- House prices dip in January
- Novacyt struggles to shake testing outlook fears
- Digital investment trusts tee up market debut
Online retailers face crackdown on 'buy-now-pay-later' offers
The FCA will tighten regulation in order to protect younger shoppers, reports Oliver Telling
The UK plans to clamp down on “buy-now-pay-later” agreements offered through online retailers, after the volume of these transactions almost quadrupled during the pandemic.
Retailers including Asos (ASC) and Boohoo (BOO) have increasingly allowed shoppers to use buy-now-pay-later services provided by Klarna and other loosely regulated firms, which have fuelled sales by allowing customers to stagger payments without paying interest.
But these companies can charge fees or pass debts to a collection agency if payments are not made on time, prompting the Treasury to warn there is “a significant risk that these agreements could cause harm to consumers”.
A review by the Financial Conduct Authority found 5m people, 11 per cent of consumers, had used buy-now-pay-later offers since the outbreak of Covid-19, bringing the total value of these transactions last year to £2.7bn. Some reported using these services to cope with financial distress during the crisis.
The government now plans to bring firms under the FCA’s remit, meaning they will be required to undertake affordability checks before lending, while consumers can escalate complaints to the Financial Ombudsman Service.
Novacyt struggles to shake testing outlook fears
Vaccine rollouts could weigh on demand for tests, writes John Hughman
Covid-19 testing company Novacyt (NCYT) – which sprung onto investors' radar in 2020 with its Covid-19 test – has seen its shares come under pressure despite a trading update that revealed a twenty-fold increase in sales in 2020 to €311.6m (£277.0m), a threefold increase in cash profits (Ebitda), and a swing to a year-end net cash position for the first time in its history.
Although the company expects continued strong trading in the current year, it declined to offer specific guidance, compounding worries that testing demand could slow as vaccines are rolled out.
However, while analysts at finnCap expect testing to peak this year, they anticipate demand to remain strong into 2022 "as a result of the logistical hurdles in vaccinating the global population”. We think Novacyt looks well placed to be a winner, with the company confirming that it continues to work with the DHSC to deploy its rapid PCR testing system and is in discussions to extend the contract first announced last September.
Book-maker leaps at IPS
Dr Martens (DOCS) debuted on the main market of the LSE this week, after massive demand for a stake in the iconic shoe-maker allowed its private equity backer Permira to net a £1.3bn windfall.
The share sale, which was eight times oversubscribed, valued Dr Martens at 370p a share, and gave Dr Martens a market capitalisation of £3.7bn, equivalent to more than 36 times’ last year’s pre-tax profits, or more than five times’ trailing sales. Frantic early trading pushed that up by a quarter to 464p, suggesting investors have little concern about the group’s growth prospects or balance sheet leverage. AN
House prices dip in January
House prices fell for the first time in six months in January, according to Nationwide, as demand tapered ahead of the stamp duty deadline in March. Sales prices declined 0.3 per cent on the prior month, while the rate of annual growth eased substantially to 6.4 per cent from 7.3 per cent in December. The mortgage lender’s chief economist Robert Gardner said that while the deadline is not until 31 March, activity could be expected to weaken well before then as transactions take several months to complete. EP
JD bags another US retailer
JD Sports Fashion (JD.) remains in acquisitive mode, having entered into a conditional agreement to buy DTLR Villa LLC, a Baltimore-based retailer of sports, fashion and outdoor brands, which operates 247 stores across 19 states, primarily in the north and east of the US. The purchase price of $495m (£361m) is to be funded through cash resources and bank facilities, with around $100m earmarked for repayment of existing borrowings. In the 52 weeks ended 1 February 2020, DTLR delivered cash profits of $45.6m. MR
Data demand pushes Vodafone growth
Telecoms giant Vodafone (VOD) has returned to service revenue growth after two quarters of pandemic-induced declines, buoyed by improvements in its biggest market Germany.
The FTSE 100 group said that lockdowns had prompted greater reliance on its networks, taking data traffic to unprecedented levels. At the same time, the blow to roaming revenues as Covid-19 scuppered international travel was smaller than endured in previous periods.
Vodafone reiterated its full-year guidance, expecting adjusted cash profits to land between €14.4bn (£12.8bn) and €14.6bn with free cash flow of at least €5bn before factoring in spectrum and restructuring costs. HC
Asos confirms Arcadia raid
Asos (ASC) has confirmed the £265m acquisition of the Topshop, Topman, Miss Selfridge and HIIT brands from Philip Green’s ailing Arcadia retail empire. The online retailer described a ‘compelling opportunity’ to add valuable and iconic brands to its stable and it is moving from a position of relative strength in the sector, paying for the deal from cash reserves. Management says it will take brands which resonate with its core 20-something target market both in the UK and overseas and transform them into digital first propositions. GD
Digital investment trusts tee up market debut
A number of tech-themed trusts are headed towards IPO, says Dave Baxter
A handful of niche, digitally focused investment trusts will attempt to come to market later this year, in a sign of the increasingly targeted thematic portfolios being offered to investors.
Great Point Entertainment Income Trust has announced plans for a £200m IPO. The trust, whose prospectus should be published on 11 February, will provide project finance to content markets and commissioners in the TV and film production industry via senior loans secured against pre-sold intellectual property. It will target a 3.5 per cent yield in its first year, with this rising to an annualised rate of 6 per cent after that. The investment manager has identified a pipeline of potential investments including distribution rights pre-sold to names such as Netflix, the BBC, ITV, Hulu and Apple.
Other new themes are also emerging. Earlier this week Digital 9 Infrastructure announced plans for a £400m IPO. The trust’s investment manager, Triple Point, is looking to invest in “a range of digital infrastructure assets which deliver a reliable, functioning internet”, including but not limited to subsea fibre, data centres and tower infrastructure, with some focus on 5G assets. The team plans to invest into Aqua Comms, a platform that owns and operates some 20,000km of sub-sea fibre systems and has a “broad range of global content providers”, including the FAANG companies, among its customers.
Similarly, Cordiant Digital Infrastructure recently announced plans to raise £300m to invest in “the plumbing of the internet”, from data centres to fibre optic networks.
