Broker tips: Icap, Spire Healthcare, Halfords

The disposal of ICAP’s voice business has prompted Exane BNP Paribas to initiate coverage of the FTSE 250 company at 'outperform', with a target price of 590p.

Tullett Prebon agreed to buy ICAP’s hybrid voice broking and information business in an all-shares deal on 11 November.

Exane BNP Paribas said the disposal is highly beneficial, with an upside beyond the market reaction it has already enjoyed.

“This disposal frees up capital and allows management to focus on its best assets: Post Trade and Electronic,” it noted.

“Structural changes, driven by OTC regulation, should prove a significant tailwind for Post Trade.”

It said it expected the company to grow into new asset classes in its electronic division as well.

Jefferies downgraded Spire Healthcare to ‘hold’ from ‘buy’ and slashed the price target to 285p from 400p following the company’s second profit warning in three months last week.

It said the warning highlights the increasing uncertainty Spire faces as the NHS adjusts to the current funding squeeze.

On Thursday, Spire cut its full year revenue guidance as it said revenues from NHS Local contracts continued to decline in the four months to the end of October.

Spire said NHS Local contract revenues were down 39% for the four months ended 31 October.

The company said it now expects full year revenues to show growth of 3% to 3.7%, or between £882m and £888m, down from previous guidance of 4% to 6% or £890m to £907m.

“Whilst excellent cost control helps mitigate some of the impact, we await clarity on the National Tariff decision in January 2016 before reassessing long-term prospects,” Jefferies said.

Berenberg lifted its recommendation on Halfords to ‘hold’ from ‘sell’ but cut the price target to 375p from 430p to reflect the company’s updated guidance.

The bank pointed out that Halfords shares are down around 30% since its ‘Three reasons to sell’ note, published on 3 August.

At the interim results last week, management set out its strategy for the mid-term, re-setting market expectations.

After three years of 6-8% growth in the cycling market, management has tempered expectations, guiding to around 3-5% market growth going forward.

“While we continue to believe Halfords’ weakness in cycling is structural as well as cyclical, we also believe that top-line expectations are now more realistic,” it said.

The pressure on profitability from the increasing cycling mix and service-led strategy has also been recognised, with management guiding to a broadly flat EBITDA margin in the mid-term.