have crashed below their summer 2017 flotation price of 55p and traded below 40p for the first time,” reported Russ Mould, the investment director of AJ Bell.
“Those investors who funded September’s £20 million capital raising at 60p a share, launched to fund acquisitions in California and Dubai, will be particularly put out since the company’s first-half results in September had given little indication that the AIM-quoted company, which also supplies temporary ice-rink facilities, would slip up quite so badly,” Mould continued.
“Management is blaming the profit shortfall on a number of one-off contracts and the costs associated with them, plus a delay in gleaning the full benefits of the planned integration of three warehouses in Britain.
“Management changes have already been made and Arena’s first job is to reassure investors that this is just a blip, and that profit margins can return to previous levels, although its decision to also take a ‘more conservative outlook for 2019’ may not help here, at least in the short term,” Mould suggested.
10.30am: Origo Partners jumps after disposing of Niutech stake
Origo Partners PLC (LON:OPP), a private equity investment group focused on China-linked core economic growth opportunities, has sold its remaining interest in Niutech Energy.
The company flogged its stake for around US$2.1mln, which was at a discount of 20% to book value, partly reflecting the decline of the Chinese currency against the US dollar.
Nevertheless, the shares rose 20% to 0.3p on the news, giving the company a market capitalisation of £7.1mln.
The company said it has already received 90% of the proceeds from the sale and will use the dosh for general corporate purposes.
Niutech has a technology that essentially produces energy from scrapped tyres and waste plastic.
The sale follows just under a year after the company announced the indirect sale of a 4.7% beneficial interest in Jinan Heng Yu Environmental Protection Technology, the operating company of Niutech Energy, to Chinese institutional and other investors, for net cash proceeds of RMB 18.8 million (roughly US$3.0 million).
In its interim results, announced in late September, Origo said its stake in Niutech at the end of June stood at 3.67%.
9.30am: Associated British Foods and Sage Group set the early pace among blue-chips
It’s unusual to have two FTSE 100 companies featuring prominently among the day’s big risers but this morning we are blessed.
Associated British Foods PLC (LON:ABF) was up 5.3% and not for the first time, it was the Primark arm that most pundits were interested in.
“Associated British Foods (ABF) results from the 16 weeks to Jan 5th continue the theme seen throughout the year, with Primark proving the chief engine of growth and sugar under a lot of pressure. Primark has a certain gravity-defying property about it thanks to year-round low prices, but UK growth is slowing,” noted Neil Wilson of markets.com.
“Primark sales rose 4%, with the UK +1% on the same period a year before. This was OK in an otherwise very tough market and after the November warning, but we are seeing much less impressive growth than in previous years. Two things about Primark – it doesn’t discount and prices are so low it doesn’t do online, so it avoids certain pitfalls and certain opportunities that other face. Ultimately the lack of an online offering will cap sales growth, but as long as it can maintain margins and be the go-to high street brand for affordable clothing it should be relatively OK,” Wilson suggested.
Nick Bubb, the independent retail analyst, notes that even AB Foods finally seems to have cottoned on to where the market’s interests lie, as the trading statement “actually begins with mighty Primark for once, rather than the usual guff about Sugar and Grocery”.
Bubb said, “the news is fine, although 1% gross sales growth for the core UK business isn’t perhaps quite as good as hoped for, despite the challenging market in November”.
Sage higher
Sage Group PLC (LON:SGE), the accountancy software group, rose 5.0% after a trading update covering the final three months of 2018 – the first quarter of the group’s current fiscal year – showed an acceleration in organic revenue growth.
The group’s organic revenue in the final three months of 2018 increase by 7.6% to £465mln from a year earlier; in the final half of the preceding fiscal year, the organic growth rate was 7.0%.
Recurring revenue increased by 10.5% to £387mln, underpinned by software subscription growth of 27.7% to £237mln, Sage said, as it reiterated guidance for the current year (FY19).
“For FY19, our forecasts imply sales up 6.1% lfl [like-for-like] to £1,951mln,” reported Gregory Ramirez at research house Bryan Garnier.
The consensus forecast is for LFL sales growth of 5.7% to £1,949mln.
“In order to reach our +6.1% lfl forecast for FY19, we estimate that for the rest of the year Sage has to post +5.6% lfl, while for reaching consensus (+5.7%) it needs to post +5.1% lfl,” Ramirez said.
Proactive news headlines:
Cybersecurity specialist ECSC Group PLC (LON:ECSC) has extended its relationship with a major food producer after landing a new £300,000 contract.
Alkaline fuel cell power technology developer AFC Energy PLC (LON:AFC) has successfully demonstrated the world’s first electric vehicle charger based on hydrogen fuel-cell technology.
Higher grades at one of the main deposits at its New Luika mine in Tanzania helped Shanta Gold Limited’s (LON:SHG) underlying profits jump 21% in 2108. Gold production for the year was 81,872oz against guidance of 80,000oz as the higher grades at Bauhinia Creek meant fourth-quarter output rose to almost 24,000oz.
Iofina PLC (LON:IOF) had a strong second half to what was a record-breaking year in 2018 in terms of crystalline iodine production.
Mobile advertising group Taptica International PLC (LON:TAP) has confirmed it is still in discussions with a potential acquisition target.
Touchstone Exploration Limited (LON:TXP) has provided details of the Ortoire exploration block where there’s potential for a multi-year exploration campaign. The statement includes the findings of a prospect evaluation process undertaken by GLJ Petroleum Consultants Ltd, which reviewed each of the prospects previously identified by Touchstone within the Ortoire block.
Cello Health PLC (LON:CLL) expects to hit expectations for 2018 after an “excellent year” at its big pharma consultancy division. Strong like-for-like growth in this arm, known as health, offset a slower outcome from brand and marketing operation Signal.
SigmaRoc PLC (LON:SRC) is expecting a revenue jump of over 50% in 2018 as it issued a trading update alongside news of a refinancing of convertible loan notes (CLNs).
ECR Minerals PLC (LON:ECR) chief executive Craig Brown highlighted that the explorer can now move forward confidently with ventures like the Windidda gold project, following the completion of financing in 2018.
88 Energy Limited (LON:88E) shares moved higher in Wednesday’s early deals as the Alaska oil explorer secured a permit to drill the Winx-1 well. Drilling is slated to start by mid-February, the company confirmed.
Photonstar LED Group PLC (LON:PSL) has raised gross proceeds of £100,000 via a placing to provide the company with additional working capital and further strengthen its balance sheet. The AIM-listed group said the placing of 500mln new ordinary shares was undertaken by its joint broker Peterhouse Capital with new and existing investors at a price of 0.02p each.
Kingswood Holdings Limited (LON:KWG) has issued an update on its strategy amid a board reshuffle as its chief executive (CEO), Marianne Ismail, departed after 18 months in the role.
Victoria Oil & Gas PLC (LON:VOG) has, in its quarterly operations update, confirmed that its production operation ended 2018 of a high. It reported an average gas production rate of 4.45mln cubic feet per day for the three months ended 31 December, and the average rate for the whole year measured 3.75mln cubic feet per day.
Oracle Power PLC (LON:ORCP) shares jumped by a fifth as its Thar power station project was re-affirmed as a priority for the Pakistani government. Approval to increase the capacity of Oracle’s proposed coal-fired power station to 700Mw from 600Mw was also granted along with the use of supercritical technology.
Capital Drilling Limited (LON:CPD) executive chairman Jamie Boyton described the mine services contractor’s performance in 2018 as strong, especially in the second half. The company, in a statement, gave investors an update on the fourth quarter ahead of the release of full-year financial results on 14 March.
Africa-focused mineral sand miner Base Resources Limited (LON:BSE) became net positive for the first time in the final quarter of 2018. The miner started the final quarter with US$23.8mln of net debt but revealed in an activities report that it closed out the year with net cash of US$1.0mln.
Regency Mines PLC (LON:RGM) said it has been informed that Andrew Bell, a director of the company, today purchased a total of 2,028,504 ordinary shares in the group at an average price of 0.335p each. The group said, following the purchase, Bell’s holding in the company totals 4.35%.