Today’s Updates From Royal Bank of Scotland Group plc, Babcock International Group plc & Chime Communications plc

Find out what has been moving these shares today: Royal Bank of Scotland Group plc (LON:RBS), Babcock International Group plc (LON:BAB) and Chime Communications plc (LON:CHW).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

RBS

Royal Bank of Scotland Group (LSE: RBS) reported a surprise boost in profitability for the second quarter of 2015. Net profit in the three months leading to 30 June 2015 was £293 million, which represents a 27% increase on the same period last year. 

On a more downbeat note, adjusted operating profit fell 7% on the same period last year, to £1.81 billion, following the scaling back of its investment bank. Restructuring costs more than doubled on the preceding quarter to £1.05 billion, as the bank’s restructuring plan accelerated. In a bid to return to improve profitability, the bank has identified that it needs to shrink its investment bank further and dispose more non-core assets. Today’s quarterly earnings update shows RBS is far from completing its restructuring plan. There is also much uncertainty about the size of the impending regulatory penalties for the bank’s legacy issues.

Shares in RBS initially rose 4.7% to a high of 370.0 pence, before falling back to 354.8 pence (+0.5%) by morning trading.

Babcock disappoints

Continued softness in the defence sector sent shares in Babcock International Group (LSE: BAB) to fall 3.7% to 1000 pence by morning trading. But today’s update showed the company is on track to deliver growth in both revenue and earnings per share. Babcock’s order book remains stable at £20 billion, with 84% of revenue for the current financial year already reserved.

Babcock has been able to offset the weakness in the defence sector with growth from its support service division, which includes the decommissioning of nuclear power plants, rail network engineering and education support services. As underlying revenue and earnings growth trends remain intact, shares in Babcock are worth buying on recent weakness. Its forward P/E is just 13.9.

Takeover bid for Chime Communications

Today, Chime Communications (LSE: CHW) confirmed market rumours that it could face a takeover from a consortium that includes Providence Equity Partners LLC and WPP. Shareholders in Chime could receive a potential cash offer of 365 pence per share, and continue to receive an interim dividend for the current year of 2.53 pence per share.

Shares in Chime rose 26.3% to 346.8 pence by mid-morning trading. Chime’s board said “there can no be certainty that the Consortium will proceed to make an offer for Chime”. But, today’s share price reaction suggests the market expects a deal is very likely. WPP, which already owns 20% of Chime , is keen to bolster its presence in the sports marketing industry with the proposed takeover.

Although the WPP consortium is paying a hefty premium on Chime Communication’s recent share price, its offer may not fully reflect the company’s long term growth prospects. The delay of two major contracts have temporarily stunned the company’s recent revenue growth, causing the recent weakness in its share price. But with a growing client list and the 2016 Olympic Games getting closer, Chime could soon return to deliver strong double-digit earnings growth. At 365 pence per share, Chime is valued at just 13.8 times its projected 2016 earnings.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »