Shares in London are up marginally in early trading. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Restaurant Group (RTN) announced the acquisition Mbel Topco Limited, the holding company that runs the Wagamama Asian dining chain for £357m in cash, representing an enterprise value (EV) of £559m giving an EV to cash profits multiple of 8.7 times. Wagamama has 133 operated sites in the UK, five in the US and 58 franchised sites across Europe, the Middle East, and New Zealand. The deal will be funded through a rights issue to raise £315m along with drawing an a £220m revolving credit facility. Around £22m of synergies are expected to be found through costs and site conversions. Shares fell 15 per cent in early trading. Buy.
Disruption at a Reckitt Benckiser (RB.) manufacturing plant caused like-for-like sales in the infant nutrition business to fall 6 per cent to £659m during the third quarter, with year-to-date revenue in the division down 5 per cent to £2.1bn. This disruption has since been resolved and supply restored. Both the health and hygiene home divisions increased sales by 4 per cent to £1.23bn and £1.2bn respectively. Management still expect to deliver 14 per cent to 15 per cent net revenue growth by the full year. Shares fell 4 per cent in early trading. Buy.
Sportech (SPO) announced that non-executive director Richard Cooper would step down from the board with immediate effect, saying he had misjudged the amount of time he would have to devote to the role since he joined in May 2017. The gaming company Is focusing on opportunities in North America after legislation banning sports betting was repealed. Shares fell more than 1 per cent in early trading. Buy.
Polymetal International (POLY) has reached an agreement to sell its Kapan mine in Armenia to Chaarat Gold (CGH), in a deal which values the mine at $55m – or a price of $99 per ounce of gold equivalent ore reserves. Chaarat has previously said the asset would cost it $75m, gets ownership of an asset that produced 50,000 gold-equivalent ounces last year and a pre-tax profit of $19m in the same period. We remain buyers of Polymetal.
KEY STORIES:
Stationery group WH Smith (SMWH) has announced a £155m acquisition of US digital accessories retailer InMotion. The target company sells mainly in US airports, and the deal is aimed at doubling WH Smith’s travel footprint. The group is busy building this side of the business as its high street estate continues to struggle. For the year to August, trading profit across 607 high street stores fell 3 per cent to £60m. To support the purchase, company bosses have put in place a new four year term loan of £200m and extended its revolving credit facility - worth £140m - for another year. Completion is expected before the end of the calendar year.
IG Group (IGG) have appointed June Felix as chief executive following the surprise departure of Peter Hetherington in September. Ms Felix had been the president of Verifone Europe and Russia until the point-of-sale software group’s recent sale to private equity firm Francisco Partners. The shares were up 5 per cent in early trading.
Oil and gas major BP (BP.) has beaten market expectations for its third quarter results by some distance, posting $3.8bn in underlying replacement cost net profits. Panmure Gordon suggested that around $400m of the unexpected profitability came from a lower tax charge of 36 per cent, while investors may have also warmed to a comment that the second tranche of the BHP acquisition will now be funded by cash, rather than shares.
OTHER COMPANY NEWS:
Further to news of its international partnership in May this year, online grocer Ocado (OCDO) and US grocery chain Kroger have now agreed terms on how Kroger will order the building of customer fulfilment centres (CFCs) and the basis on which Ocado will now develop and operate those sites. Kroger is expected to order 20 CFCs over the first three years of the agreement, and order the first three CFCs by the end of 2018. The terms and fee structure are “similar to those for other transactions to-date, combining up-front fees with ongoing capacity fees”. Ocado still expects the earnings impact to be neutral in FY2018, with a peak cumulative net outflow for Ocado of these initial three CFCs in the region of £90m.
Shares in Hunting (HTG) are off this morning after the US-focused oil and gas services group said it expected trading to slow in November and December. Despite this, business this year is so far trending in line with management expectations, while working capital again climbed 7 per cent to around $346m.
Danakali (DNK), potential developer of the Colluli potash project in Eritrea, is out with a third quarter update today, its first since completing a secondary listing in London. During the period, the group held its first ‘bank club’ meeting with potential debt financiers and Eritrean government officials, established a shortlist for the appointment of a chief executive, and confirmed DRA as its preferred mining contractor.
Though its third-quarter operations update showed signs of a stabilising balance sheet, Nostrum Oil & Gas (NOG) has downgraded its full-year production guidance and cautioned that mechanical completion of the long-delayed GTU3 gas plant expansion has again been pushed back, and will incur higher costs.
