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IC TIP UPDATES:
Shares in Whitbread (WTB) are up 16 per cent in early trading after the company announced it would sell Costa to The Coca-Cola company for an enterprise value of £3.9bn. This represents a 16.4 times premium to Costa’s cash profits in 2018. A “significant majority” of the £3.8bn of net cash proceeds will be returned to shareholders, and Whitbread will also pay down some debt, contribute to the pension plan, and finance expansion plans for Premier Inn. Chief executive Alison Brittain said Premier Inn will continue to take advantage of the “considerable structural growth opportunities” in the UK and accelerate its network expansion in Germany. Analysts called the price for Costa “much fuller than expected”. Buy.
Restaurant Group (RTN) reported a 2.1 per cent decline in sales to £326.1m during the first half, or a 3.7 per cent fall on a like-for-like basis. The company experienced a World Cup boost, with comparable sales during the 6 weeks to 26th August up 2.4 per cent. Analysts said the results represent “impressive strategic process” in shifting the company from leisure to more attractive concessions and pubs. Since the period end the company bought Food & Fuel, a portfolio of 11 premium leasehold London pubs, for £14.9m. Full-year adjusted pre-tax profit is expected to be “broadly in-line” with current market expectations given the impact of adverse weather and the World Cup. Shares were up 3 per cent in early trading. Buy.
KEY STORIES:
Shares in accounting software group Sage (SGE) were down 6 per cent this morning, on the news that chief executive Stephen Kelly is stepping down. He will be available to the group until his departure at the end of May 2019. Mr Kelly has been at Sage for four years. Sage will continue its shift towards becoming a software-as-a-service (SaaS) business; chairman Donald Brydon said Mr Kelly “energised the Group” and the board remains “fully supportive” of the overall strategy. It has appointed chief financial officer Steve Hare as interim chief operating officer, with authority to run the business until a new chief executive is appointed.
OTHER COMPANY NEWS:
ExxonMobil’s (US:XOM) Hammerhead-1 well has found oil, its ninth major discovery offshore Guyana. The development may not move the needle for the supermajor’s shares, but the impact on Eco Atlantic (ECO) is more pronounced, as the discovery lies just 7km from Orinduik – the licence the Aim minnow shares with Tullow Oil (TLW). Shares in Eco are up 6 per cent today.
Emis (EMIS) saw revenues rise 7 per cent in the first half to June, reaching £84.5m, with recurring revenue up 4 per cent to £69.4m. Meanwhile, pre-tax profits climbed 22.5 per cent to £13.1m. The healthcare software group said its NHS Digital recovery plan was “well advanced”. The shares were up 1 per cent in morning trading.
