Beaufort Securities Breakfast Alert: Amryt Pharma, Finsbury Food Group and Interserve
Date
9/21/2016 5:45:20 AM
(MENAFN- ProactiveInvestors - UK) Beaufort Securities, 09:27
"The overnight markets held their breath, treading water ahead as the two major central banks starting their policy meetings. Typically, markets are seen to stall in anticipation followed by anti-climax on the final outcome, a scenario which is expected to play out once again this time. The Fed is widely seen pushing its rate decision 'can' down the road once again, while the BoJ is likely to play 'around the edges' trimming rates while marginally extending its short-term and riskier asset purchases in the hope of steepening its yield curve and weakening the Yen. Against this background, London equities are expected to make little headway this morning, with the FTSE-100 seen opening perhaps 5 points down. Energy stocks will likely be in focus as both Nymex and Brent declined on news of Saudi Arabia increasing July exports, having pumped crude at record levels of 10.67mbbl/day in order to regain global market share despite obviously oversupplies international markets. Although the Kingdom has since informed OPEC that August production had marginally declined, traders nervously await US inventory and China final oil trade data due for release tomorrow, while attempting to also factor in expected resumption of shipping from both Libya and Nigeria. That aside, having started their session strongly with the Dow up over 130 points at one stage, all the principal US markets ended fractionally in the negative with profit taking in tech and oils the only minor feature. Asia was little different, with just Japan prepared to register a half-hearted gain, with a few traders suggesting Governor Haruhiko Kuroda could be in the mood to stimulate the financial markets and punish the Yen more aggressive that the futures were suggesting. There is little macro data of significance expected from the UK today, although the supermarkets and related consumables stocks will be looking forward to release of the Kantar Worldpanel Grocery Market Share figures due this morning; earnings figures are also due from Bango (LON:lBGO), Fox Marble (LON:FOX), French Connection (LON:FCCN), GVC Holdings (LON:GVC), Horizon Discovery (LON:HZD), IG Group (LON:IGG), Kingfisher (LON:KGF), Pennon (LON:PNN) and Pittards (LON:PEG). The US$ could also remain sensitive to further news from Syria regarding reports that the cease-fire struck in the territory has already broken down."
– Barry Gibb, Research Analys
Markets
Europe
The FTSE-100 finished yesterday's session 1.54% higher at 6,813.55, whilst the FTSE AIM All-Share index closed 0.44% better-off at 811.61. In continental Europe, markets ended in the green, driven by gains in financial and commodity stocks. Investors awaited the Fed's decision regarding an interest rate hike at the meeting this week. France's CAC 40 and Germany's DAX advanced 1.4% and 1.0%, respectively.
Wall Street
Wall Street ended broadly unchanged in a volatile trading session. Investors were in wait-and-watch mode and looking forward to the central bank meetings in the US and Japan. The S & P 500 closed flat, with telecommunications leading decliners and utilities gaining the most.
Asia
Equities are trading lower as investors remain concerned about the outcomes of the meetings to be held by the Fed and Bank of Japan. The Nikkei 225 fell 0.2%, and the Hang Seng was trading 0.1% down at 7:00am.
Oil
Yesterday, WTI prices increased 0.6% to US$43.30 per barrel, and Brent oil prices rose 0.4% to US$45.95 per barrel.
Headlines
Eurozone's construction output improves in July
As per preliminary data from Eurostat, construction output in the Eurozone increased 3.1% y-o-y in July, after growth of 0.6% in June, marking the strongest performance since February 2016. Growth was led by a rise of 3.2% in building construction and 2.9% in civil engineering. On an m-o-m basis, the construction output expanded 1.8% in July, following a 0.3% increase in June.
Company news
Amryt Pharma (AMYT.L, 19.25p) – Speculative Buy
Amryt Pharma (Amryt) has appointed Mark Sumeray (MBBS, MS and FRCS) as Chief Medical Officer with immediate effect. Dr Sumeray has over 17 years of experience in the pharmaceutical, medical device and biotechnology sectors across the UK and the US. Most recently, he had a stint of around five years as Chief Medical Officer at Aegerion Pharmaceuticals, a US-based orphan disease biotechnology company. At Aegerion Pharmaceuticals, he was responsible for clinical development, medical affairs and pharmacovigilance for global approval, as well as for the launch of a new treatment of a serious, rare genetic disease. Before joining Aegerion Pharmaceuticals, he worked at Bristol-Myers Squibb, where he led a large US medical affairs team focused on the cardiovascular and metabolism areas.
Our view: The appointment of Dr Sumeray as Chief Medical Officer is a positive development for Amryt. Dr Sumeray has significant experience in clinical development. Moreover, he has experience in building medical functions to support the launch and commercialisation of an orphan disease product. His experience in interaction with the FDA and the EMA, and management of late-stage clinical trials would benefit Amryt, considering the firm approaches the start of its pivotal Phase III study for the treatment of epidermolysis bullosa. We appreciate the appointment of Dr Sumeray and look forward to further updates from Amryt. We reiterate a Speculative Buy rating on the stock.
Finsbury Food Group (FIF.L, 135.50p) – Buy
Finsbury Food Group ('Finsbury Food'), the UK speciality bakery manufacturer of cake, bread and morning goods for the retail and foodservice channels, yesterday provided its preliminary results for the 53 weeks ended 2 July 2016 ('FY2016'). During the period, revenue advanced +24.8% to £319.7m and like-for-like ('LFL') sales grew +5%, against the comparable period (52 weeks ended 27 June 2015 or 'FY2015'). Gross profit increased by +30% to £102.6m and adjusted operating profit rose +37.7% to £17.1m with its margin improved by +0.5% to 5.3%. Pre-tax profit jumped by +39% to £11.8m, resulting basic earnings per share climbed +5.2% to 6.1p. Net debt was reduced to £19.7m (FY2015: £21.3m) while cash and cash equivalents at the period end stood at £3m (FY2015: £0.6m). On the operational front, the Group invested record £12.1m to ensure long-term competitiveness (171% of depreciation). Johnstones Food Services was selected as Costa supplier of the year while the Group won a 2016 Celebration Cake Business of the Year (Bakery Industry Awards). Finsbury Food's CEO, John Duffy commented 'If 2015 was all about transformation for the Group, then 2016 has been about delivering on our growth strategy and moving even closer to our vision of building the leading speciality bakery group in the UK focused on quality products. Looking ahead our strongly performing businesses and a robust balance sheet positions us well to both take advantage of growth opportunities and mitigate challenges ahead. The Group remains as dedicated and focused as ever, and I remain confident that the patient, unwavering strategy adopted will reap benefits for the business in the years ahead.' The Group declared final dividend of 1.87p per share, to be paid on 16 December 2016, bringing full year dividend to 2.80p per share, up +12%.
Our view: Finsbury Food delivered more double-digit growth, boosted by successful acquisitions/integration of last year's purchases of Fletchers Group and Johnstone's Food Service Ltd. Although second half growth momentum was more pedestrian than the exceptional rate seen in the first, this was primarily due to the strength of the H2 FY2015 comparative. The Group delivered LFL sales growth across all divisions (Fletchers and Johnstone's +5%, UK bakery division +3%, overseas division, the 50% owned European business, +25.7%) despite a deflationary and competitive market environment. As a result of the management's extensive investment, sales in the rapidly growing 'out of home eating' foodservice channel grew +5.3% on a LFL basis and accounted for just over 21% of Group's total UK annual bakery sales revenues (from zero just two years ago). Management has once again demonstrated its ability to identify new corners of demand and then to capture market share. Post the Brexit vote, consumer confidence appears largely unaffected. Consumer staples tend, in any case, to be generally resilient while the overseas division is a natural beneficiary of Sterling depreciation. The management, on the other hand, saw fit to note that if Sterling weakness is sustained, it will add cost inflation to raw materials and potentially create some pressure on margins. Moreover, if the Theresa May does as expected stick to the former Chancellor, George Osborne's National Living Wage policy (£9 an hour by 2020), this will further build on cost pressures. The Group remains strongly cash generative, however, with Net Debt/EBITDA now reduced to 0.8x, enhanced cash position and £50.9m of debt facility in place. The Group also confirmed that it is already working to offset prospective cost inflation through enhanced internal efficiencies. Given FY2017E P/E of 13.5x along with a dividend yield of 2.2%, the shares still do not appear expensive despite rising +37% year-to-date and strongly outperforming both the FTSE All-Share and the Food Producers sector. Beaufort reiterates its Buy rating on the shares.
Interserve (LON:IRV, 385.0p) – Buy
Interserve has received an £11.0m two-year extension to its contract with the UK Environment Agency. Interserve has been providing a range of facilities management services for the UK government department since 2013, including maintenance, cleaning and security across over 100 locations.
Our view: The extension of Interserve's contract with the UK Environment Agency indicates continued strengthening of the relationship between the two parties. Interserve has been catering to the agency since 2013, indicating it has developed a strong understanding of the agency and its requirements. Interserve plans to achieve cost savings for the agency through innovations in the next two years. Recently, Interserve reported results for H1 2016. Its performance across most divisions and regions was in line with expectations. Underlying profit benefited from a strong contribution from its Middle Eastern construction operations. Meanwhile, the UK support services arm performed in line with expectations. Equipment services continued its growth momentum, particularly in the UK and the Far East, with 5% revenue growth. Interserve's decision to exit from the loss-making energy from waste business, due to related challenges and a difficult outlook, was a key event. Meanwhile, Interserve registered a sharp rise in operating cash flow and a significant reduction in debt for H1 2016. It received many contracts, from new and existing clients, including the Defence Infrastructure Organisation, Home Office, JLL, Renfe, East Midlands Trains, Emaar (UAE), Majid Al Futtaim Group (UAE) and Hitachi (Qatar). The outlook for Interserve for the rest of the year remains unchanged despite the ongoing political and economic uncertainty after Brexit. Therefore, we maintain a Buy rating on the stock.
Beaufort Securities