IC TIP UPDATES:
Focusrite (TUNE) has announced the acquisition of Martin Audio and associated companies, a designer and manufacturer of high-performance loudspeaker systems for the touring and installation markets. The total consideration to be paid is £39.2m for the business, which has around £4m of cash. This will be funded via existing cash resources and a new £40m loan facility with HSBC and Natwest. The completion of the loan facility (and the completion of the acquisition) is subject to shareholder approval in a general meeting on 30 December 2019. The deal is deemed a substantial transaction under Aim rules. Management expects the acquisition to enhance EPS in the current financial year, excluding transaction costs, and thereafter. This is Focusrite’s second substantial acquisition this calendar year - after buying ADAM for £16.2m in July. After the Martin Audio deal, it will have net debt of around £25m. Buy.
KEY STORIES:
Goodwin (GDWN) shares fell 16 per cent in morning trading, after the engineering holding company blamed its half-year profit decline on “the disruption caused by the commotions in our parliamentary system over the past six months where the uncertainty has temporarily stalled projects”. Pre-tax profits fell to £7.4m from £7.8m, despite a 3.8 per cent revenue increase to £70.1m from £67.5m. Goodwin expects similar levels of profitability for its second half.
Royal Bank of Scotland (RBS) has made wholesale management changes at its NatWest Markets division, with Chris Marks and Richard Place stepping down as chief executive officer and chief financial officer. Permanent successors are yet to be found but RBS treasurer Robert Begbie and treasury finance director Robert Horrocks will take up the roles of chief executive and chief financial officer, respectively, on an interim basis.
OTHER COMPANY NEWS:
Vodafone (VOD) has entered into an agreement to sell 100 per cent of Vodafone Malta to Monaco Telecom. Monaco Telecom has agreed to pay a cash consideration equivalent to an enterprise value of €250m, implying FY2019 multiples of 7.8 times earnings before interest, tax, depreciation and amortisation (EBITDA) and 13.1 times operating free cash flow. Vodafone Malta will continue to operate under the Vodafone brand for a transitional period following completion – and the transaction requires regulatory approval from the Malta Communications Authority. Completion is anticipated in the first quarter of 2020.
Shares in XLMedia (XLM) fell by more than a fifth this morning after the group said that while revenues for 2020 are expected to be “broadly stable versus 2019”, adjusted cash profits are expected to be “materially lower than previous management expectations”. That’s because the group is taking “proactive measures designed to benefit the business in the longer term”, such as investing in and expanding its global publishing activities, and implementing a transformation plan to “evolve” its operating model. Investment and costs budgeted for 2020 are thus much higher than previously anticipated. For the year to December 2019, the group said that trading has been “broadly consistent” with earlier guidance – with management expecting revenues of around $78m and adjusted cash profits of around $32m.
After market-close yesterday, Hyve (HYVE) announced the acquisition of Shoptalk and Groceryshop – two US-based events focused on e-commerce broadly, as well as the food and grocery segments specifically – for a total sum of $145m (£111m). Hyve also announced a placing of up to 59.6m new shares, and a subscription of 14.6m shares by the founders and certain other management shareholders of Shoptalk and Groceryshop. This morning, the group said that the placing and subscription of 74.2m shares has raised gross proceeds of around £63.9m, at a placing price of 88p per share. The placing and subscription shares represent around 10 per cent of the issued share capital of Hyve.
