Top UK Stocks to Watch: Kainos shares fall despite positive outlook
Joshua Warner April 16, 2021 8:47 AM
Kainos says it will hit the upper end of expectations, Ocado hopes self-driving vehicles can help it cut costs, Mediclinic begins bouncing back from the pandemic, Essentra returns to growth, Ashmore grows confident about emerging markets, and musicMagpie unveils listing plans.
Top News: Kainos Group to hit upper end of expectations
Kainos Group said it expects to deliver results toward the upper end of expectations in its recently-ended financial year as both of its divisions, Digital Services and Workday, continue to capitalise on demand from new and existing customers.
The firm released a trading update ahead of the publishing its annual results covering the 12 months to the end of March on May 24.
‘The momentum outlined in the trading statement dated 22 January 2021 has been maintained in this most recent period and we expect our results for the year ended 31 March 2021 to be at the upper end of current market consensus forecasts,’ said Kainos.
An earnings consensus compiled by Reuters shows analysts expect Kainos to report annual revenue of around £250 million compared to just £178.8 million the year before, while both adjusted and reported pretax profits are expected to more than double.
Kainos upped expectations in January when it said results for the full year would be better than expected as Digital Services was benefiting from work on the UK government’s digital transformation programme and supporting the NHS with its coronavirus response, while Workday was continuing to win new consulting contracts.
‘Looking ahead, our robust pipeline, strong balance sheet and significant contracted backlog underpins our confidence in the outlook. And whilst we are mindful of the ongoing challenges caused by Covid-19, we believe that we are well-positioned for further growth and remain confident in our strategy,’ Kainos said on Friday.
Kainos shares were down heavily in early trade despite the positive news after hitting an all-time earlier this week. Kainos shares are still trading over one-third higher than the start of 2021.
Where next for the Kainos share price?
Kainos has traded within an ascending channel since late March. The price broke out above the upper band of the ascending channel in early April, hitting an all-time high of 1720. The RS, however, was also deeply in over bought territory.
Today’s over 5% fall has brought the price back to the upper band resistance turned support at 1580, the low of the day.
Should the price break through this support, the 20 EMA at 1550 could be tested. It would take a fall below 1420 the 50 EMA and the February high to negate the current bullish trend.
On the flip side, should support at 1580 hold then the price could look to retake the all-time high of 1720 ahead of targeting 1800 round number.
Ocado invests in Oxbotica
Ocado has agreed to invest in and partner with Oxbotica to develop a range of self-driving vehicles that could help the online grocer save time and money.
The company has been working with Oxbotica since 2017 and is investing £10 million into the business as part of the new deal after being convinced by the progress that has been made since then. The pair will develop both hardware and software to create autonomous vehicles that can be used by Ocado for a wide range of tasks, from shifting stuff around its warehouses and sites to completing that tricky last-mile delivery to the customer’s door.
‘This will be a multi-year collaboration, and the ultimate ambition is to enable Ocado's partners that use the Ocado Smart Platform to reduce the costs of last-mile delivery and other logistics operations,’ said Ocado.
Ocado will be dedicating engineers to advancing the technology and said it will initially focus on the UK before looking to expand the tech to its overseas operations.
If successful, it could be huge for both Ocado and its customers. For example, half of the costs of last-mile delivery operations are made up by labour, and replacing them with robots could result in significant cost-savings.
‘For both regulatory and complexity reasons, Ocado expects that the development of vehicles that operate in low-speed urban areas or in restricted access areas, such as inside its CFC buildings or within its CFC yards, may become a reality sooner than fully-autonomous deliveries to consumers' homes. However, all aspects of autonomous vehicle development will be within the scope of this collaboration. Ocado expects to see the first prototypes of some early use cases for autonomous vehicles within two years,’ said Ocado.
Ocado shares were trading 1.2% higher in early trade at 2164.5.
Mediclinic expects recovery this year
Mediclinic warned that revenue and margins were both knocked during its recently-ended financial year after being hard-hit by the pandemic, but said it has started to bounce back and expects its performance to improve this year.
The company, which provides private healthcare, said annual revenue declined 3% in the year to the end of March. That predominantly reflects the negative impact of the initial stages of the coronavirus crisis that caused significant disruption to the healthcare industry. However, revenue improved in the second half and was up 1% as things settled down.
The same was true for its Ebitda margin, which declined to 14% from 17.5% but markedly improved in the second half compared to the first.
‘We are well positioned to deliver growth in revenue and Ebitda across all three divisions in FY22 despite further waves of the pandemic expected in the coming months, especially in Switzerland and Southern Africa,’ said chief executive Ronnie van der Merwe.
Mediclinic shares were up 1.7% in early trade at 324.6.
Essentra returns to quarterly revenue growth
Essentra reported mild revenue growth in the first-quarter of 2021 and said it is ‘well positioned’ to rebound from the coronavirus crisis with plans to deliver organic growth, expand through M&A and cut costs.
The company, which makes components, packaging and filters that are used by a wide range of companies from pharmaceutical firms to carmakers, said like-for-like revenue grew by 1.4% in the first three months of the year. This was predominantly driven by a strong start to the year for components, with sales returning to growth of 5%, and strong topline expansion for its filters division, up 10%. Its packaging division suffered from a quiet January and trading has improved since then, but Essentra said it is focusing on cutting costs to improve the division’s profitability.
Essentra said the pandemic continues to weigh on its outlook but that an improving order book is building confidence that it can recover after being hit hard when the crisis erupted last year.
‘I am extremely pleased with the positive start to the year that we have had. The diverse nature of our businesses' end markets provides a degree of resilience against the macro uncertainty caused by the pandemic, but nonetheless it very encouraging to see that we have maintained the momentum of improving quarterly performance, resulting in overall LFL growth of 1.4%. Across the businesses, recent order book trends are improving, and I expect this positive momentum to be maintained,’ said chief executive Paul Forman.
Essentra shares were trading 1.2% higher in early trade at 302.3.
Ashmore stays positive despite reporting lower AUM
Ashmore Group said it has continued to see improving trends and has growing confidence about the potential of emerging markets despite reporting a fall in assets under management.
The investment manager, which specialises in emerging markets, said AUM dropped by $3.1 billion in the first three months of the year to end March at $89.9 billion from $93.0 billion at the end of December.
Ashmore said that global equity markets increased during the period while fixed income markets declined, which overall delivered a reduction in AUM, but the company said overall trends continued to improve as investors bank on emerging markets recovering.
‘The past quarter has shown that as economies transition from the shock of the COVID-19 pandemic back to growth, there will be periods of market volatility as they adjust towards normality. While this has had a mark-to-market impact, it provides opportunities for active management and the positive trend in Ashmore's net flows continued including the seventh consecutive quarter of net inflows to equity strategies,’ said chief executive Mark Coombs.
‘There are good reasons to believe that annual inflation rates will subside after a short-term spike over the next few months, given the base effects of the economic shock in 2020 and pressure on supply chains, and the deflationary influence of higher unemployment. Central bank policies are expected to remain supportive, which provides a solid backdrop for continued superior economic growth and strong performance in Emerging Markets,’ he added.
Ashmore shares were up 2.3% in early trade at 428.6.
musicMagpie earns £208 million IPO valuation
Re-commerce site musicMagpie will go public on AIM later this month, giving the company an initial valuation of £208 million.
The firm, which buys gadgets, games and other equipment from people before refurbishing them and selling them on, said it is issuing 7.8 million new shares at 193 pence each, raising around £15 million for the firm. Existing shareholders will also cash-in around £95 million of their existing shares as part of the listing.
The proceeds are being used to repay debt and expand its smartphone proposition. Shares in musicMagpie should start trading on AIM on April 22 under the ticker ‘MMAG’.
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