IC TIP UPDATES:
Supermarket Income Reit (SUPR) has formed a joint venture with British Airways Pension Fund to acquire a 25.5 per cent stake in a portfolio of 26 Sainsbury’s (SBR) stores from British Land (BLND). The portfolio is funded by bonds, which mature in 2023, and the rental income received from the portfolio pays down the outstanding balance of the bonds to a final amount which will be repayable in 2023 by way of a refinancing or sale of the portfolio. Buy.
Hammerson (HMSO) chief executive David Atkins has announced plans to step down from his role, he will remain in place until at least Spring next year while a search for a successor takes place. Sell.
When Provident Financial (PFG) axed its final dividend at the end of March, it did so to boost its capital by approximately £40m. Despite this, the high-cost credit provider’s surplus capital above the regulatory minimum had declined from £200m to £190m by the end of April. However, analysts at RBC warned the near term outlook for impairments and profits is “extremely uncertain”, a point reflected in today’s trading update, which showed a contraction in each of its divisions, and a home collection rate tracking well-below pre-Covid expectations. Sell.
While some businesses are starting to view prime London real estate as an unnecessary liability, foreign exchange services group Argentex (AGFX) has just agreed a move to a new “state-of-the-art” office on Oxford Circus. The switch from the group’s City base, which it has recently outgrown, comes despite a “successful” transition to remote working during the lockdown. Under review.
Soft drinks supplier Britvic (BVIC) saw adjusted revenue nudge up 1.4 per cent to £698.8m in its first half, with profit after tax up by more than a tenth to £38.9m. But the group has been hit by coronavirus across all of its business units, and expects a £12-18m impact on earnings before interest per month. Management has deferred its decision on the dividend to later in the year, when the impact of coronavirus on the business will be clearer. All of its factories are operational, apart from one in Ireland which has been temporarily closed. Under review.
KEY STORIES:
British Land (BLND) reported a £1.11bn pre-tax loss for the year to March after the value of its retail portfolio plunged by just over a quarter. Around 40 per cent of retail tenants have been given rent deferrals until the end of June, with overall rent collection in respect of the second quarter coming in at 68 per cent. The commercial landlord also increased its target for retail disposals, hoping for retail to comprise between 25 and 30 per cent of the portfolio in the medium-term, although the current lack of liquidity in the market makes sales difficult, it conceded.
Diversified Gas and Oil (DGOC) has completed its second deal in as many days, this time the Carbon Energy acquisition of wells producing 9,200 barrels of oil equivalent per day (boepd). The $98m purchase was done with new debt, with a $160m loan announced this morning. The Carbon completion follows the similarly-sized deal from yesterday, with the purchase of assets from EQT. Both deals bring in gas production and pipelines in the Appalachian basin. DGO said the new debt brought its net-debt-to-adjusted-Ebitda ratio to 2.3 times, just below its preferred ceiling of 2.5 times.
With its domiciliary care business held as discontinued, Mears (MER) saw revenue from continuing operations rise 17 per cent to £905m in the year ending 31 December. This was driven by the acquisition of Mitie Property Services and the mobilisation of the asylum accommodation and support contract (AASC). Higher finance costs meant statutory pre-tax profit dipped 8 per cent to £25m. When including the £87m loss from its care business, the group swung to a £66m loss for the year. Excluding £269m in lease liabilities, net debt came down by more than a fifth to £51m, although average daily net debt of £114m was flat versus a year earlier, falling short of its £105m target. As previously announced, the final dividend has been scrapped. Sell.
OTHER COMPANY NEWS:
Asset manager-cum-insurance run-off firm M&G (MNG) has confirmed it will pay £410m in dividends due on Friday. The distributions, which comprise an ordinary dividend of 11.92p per share and a 3.85p de-merger special, had been in doubt given the swathes of last-minute cuts and cancellations in recent weeks. While the ex-dividend date has already passed, the shares are up 9 per cent thanks to positive updates on the group’s capital position and assets.
St James’s Place (STJ) has provided the latest sign today that long-term retail investors remained relatively calm during recent market turbulence. In an update for the four months to April, the wealth manager said the retention rate for its funds under management had increased to 96 per cent, while both gross and net inflows increased year-on-year. However, chief executive Andrew Croft flagged the uncertain “short to medium-term impact” of government measures and economic volatility.
