>>>Shopify beats by $0.10, beats on revs; guides Q1 revs above consensus; guides

Shopify beats by $0.10, beats on revs; guides Q1 revs above consensus; guides FY18 revs above consensus (137.56)
  • Reports Q4 (Dec) earnings of $0.15 per share, $0.10 better than the Capital IQ Consensus of $0.05; revenues rose 70.9% year/year to $222.8 mln vs the $209.7 mln Capital IQ Consensus.
  • MRR as of December 31, 2017 was $29.9 million, up 62% compared with $18.5 million as of December 31, 2016. Shopify Plus contributed $6.3 million, or 21%, of MRR compared with 17% of MRR as of December 31, 2016.
  • GMV for the fourth quarter was $9.1 billion, an increase of $3.6 billion, or 65% over the fourth quarter of 2016. Gross Payments Volume grew to $3.5 billion, which accounted for 39% of GMV processed in the quarter, versus $2.2 billion, or 39%, for the fourth quarter of 2016. Gross profit grew 78% to $121.1 million as compared with the $68.1 million recorded for the fourth quarter of 2016.
  • Co issues upside guidance for Q1, sees Q1 revs of $198-202 mln vs. $195.69 mln Capital IQ Consensus Estimate. Adjusted operating income in the range of $(5) million to $5 million, which excludes stock-based compensation expenses and related payroll taxes of $100 million.
  • Co issues upside guidance for FY18, sees FY18 revs of $970-990 mln vs. $956.92 mln Capital IQ Consensus Estimate. Adjusted operating loss in the range of $6 million to $8 million, which excludes stock-based compensation expenses and related payroll taxes of $19 million.

>>> Omnicom beats by $0.01, reports revs in-line

Omnicom beats by $0.01, reports revs in-line (82.78)
  • Reports Q4 (Dec) earnings of $1.55 per share, excluding non-recurring items, $0.01 better than the Capital IQ Consensus of $1.54; revenues fell 1.5% year/year to $4.18 bln vs the $4.21 bln Capital IQ Consensus.
  • Organic growth in the fourth quarter of 2017 as compared to the fourth quarter of 2016 in the co's fundamental disciplines was as follows: Advertising increased 1.2%, CRM Consumer Experience increased 3.4%, CRM Execution & Support also increased 3.4% and Public Relations increased 0.1%, while Healthcare decreased 1.9%.

>>> Avon Products beats by $0.05, misses on revs (2.27)

Avon Products beats by $0.05, misses on revs (2.27)
  • Reports Q4 (Dec) earnings of $0.12 per share, excluding non-recurring items, $0.05 better than the Capital IQ Consensus of $0.07; revenues rose 0.1% year/year to $1.57 bln vs the $1.6 bln Capital IQ Consensus, declined 2% in constant dollars. Active Representatives declined 2% primarily due to decreases in South Latin America and North Latin America. Average order was relatively unchanged primarily due to growth in South Latin America that was offset by a decline in Europe, Middle East & Africa. Ending Representatives was relatively unchanged primarily due to growth in Europe, Middle East & Africa that was offset by a decline in South Latin America.
  • "Our top line remains under pressure as we continue to operate in challenging macro and competitive conditions, particularly in our largest markets. We delivered improving operating margins in the fourth quarter supported by continued benefit from our ongoing cost savings initiatives. Importantly, we continued to strengthen our cash position, enhancing the financial flexibility necessary to fund priority investments." Zijderveld went on to say, "With the support of the Board of Directors, and the reality of our current performance, I am taking a fresh look, diving deeply into our business, starting with spending time in our key markets to gain a full picture of the operating climate as a basis to improve performance. I am committed to accelerating the pace of change and to positioning Avon for success.

>>> ValueAct Holdings (Jeffrey Ubben and Bradley Singer) disclo

ValueAct Holdings (Jeffrey Ubben and Bradley Singer) discloses updated portfolio positions in 13F filing: New ESRX C positions

 Highlights from 2017 Q4 filing as compared to 2017 Q3 filing:
  • New positions in: ESRX (~1.2 mln shares), C (~1.1 mln)
  • Maintained positions in: FOX (~53.33 mln shares), KKR (~47.75 mln shares), STX (~21.46 mln shares), TRN (~18.61 mln shares), VRX (~18.01 mln shares), MS (~17.96 mln shares)
  • Closed positions in: BHGE (from ~31.41 mln shares), WLTW (from ~2.98 mln), BIVV (from ~1.27 mln)
  • Decreased positions in: CBG (to ~24.92 mln shares from ~28.88 mln shares)

>>> Luxor Capital Group discloses updated portfolio positions i

Luxor Capital Group discloses updated portfolio positions in 13F filing: New ANGI FOR HFRO positions

Highlights from 2017 Q4 filing as compared to 2017 Q3 filing:
  • New positions in: ANGI (~5.19 mln shares), FOR (~0.28 mln), HFRO (~0.02 mln)
  • Increased positions in: AABA (to ~3.67 mln shares from ~0.85 mln shares), MEET (to ~3.08 mln from ~1.54 mln), IAC (to ~1.74 mln from ~1.16 mln), VOYA (to ~2.7 mln from ~2.17 mln), H (to ~1.21 mln from ~1.02 mln) HCHC (to ~0.04 mln from ~0.01 mln), SPY (to ~0.05 mln from ~0.04 mln)
  • Maintained positions in: MB (~6.22 mln shares), VDTH (~5.47 mln)
  • Closed positions in: LQ (from ~4.76 mln shares), YNDX (from ~0.34 mln), FB (from ~0.07 mln)
  • Decreased positions in: DHXM (to ~2.18 mln shares from ~4.4 mln shares), GLNG (to ~1.22 mln from ~2.68 mln), ALLY (to ~1.92 mln from ~3.25 mln), GRUB (to ~1.74 mln from ~2.44 mln), AMC (to ~0.43 mln from ~0.79 mln), LBTYK (to ~2.3 mln from ~2.61 mln), NXST (to ~0.16 mln from ~0.47 mln), CJ (to ~1.37 mln from ~1.57 mln)

>>> Fairholme Capital (Bruce Berkowitz) discloses updated portf

Fairholme Capital (Bruce Berkowitz) discloses updated portfolio positions in 13F filing: decreased positions in SHLD and SRG

Highlights from 2017 Q4 filing as compared to 2017 Q3 filing:
  • Maintained positions in: JOE (~27.9 mln shares
  • Decreased positions in: SHLD (to ~24.08 mln shares from ~28.51 mln shares), SRG (to ~3.27 mln from ~3.77 mln)

FT : Capgemini bullish after 24% surge in digital and cloud revenues

Capgemini bullish after 24% surge in digital and cloud revenues
French IT services group expanding through bolt-on acquisitions

Capgemini on Thursday said companies’ demand for digital and cloud services is fuelling its growth as the French IT services group unveiled its full-year results for 2017.

Digital and cloud revenues were up 24 per cent year-on-year at constant exchange rates, reaching almost €5bn and fuelling overall revenue growth of 4 per cent to €12.8bn during 2017. The group’s net profit grew 11 per cent to €820m.

“What used to drive the IT services market was offshoring to countries like India,” says Paul Hermelin, Capgemini’s chairman and chief executive. “Today, the major shift is companies’ digital transformation.”

The strongest demand for digital and cloud services are from clients in the consumer, retail, financial services and manufacturing sectors, he added.

Competitors of Capgemini, which provides consulting and IT services, range from the likes of Accenture, to the re-emergence of the consulting arms of the “Big Four” professional services firms, as well as smaller niche players.

The group has been expanding the business with bolt-on acquisitions, announcing this month a €400m acquisition of LiquidHub, a US-based digital transformation specialist focused on customer engagement.

“There’s a convergence between traditional IT services companies and marketing agencies,” says Jonathan Brassington, chief executive of LiquidHub. “Firms with the ability to bring capabilities in both of these spaces are positioned to be winners.”

Analysts last year highlighted Accenture and Capgemini as potential buyers for advertising agencies such as Publicis or WPP.

Mr Hermelin said in October that Capgemini could be pushed towards a deal in the advertising sector if rival Accenture made a takeover in the industry. Speaking on Thursday he sounded less convinced: “All of the large agencies are exposed to their industry pressures. It’s safer for us to buy niche players that are easier to integrate.”

Mr Hermelin says he is seeing a big shift in Europe from companies using IT to cut costs to companies spending money on technology to drive growth.

All of Capgemini’s major geographic regions reported revenue growth in 2017, apart from the UK and Ireland, where revenues fell 9.6 per cent year-on-year at constant exchange rates. This reflects a decline in the public sector and “a market that looks pretty soft with the consequences of Brexit”, Mr Hermelin said.

Capgemini said on Thursday that it aims to increase revenues 6-7 per cent in 2018 at constant exchange rates.

FT : GKN sets out formal defence against Melrose

GKN sets out formal defence against Melrose
Board says ‘private equity-style’ bid from turnround group is ‘low price and high risk’


GKN, the UK engineering group battling a hostile takeover offer from turnround specialist Melrose, has published its formal pitch to shareholders to reject the bid calling it “low price and high risk”.

A day after spelling out its own plan for the business in a series of promises to investors to boost cash generation and revive flagging margins, GKN’s board set out its full defence against Melrose’s takeover offer and its argument for why GKN’s new management should be given a chance to deliver their vision for the company.

GKN criticises the “private equity-style” strategy it says Melrose will use to overhaul the company, characterising the “short-term business model” as “inappropriate for GKN”.

“There is no evidence that management has relationships with key customers such as Airbus, Boeing, Fiat Chrysler, Ford and VW,” the document continues.

“Furthermore, Melrose’s stated three-to-five-year exit strategy is not compatible with the long-term investment and technology horizons that are essential in GKN’s markets. Cars and aircraft are researched, designed, produced and serviced over several decades - your Board believes that a short term, private equity-style strategy is not the right way to provide sustained shareholder value in our sectors.”

Not only was Melrose trying to buy GKN on the cheap, GKN’s board added, it was doing so even by Melrose’s own standards:

The premium Melrose is offering is very low. On the basis of its most recent share price, Melrose claims its premium is 22 per cent. By comparison, precedent FTSE 100 takeovers have an average premium of 43 per cent. Melrose has also paid materially higher premiums in each of its prior public takeovers. In the case of FKI, Melrose’s only prior UK public takeover, the premium was 72 per cent.

(CS) Shire - Q4 2017 - note attached

* FY17 saw results ahead of consensus, (on higher sales) guidance for 2018
was below consensus expectations (on a lower gross margin from the
Covington new plant ramp, directionally signaled at 3Q17, but not quantified
at the time.) Top line growth over 2018-19 will be limited by continued
hemophilia uncertainty (where our sales were already in line with new long
term guidance) and the short term trajectory of HAE franchise sales where
CSL’s US launch of Haegarda has so far made a minimal impact on sales.
We believe that Shire has filed their follow-on drug lanadelumab and can
achieve a 2H'18 launch. We have trimmed the price target to £40 to reflect
the 3% cut in 2018 EPS, but retain our Outperform rating.

* Our enthusiasm for Shire comes from our view of the sustainability of the IG
franchise (where Shire is adding a stronger commercial focus globally), and
the strong cash flow currently being used to pay down debt. Plasma derived
products where Shire is now an equal player, with the more highly rated
competitors Grifols and CSL accounting we estimate for around one-third of
group sales, with an 8% plus sustainable growth rate, and very high barriers
to entry. Shire has a search and develop approach with limited internal R&D
(c 11% of sales) and so we do expect more deals over time to leverage
infrastructure. In the meantime Shire pointed to product disposals to
accelerate debt pay-down/increase shareholder returns. Within our universe
we believe that Shire has the strongest cash flow not already earmarked for
R&D, dividend or buybacks and now that their competence in managing
Baxalta is more assured could, post '19, utilise this cash flow more creatively.

* Catalysts: 1Q18: acceptance of US filing of lanadelumab in HAE; 2Q:
HAVEN-3 data presentation of Roche’s Hemlibra in non-inhibitors patients.

* Valuation: Shire trades on a 2019 PE of 8.3x vs EU pharma peers of 17.6x a
52% discount. Downside risk is from M&A execution risk, greater sales loss
of the hemophilia franchise, less successful ex-US rollout of Shire's ADHD
franchise, regulatory/execution risk on Xiidra, and early stage pipeline
losses.