Telit Communications shares surge on u-blox merger proposal

Jamie Gordon
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Telit Communications shares surge on u-blox merger proposal
Media speculation has been corroborated by Telit Communications (AIM:TCM) regarding chatter about a preliminary merger proposal it received from Swiss semi-conductor manufacturer, u-blox (SWX:UBXN). Under the terms of the proposal, Telit Communications shareholders would receive u-blox shares with a value of £2.50 per Telit share. This, based on the proposal‘s assumptions, would result in shareholders owning around 53% in the combined company.

Telit said that its Board were considering the merger proposal, alongside its financial adviser, Rothschild & Co, and further announcement would be made as further developments emerge.

The company added that the proposal assumes any such merger would be structured as an offer for Telit by u-blox, but added that there can be ‘no certainty’ that the proposal or any similar will be granted. Its statement added:

“In accordance with Rule 2.6(a) of the Code, u-blox is required, by not later than 5.00 p.m. on 18 December 2020, to either announce a firm intention to make an offer for the Company in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer for the Company, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies.”

“This deadline can be extended with the consent of the Panel on Takeovers and Mergers in accordance with Rule 2.6(c) of the Code.”

Following the announcement, Telit Communications shares jumped 17.95%, up to 198.40p on Friday 20/11/20. This price is its highest since 2017, where it peaked at around 371.00p a share, but ahead of its six-month high of 106.00p. Conversely, u-blox shares dropped by 8.17%, to 53.65 CHF, though still ahead of its year-to-date nadir seen around Halloween, at 45.12 CHF.

Fusion Antibodies shares down on H1 trading update

Safiya Bashir
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Fusion Antibodies shares down on H1 trading update
Fusion Antibodies shares (LON: FAB) plunged 16% on Friday morning’s opening after releasing a trading update for the six months ended 30 September 2020. In the period, revenue increased by 9% from £1.75m to £1.90m. The specialists in pre-clinical antibody discovery said that trading for the period had been in line with the expectations. Losses for the period remained the same as the year previously at £0.47m. The board is not recommending the payment of a dividend in relation to the first half of the current financial year. Commenting on the interim results, Paul Kerr, chief executive of Fusion Antibodies, said: “I’m pleased to report that our revenues have grown despite the fact that the period has been dominated by the COVID-19 pandemic. We have expanded our R&D programme to include a COVID-19 target along with our oncology targets, with the goal of using our Mammalian Antibody Library, which will be branded as “OptiMAL(TM)”, to produce neutralising antibodies against the virus, and have raised capital for that purpose. “We have remained operational throughout changing levels of government restrictions and have taken the steps to sustain the business in the coming months. I would like to thank our shareholders and staff for all their valued support to enable us to continue to grow in these challenging times.” Fusion Antibodies shares (LON: FAB) are trading -8.80% at 114,00 (0958GMT).

Nationwide reports rise in profits on mortgage demand

Safiya Bashir
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Nationwide reports rise in profits on mortgage demand
Nationwide reported a 17% rise in pretax profit to £361m. The lender had a resilient performance for the first half of the financial year, which was boosted by strong demand for buy-to-let mortgages. Chief financial officer, Chris Rhodes, commented: “It is pleasing to see the benefits of our conservative approach feed through into the results for the half-year.” “Our margin has stabilised, costs have reduced and profit is stable compared to the same period last year, despite a rise in impairment charges associated with the pandemic and the current uncertain economic outlook.” The housing market came to a standstill over lockdown, however, has since recovered and mortgage approvals in September were 39% higher than the year previously. Chief executive Joe Garner said: “It is very hard to predict what will happen to the economy, jobs and the housing market in the near future as a result of the pandemic and Brexit. “While there are many uncertainties ahead, Nationwide faces into them from a position of considerable strength. We have steady profits, stable income, a strong balance sheet, and a strong capital position.” Looking forward, Nationwide has warned of the many uncertainties ahead. Earlier this month, the group warned of the likely slowdown in the housing market. Robert Gardner, Nationwide’s chief economist, said: “activity is likely to slow in the coming quarters, perhaps sharply, if the labour market weakens as most analysts expect, especially once the stamp duty holiday expires in March.”

UK retail sales beat analysts’ expectations

Safiya Bashir
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UK retail sales beat analysts’ expectations
UK retail sales have grown for a sixth consecutive month in October. October saw retail sales grow by 1.2%, which was ahead of the 0% expected, according to the Office for National Statistics. Since February, retail sales have increased by 6.7%. Online sales have jumped by 52.8%, whilst in-store sales were down by 3.3%. “Despite the introduction of some local lockdowns in October, retail sales continued its recent run of strong growth,” Jonathan Athow, the deputy national statistician for economic statistics. “Feedback from shops suggested some consumers may have brought forward their Christmas shopping, ahead of potential further restrictions. Online stores also saw strong sales, boosted by widespread offers. “However, the slow recovery in clothing sales has stalled after five consecutive months of increased sales.” The only sectors that are below pre-pandemic levels are clothing stores and fuel. Analysts have warned that this could be the last growth in sales ahead of the new restrictions. Lisa Hooker, consumer markets leader at PwC, said: “There was a recovery in almost every category of the sector, and measuring the period to 31 October, these figures don’t include the last minute rush to the high street after the second lockdown was announced. “In fact, the only category to show a material decline in sales was fashion, with less demand for occasionwear and workwear continuing to hit an already beleaguered part of the market. “The closure of non-essential stores and slump in consumer sentiment earlier this month will severely hamper the sector with little over a month to go to Christmas and Black Friday just a week away. “Looking ahead to December, with online delivery capacity already stretched to its limits, retailers will be hoping for a swift lifting of lockdown restrictions and that consumers continue to show they can bounce back into spending mode, as they did after the first lockdown was lifted in June.”

UK debt hits record highs

Safiya Bashir
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0
UK debt hits record highs
The UK’s national debt has hit the highest rate since the 1960s. Recent figures from the Office for National Statistics show that Britain borrowed £22.3bn in October, which is £10.8bn more than a year ago. The ONS said: “The extra funding required to support government coronavirus support schemes combined with reduced cash receipts and a fall in gross domestic product (GDP) have all helped push public sector net debt as a ratio of GDP to levels last seen in the early 1960s.” The cost of the pandemic continues to rise and borrowing between April and October is the highest level in that period since records began in 1993. “We’ve provided over £200bn of support to protect the economy, lives and livelihoods from the significant and far reaching impacts of coronavirus,” said Rishi Sunak, commenting on today’s figures. “This is the responsible thing to do. But it’s also clear that over time it’s right we ensure the public finances are put on a sustainable path,” he added. The level of borrowing fell from the month prior, where the UK government borrowed £28.6bn. Overall, Britains debt has grown to £2.06 trillion in October. This year it has grown by a record level. The public sector net debt is around £2,076.8bn, which around 100.8% of gross domestic product (GDP).  

Sage posts 20% subscription growth

Safiya Bashir
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Sage posts 20% subscription growth
Sage has reported an 8.5% rise in revenue to £1.6bn. The software company also saw subscription growth rise by 20.5% to £1.1bn. Operating profit was down 3.7% from £406m to £391m in the year ended 30 September 2020. The growth in revenue was mainly thanks to the growing demand and number of new customers in Northern Europe and North America. Steve Hare, the chief executive, said: “We’ve delivered a strong performance in FY20, achieving recurring revenue growth in line with the guidance we gave at the beginning of the year, despite the COVID-19 pandemic. “I would like to thank all of our colleagues and partners for their continuing commitment to our customers, communities and each other during this period. We’ve also made good strategic progress, delivering against our customer, colleague and innovation commitments. “While the near term remains uncertain, these foundations position us well to support customers as they adopt digital business models, and I am confident that our additional investment in Sage Business Cloud, and in particular cloud native solutions, will deliver stronger growth and drive the future success of the Group,” he added. Looking forward, Sage is expecting recurring revenue growth for the next financial year to be in the region of 3% to 5%, weighted towards the second half of the year. The group plans to invest more in its cloud business.

Sonos shares crank up 30% on ‘record’ results and $50m stock buyback

Jamie Gordon
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Sonos shares crank up 30% on ‘record’ results and $50m stock buyback
Sitting atop the Nasdaq as trading closed on Thursday, home audio innovators Sonos (NASDAQ:SONO) saw their share price rocket on a double-barrelled packet of good news for its investors. The company swung from a $29.6 million loss to $18.4 million income year-on-year during the fourth quarter. Similarly, revenue jumped by 16%, to $339.8 million, while adjusted EBITDA spun around, from a $2.8 million loss to $46.4 million in earnings. The situation was equally peachy for SONOS shareholders, with diluted EPS flipping from a $0.28 loss to a $0.15 profit year-on-year. The big news for stakeholders, though, was that the company have completed a $50 million share buyback programme – in which it repurchased 3.8 million shares – and now the Board have authorised an additional buyback programme for the same amount of shares to be purchased again. Funded by cash and cash equivalents, the buyback will see outstanding Sonos shares absorbed from the open market, which, inevitably, has given the company’s share price another reason to surge higher. Speaking on the company’s updates, and what he sees as a paradigm shift in the business, CEO, Patrick Spence, said: “We reached an inflection point in the fourth quarter that demonstrates the power and profitability of our model. As our customers recognize, Sonos products operate seamlessly together, with more products improving the experience. That’s why year in and year out, our existing customers add more products to their systems – every new household that we gain starts that cycle anew.” “Fiscal 2020 was the 15th year in a row we grew total households by at least 20%, while our existing customers once again showed strong repurchase habits, accounting for a record 41% of total product registrations. We deliver a consistent cadence of new, innovative products and services, and we have only started the process of realizing the lifetime value of our customers, both old and new.” “In fiscal 2020, we delivered a record 8.2% adjusted EBITDA margin, or 10.6% excluding the effect of tariffs, and we project delivering 12% to 14% adjusted EBITDA margins next year, which is ahead of our prior targets,” continued Mr. Spence. He added that, going forwards, the company will remain committed to delivering ‘innovative new products’ and supporting its partnerships. Over the long-term, he believes the company can deliver strong profit margins, cash flow, revenue growth and increased shareholder value. Following the news, Sonos shares soared by 29.84%, up to $22.19 19/11/20. This is not only well above its year-to-date nadir of $7.92, but ahead of its previous all-time-high, of $20.95 back in August 2018.

Nasdaq dodges the over-extended equities correction

Jamie Gordon
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Nasdaq dodges the over-extended equities correction
Tech and growth stock-heavy index, the Nasdaq Composite, escaped the market correction on Thursday, as virus fears crunched over-extended value equities. European equities fell sharply during the morning, with the DAX and CAC falling 0.88% and 0.67% apiece. Following was the FTSE, who, having suffered 5% losses by Kingfisher and Johnson Matthey, extended yesterday’s losses, and fell 0.80%. Speaking on the sour mood across equities, IG Chief Market Analyst, Chris Beauchamp, said: “After the soar-away gains of the past two weeks, equities now look much more richly-valued, and thus vulnerable to an outbreak of bad news.” “This is precisely what we got in the form of spreading infections in the US but also in Japan, a worrying sign indeed for a country that had been successful earlier in the year in controlling the spread.” “Even reports of success for AstraZeneca’s new vaccine were not enough, the impact of these vaccine announcements having been on a declining trend since the first, excitedly-received news from Pfizer almost three weeks ago.” “There appears to be little desire to chase equities at these levels, and perhaps rightly so, with markets looking priced for perfection and still vulnerable to some short-term turbulence. Over the pond, the Dow Jones shed 0.13%. Interestingly, though, the Nasdaq bucked the trend, and bounced by around 0.60%. This was partially led by some modest gains from big tech stocks, with Amazon, Apple and Facebook all rising by around 0.40%, while Microsoft bounced by 0.85% and Alphabet rallied 1%. Other interesting developments came from Sonos, soaring 28%, while hot stocks NIO bounced 7%. In the meantime, Black Friday and the Christmas holiday have seen Wayfair and Etsy soar, up around 6% apiece.

Halma shares rise on “resilient performance”

Safiya Bashir
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2
Halma shares rise on “resilient performance”
Halma shares (LON: HLMA) opened almost 2% higher on Thursday after the group revealed a “resilient performance” for the six months ended 30 September 2020. Revenue and adjusted profit before tax for the period was down 5% to £618mln and £122mln respectively. The group has raised its dividend by 5% to 6.87p per share. Despite a revenue decline in mainland Europe and the Asia Pacific, Halma reported growth in the US and China. Andrew Williams, chief executive, commented: “Halma’s proven strategic, financial and organisational model has contributed to a resilient performance in testing circumstances, with our financial performance improving as the first half progressed. Throughout the pandemic, we have maintained our focus on employee safety and wellbeing, while working hard to ensure the continued delivery of critical safety, health and environmental solutions for our customers. This was achieved thanks to the tremendous commitment and capability of our colleagues across the Group. Our rapid response to the many new challenges of recent months enabled Halma to not only weather the storm, but to be well positioned to meet the challenges and opportunities ahead. “We have had a good start to the second half, with order intake ahead of revenue and up on the same period last year. Our improving trading performance, together with our strong cash position, will enable us to accelerate strategic investments in the second half of the year. As a result of our progress so far this year, we now expect Adjusted profit before tax for FY 2020/21 to be around 5% below FY 2019/20, compared to prior guidance of 5% to 10% below FY 2019/20.” Halma shares (LON: HLMA) are trading +1.85% at 2.393,41 (1530GMT).

Octopus Renewables credit facility could add £250m to its acquisitions firepower

Jamie Gordon
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2
Octopus Renewables credit facility could add £250m to its acquisitions firepower
Octopus Renewables Infrastructure Trust plc (LON:ORIT) announced on Thursday that it had secured a £150 million rolling credit facility from a group of five lenders. The credit facility, provided by provided by Banco de Sabadell, Intesa Sanpaolo S.p.A. London Branch, National Australia Bank, NatWest and Santander, has a term of three years, an interest rate of 2.3% above LIBOR, and can be drawn down in GBP, EUR, AUD and USD. The company added that the facility also features an uncommitted accordion allowing it to be increased by an additional £100 million. Octopus Renewables said it plans to use a portion of the funds to pay for ongoing construction and acquisition commitments, which will allow further amounts drawn from under the credit facility to be used to acquire further renewables assets. Speaking on the new facility, ORIT Investment Director, Chris Gaydon, said: “We are delighted to have secured this £150m RCF for ORIT with the support of a group of high-quality lenders. This RCF marks the next step in ORIT’s development and provides additional resources to enable us to continue to grow and diversify ORIT’s portfolio.” This latest financing development follows the complete deployment of all the funds Octopus Renewables raised as part of its December 2019 IPO. Among the capital allocations were five key acquisitions, including the buy-up of 14 windfarms, the Ljungbyholm Wind Farm, and a 24MW construction-ready windfarm in France. Despite the seemingly positive update, the company’s shares dipped by 0.47%, to 107.00p apiece – back to just below where it started the year, at 108.80p.
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