London's index was down in morning trade on the back of further concerns about the coronavirus outbreak.
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Midwich (MIDW) has acquired Starin Marketing, a specialist audio visual (AV) distributor in the US, for an enterprise value of up to $46.1m (£35.7m). The purchase marks the group’s entry into North America, the world’s largest AV market, and is expected to modestly boost earnings in the current financial year. Midwich has also announced an accelerated bookbuild to raise £39.7m, which comprises a proposed placing of 7.9m shares at 500p, equivalent to 9.9 per cent of the group’s issued share capital. The net proceeds will be used to repay the debt facilities used for the Starin acquisition and to fund further M&A activity. Buy.
Countrywide’s (CWD) £38m disposal of commercial business Lambert Smith Hampton has hit a stumbling block, after the estate agency group revealed that it had been delayed due to buyer, John Bengt Moeller, “being indisposed during January and due to logistical difficulties relating to the transfer of the requisite completion monies”. The group said it had been assured that completion was imminent and that it was working with Mr Moeller to resolve the situation urgently. Sell.
As we predicted in our Coronavirus piece last week, the spread of the virus from China’s Wuhan province has impacted Luxury demand in the country. Burberry (BRBY) warned this morning that 24 of its 64 stores in China are closed, while the remainder are operating with reduced hours and “significant footfall declines”. Demand from Chinese tourists in Europe has been less impacted, but this is expected to worsen as travel restrictions widen. The shares are down a further 2 per cent this morning, but long term we still believe in the group’s strategy. Buy.
KEY STORIES:
Don’t call it “cashing in” or “taking profits”; massive director sales are now all done in the name of “diversification”. Peter Hargreaves, founder of fund supermarket Hargreaves Lansdown (HL.), is the latest exponent of this craft, after agreeing to sell 34.4m shares worth £550m in an outsized placing. Mr Hargreaves, who still owns a 24.3 per cent stake, will “continue to be a substantial shareholder”, though the timing of the disposal – following a recent decline in net inflows, with the Woodford debacle fresh in the memory and the shares down 15 per cent so far this year – is hardly ideal.
Admiral (ADM) expects to report pre-tax profit of between £510m and £540m for 2019, up to 13 per cent higher than the previous year, due to higher-than-expected reserve releases in UK motor insurance. Clarity over the new Ogden rate in July 2019 also led to an increase in the number of large claims settling in 2019 compared to recent years, which contributed to the level of releases. Despite claims inflation remaining elevated, the insurer expects to pay a final dividend of between 73p to 78p, which in addition to an interim payment of 63p, would make the annual dividend up to 12 per cent higher than 2018.
Bellway (BWY) recorded a 6 per cent increase in completions during the first half, while the the reservation rate rose by the same proportion to 194 per week. The private reservation rate rose by 11 per cent to 151 per week, although that is against subdued demand the prior year due to heightened Brexit uncertainty. Housing revenue rose 4 per cent driven by housing completions, which was partially offset by a 3 per cent decline in sales prices.
Tui (TUI) has agreed to acquire cruise business Hapag-Lloyd Cruises for €1.2bn, as part of a joint venture between the travel company and Royal Caribbean Cruises.
Sirius Minerals (SXX) shareholders will vote on the Anglo American (AAL) takeover deal on 3 March. The Yorkshire mining hopeful has told investors the all-cash, 5.5p per share offer is the only chance of the polyhalite project going ahead as it published the offer document. This week, major shareholder Jupiter Asset Management said the company should have looked for options that kept it listed. In the offer document, the Sirius board said it had looked into both raising the $600m (£464m) needed to keep the development running for two years through either debt or equity, but this would have been too difficult to arrange before the company ran out of cash. “Unless Sirius is able to secure additional funding or a merger or acquisition transaction involving Sirius by the end of March 2020 or soon thereafter, the Sirius board would be required to place Sirius into administration or liquidation,” the company said.
OTHER COMPANY NEWS:
The latest UK report on jobs from KPMG and the Recruitment and Employment Confederation has shown the strongest rise in permanent hiring in over a year. Amid increase business confidence post-election, the total number of staff vacancies across the UK rose at the quickest pace for ten months in January, driven by improved demand for permanent workers. This was particularly evident in the private sector, especially in accounting, finance and engineering. However, billings from temporary staff fell for the first time since 2013. Uncertainty and a low unemployment rate has continued to weigh on worker supply, with a steep reduction in permanent and temporary candidate numbers in the first month of this year.
Ofgem has announced that the default price cap will be reduced from £1,179 to £1,162 between April and September. RBC Capital Markets says the fall is not unexpected given the continued fall in wholesale energy prices. The ‘Big Six’ energy suppliers have been cutting their prices in order to stem customer loses to cheaper rivals. According to RBC, net switches away from the Big Six narrowed to a monthly average of 91,000 in the last quarter, versus an average of the previous 12 months of 138,000. The regulator has said it will conduct a review on whether the price cap will be lifted or extended past 2020.
Future (FUTR) has published the presentation slides for its Capital Markets Day, which took place yesterday (6 February). During the event, chief executive Zillah Byng-Thorne and other members of senior management discussed topics including the execution of the group’s strategy, the importance of diversification and the group’s ‘acquisition playbook’. It said that the principles underpinning its strategy haven’t changed since 2016 – to be a market leader, to grow revenue streams organically and to accelerate growth with ‘value add’ acquisitions. The shares edged up this morning. This comes after Future revealed on 3 February that its full-year outcome is expected to be materially ahead of market expectations. The shares had fallen the previous Friday, after the release of a bearish report from short-seller Shadowfall.
