Shares across London's main indices have started the week with modest gains despite ongoing concerns around the spread of the coronavirus and its impact on the global economy, intensified by weak economic data from Japan. Click here for The Trader Nicole Elliott's latest thoughts on the markets.
IC TIP UPDATES:
Tesco (TSCO) has run into trouble with the Competition and Markets Authority for unlawfully placing restrictions on landlords. The UK’s largest supermarket group was found to have restrictive covenants on 23 of its 5,354 land agreements, which in some cases granted it exclusive rights to sell groceries in certain areas for longer than the five-year period permitted, and in other cases prevented other tenants from opening competing stores near Tesco stores. The CMA said in the majority of these cases the breaches were caused by renewals of existing agreements from before such restrictions were banned in 2010. Tesco has agreed to take remedial action. Buy.
According to Sky News, De La Rue’s (DLAR) lenders have appointed FTI Consulting to oversee a review of the banknote printer’s finances. This follows the group announcing in November that there was “material uncertainty” over its ability to continue as a going concern and risk it could breach its banking covenant of maintaining net debt at less than three times cash profits (Ebitda). Net debt reached £171m at the half year stage, equivalent to 2.72 times cash profits, and is more than De La Rue’s current market cap of £140m. It has a £275m credit facility that is due to expire in December 2021. Under new chairman Kevin Loosemore and chief executive Clive Vacher, the group is expected to unveil a turnaround plan by the end of the first quarter. Sell.
William Hill (WMH) has appointed a new finance director. Current FD Ruth Prior’s departure was announced in January, though an effective date has not yet been confirmed. Adrian Marsh will join from DS Smith, where he has been FD for the last seven years. Chief executive highlighted Mr Marsh’s experience with mergers and acquisitions, deal execution and finance across US and European markets - two areas where the group has been pushing for growth. Buy.
KEY STORIES:
High conviction active fund manager Jupiter Fund Management (JUP) is to acquire rival Merian Global Investors for £390m. The deal adds £22bn in assets under management, and will be funded through the issue of £370m-worth of new Jupiter shares and the issue of £50m of tier-two subordinated debt. Arriving amid a difficult period for fund flows, house broker Numis nonetheless described the move as “value-accretive, inexpensive [and] opportunistic”.
OTHER COMPANY NEWS:
To no one’s great surprise, BR Shetty, joint controlling shareholder and co-chairman of NMC Health (NMC) has resigned from the board of the embattled healthcare group after he was excluded from discussions for possibly misstating his personal holding – inquiries into this matter are ongoing. Chief investment officer Hani Buttikhi and Abdulrahman Basaddiq also stepped down from their board roles.
Building magazine has reported that China’s state railway company, China Railway Construction Corporation (CRCC), wrote to HS2 Ltd last month offering to build the high-speed rail line in just five years, close to the 2015 estimated budget of £56bn and financing up to 80 per cent of the project. As it currently stands, HS2 is not scheduled to fully open until 2040 with a price tag of around £106bn. According to the trade publication, HS2 Ltd has told CRCC that involvement in phase 1 between London and Birmingham is likely too late but has left the door open for phase 2. The news comes as the government defends its controversial decision to grant Huawei a limited role in the UK’s 5G mobile network. Speaking on the BBC’s The Andrew Marr Show, transport secretary Grant Shapps said: “This has not been a discussion with the department, it’s been a discussion with HS2, as I understand it”.
