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Mid and small cap news: Aegis, JD Wetherspoon, Britvic, Barratt Developments, Galliford Try, SuperGroup, Thorntons

Published: 05:17 14 Jul 2012 EDT

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Advertising group Aegis (LON:AGS) received a takeover bid from Japanese firm Dentsu, valuing it at £3.2 billion.

Dentsu has offered 240 pence a share, representing a 48 per cent premium to the closing Aegis share price yesterday (162.2pence).

The firms said the takeover would create the biggest media and digital communications group in Asia and second largest in Western Europe.

Aegis has around 12,000 staff and operated in 80 countries.

Dentsu was founded in 1901 and is an advertising agency, which includes media buying and planning, creative production, sales and marketing services.

Strong trading around the Queen's Diamond Jubilee and the Euro football championship boosted fellow FTSE 250 constituent JD Wetherspoon (LON:JDW).

The pub group said like-for-like sales in the 11 weeks to July 8 increased by 6.1 per cent, and total sales increased by 11.9 per cent.

Meanwhile, in the year to date, like-for-like sales were up 3 per cent, while overall, the company sales increased by 9.2 per cent.

The firm's current year ends on July 29 this year and it expects to achieve what it called a "reasonable outcome".

The main challenges for the firm are continuing cost pressures resulting from government legislation, including increases in excise duty, business rates and carbon tax, it said.

The company also said it had opened 40 new pubs and closed three pubs since the beginning of the financial year.

It said it aimed to open around 20 to 30 pubs in the next financial year.

Britvic (LON:BVIC) was among the heaviest fallers in the FTSE 250 after announcing that the financial impact from a product recall flagged last week will be worse than previously thought.

It warned last week there had been safety issues with a new design cap for Fruit Shoot and Fruit Shoot Hydro packs sold in the UK and France and that it was recalling the products.

It had initially expected pretax profit in the current year to be reduced by between £1 million and £5 million, but told investors that the overall impact of the recall and lost sales is more likely to be in the region of £15 million to £25 million, across the current and next financial year.

Despite its ongoing investigations, Britvic has been unable to speedily resolve the issues regarding the new design cap, it said

It has therefore decided to re-supply in the short term with an alternative in-market proven sports cap, starting in six weeks and gradually increasing output to meet historic levels of demand within six months.

In other news in the FTSE 250, homebuilder Barratt Developments (LON:BDEV) said this week annual profits had soared thanks largely to the stability of the housing market.

Pre-tax profits increased by 158 per cent to £110 million for the full-year to 30 June.

Group revenues jumped 14 per cent to £2.3 billion as Barratt completed 12,637 houses compared with just over 11,000 the year before.

Group operating profit rose 41 per cent to around £191 million (2011:£135 mln).

Demand in the housing market has remained high thanks to a lack of new homes in the UK and a government drive to help the market move forward, with schemes including New Buy.

“This year has seen a rapidly improving performance across the group and shows that our strategy is delivering, with profits up more than 150 per cent and an almost halving of our net debt,” said chief executive Mark Clare.

Peer Galliford Try (LON:GFRD) told investors that the housing market has been stable and its full year results are set to be in line with forecasts. 

During the year to end June, housing completions surged 40 percent to 3,039, while the average selling price in private housebuilding rose 10 percent to £250,000.

The group also reported an 11 percent jump in housing sales carried forward, which stood at £273 million at the end of the year.

Additionally, the landbank has increased to 10,500 plots from 10,250 p-lots a year earlier with Galliford noting that it has more plots in the stronger south east.

Meanwhile, the group has secured 82 percent of projected revenues for the current financial year and had an order book of £1.6 billion and net cash of £20 million at the end of June.

“...against a background of challenging economic conditions, we have maintained a quality construction order book and benefited from a number of contract wins,” said chief executive of Galliford Greg Fitzgerald.

Outside of the FTSE 350, online marketer dotDigital (LON:DOTD) and software group ZOO Digital (LON:ZOO), which both saw their shares rise in Wednesday’s session.

DotDigital plans a major expansion of its new online survey tool dotSurvey following a rapid take-up since its launch in May.

The service now has over 400 paying clients and almost 2,500 trial users.

While it is still early days for dotSurvey, chief executive Peter Simmonds says he has also received very positive anecdotal feedback for the new online survey tool.

The plan is to market the product using a variety of digital channels.

“From a business planning point of view, I have a product that’s getting great feedback. I know it works, I know I’ve got existing people using it, and this is really just a case of which marketing channels are most effective,” said Simmonds.

The company added it had met expectations for the current year with the good trends seen in the first half continuing.

Total annual revenues were around 32 per cent higher than in fiscal 2011, while pre-tax operating profits also went up.

New business sales and growth in recurring revenues from existing clients were behind the improvement.

dotMailer, the email marketing service, grew revenues by around 34 per cent and now accounts for over 60 per cent of total revenues.

New customer sign-ups were also a “significant source of revenue growth” with 1,684 new clients added.

Development work had been completed on the platform (including integration with the eBay’s X-Commerce arm), which should boost sales in the corporate sector.

Meanwhile, ZOO’s improved second half performance suggests things are looking up for the creative media software group, said broker finnCap.

ZOO was caught out last year by a rapid collapse in the DVD market, but has regrouped around e-books and adapting films and TV programmes for new media formats such as Blu-ray.

Revenues for the year to March came in at US$11.2 mln against US$13.8 mln, while operating losses were US$1 mln compared with a US$1.1 mln loss in the first half.

Finncap expects revenues to recover further to US$14 mln in the current year, with the group swinging back into adjusted profits of US$700,000. 

The group made a pre-tax loss of US$2mln after heavy financing costs following a convertible issue.

DVD volumes stabilised in the second half said chief executive Stuart Green, which helped the firm return to the black at the operating level.

The proportion of titles adapted using ZOO's workflow systems has also increased since the year end despite a steep fall in the overall volumes from 12 - 18 months ago.

A greater emphasis on adapting titles for Blu-ray, particularly with back catalogues, added extra impetus, Green added.

“The improvement that we saw in the second half of the year has continued into the current financial year and we believe that we have a better diversity and suite of products than at any time previously. “

“Whilst we enter the new year with confidence we remain alert to general conditions,” he said.

Mobile phone-based slot gaming specialist Probability (LON:PBTY), which enjoyed a strong three months as revenues and player deposits rose over 40 percent.

Probability said net gaming revenues were £2.26 million in the quarter to June 30, compared with £1.57 million in the comparable period last year.

A rise in player deposits, meanwhile, points to a stable operating margin, the group said.

The company also made a breakthrough in getting its LadyLuck’s application into the Apple App Store following many months in review.

It is still early days and the company says the long term impact can’t yet be predicted but the early signs are positive.

Indeed, LadyLuck’s has now been available to download from the app store for just five days. And in that time it has already become a highly ranked download, reaching as high as number three in the store’s ‘top free’ casino games.

Such a ranking reflects LadyLuck’s strong early traction on the app store which clearly is an important distribution channel for Probability.

However chief executive Charles Cohen is quick to point out that the company’s mobile gambling product is, for several reasons, very different to most of the other casino games in the app store.

And importantly he stresses that the product’s success does not depend on either Apple’s or Google’s marketplace.

“We don’t need to be in the App Store or the Google Play store in order to get people to use our product on their phones,” he said.

“It (the App Store) is just a nice extra thing. We want people to be able to find us wherever they look.”

Veterinary pharmaceutical specialist Eco Animal Health Group (LON:EAH) this week hailed a breakthrough for the company after the US finally approved Aivlosin, its water soluble antibiotic for pigs.

The green light from the Food and Drugs Administration is ECO’s first in the United States and following Canadian regulatory approval last year, ECO can now roll out Aivlosin as a global veterinary product.

Peter Lawrence, ECO’s chairman said: “This key milestone follows some 12 years of investment in product development and regulatory activity in North America.

“The USA represents more than one third of the world market for our products and this breakthrough will benefit our future profitable growth.

“It is a significant milestone on the road to making ECO one of the most important global animal health companies.”

Aivlosin is used for the treatment of respiratory and enteric (gut) diseases in pigs and poultry.

In the retail sector, SuperGroup (LON:SGP) told investors its problems in 2012 were largely self-inflicted after underlying pre-tax profits fell further than expected.

Revenues at the SuperDry brand owner continued to grow, up 32 per cent to £314 million for the full-year to 29 April, boosted by 19 new store openings in the UK.

However stock control issues undermined this success.

Underlying profit before tax fell almost 15 per cent, while operating profit margin was 7.5 percentage points lower than 2011. This was due to a shortage of stock after a new warehouse IT management system threw a spanner in the works last autumn.

SuperGroup also warned investors that trading so far this year had been affected by the wet weather.

“Whilst sales have continued to grow substantially, this has been a disappointing year for the group,” said chief executive Julian Dunkerton.

Meanwhile,confectionery retailer Thorntons (LON:THT) issued a mildly reassuring update on current trading but stated it remained cautious about the outlook for the coming year.

While total sales for the nine weeks to June 30 - the bulk of its fourth quarter - rose 7.8 percent from the same period a year earlier to £24.7 million, this period only represents less than 12 percent of annual sales, the company said.

Thorntons has been struggling over the past two years due to much-reduced customer spending on the High Street.  It issued several profit warnings and launched a strategic review which also included store closures.


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