Brexit ‘taking back control’ undermined by £32bn bid for London Stock Exchange
In a somewhat surprising move, the Hong Kong exchanges and Clearing (HKEX) have proposed a £31.6 billion merger deal, which would see the HKEX take over the London Stock Exchange (LON: LSE).
The LSE said it “will consider this proposal and will make a further announcement in due course”. It described the proposal as, “unsolicited, preliminary and highly conditional”.
The conditionality is important, with the deal being subject LSE’s £22 billion deal to buy data giant Refinitv falling through. In the meantime, the London Stock Exchange said it, “remains committed to and continues to make good progress on its proposed acquisition of Refinitiv”. However, based on the closing value of the LSE’s shares on the 10th of September, the £31.6 billion price tag offered by the Hong Kong exchange represents a 23% premium.
HK exchange Chairman, Laura Cha, said that the proposal represents,
“[A] highly compelling strategic opportunity to create a global market infrastructure group, bringing together the largest and most significant financial centres in Asia and Europe”.
Charles Li, Chief Executive of HKEX, added,
“Together, we will connect east and west, be more diversified and we will be able to offer customers greater innovation, risk management and trading opportunities.”
This move, if successful, could mark one of many snatch-ups of key business assets in the UK, with a weak pound making it open season for foreign investors, even in sectors of strategic importance. It wouldn’t be the first, either, with a £4.6bn deal agreed for UK pubs operator Greene King (LON: GNK) by Hong Kong tycoon Li Ka-Shing.
The deal would also be the largest in the LSE’s history, and regarding Brexit, it is a hammer blow against the drum-beating nationalists who lauded the opportunity to take back control. If the UK hopes to be a free market trading hub, and its own hub for free market trade is owned by a non-UK benefactor, where is the control?
Ben Marlow of the Telegraph says it best,
“The timing of a blockbuster bid for the London Stock Exchange from its Hong Kong counterpart could not be worse for a Government desperate to reposition itself as the pre-eminent global free trading hub.”
“The City will be pivotal to any such attempt to build a thriving economy outside of the European Union and the LSE is the beating heart of the Square Mile. Yet the irony of the EU referendum is that it has turned UK companies into sitting ducks.”
“The pound is at record lows, stock prices have tanked, and debt has never been cheaper, paving the way for any overseas investor with even modest aspirations to pick off targets at will. Blue-chip firms have been falling like dominoes.”
He goes on to point out that the government should fear not only further foreign buy-ups but the potential ramifications of our government’s inaction. With China tightening its grip on Hong Kong, the success of this proposal could have worrying strategic implications for the UK going forwards.
Last year the government supposedly tightened its Takeover Code, but that didn’t stop investment firm Melrose from breaching faith and shutting down a factory of its GKN acquisition within a year. The government’s lax attitude is not only bad for business but it is damaging to the fabric of society – it should be enough to inspire some resentment that our leaders are willing to let key parts of our way of life be bought up for momentary gain, irrespective of the long-term strategic, social and economic damage.
If we can only afford hollow laughter, then take at least some enjoyment from this empty response from Business Secretary Andrea Leadsom, who heard about today’s approach for the London Stock Exchange while live on Bloomberg,
“We’re always keen to see foreign direct investment, and collaboration with different international interests.”
“But we’d have to look very carefully at anything that potentially had security implications for the United Kingdom.”
Going forwards we should ask ourselves, if a deal like this is justifiable in the name of growth and ‘good business’, then what isn’t? This kind of nihilistic hand-to-mouth, mercantile attitude has some place in the darkest recesses of merchant banking, but in matters that are innately tied to international strategy and statecraft, it makes any kind of patriotic post-Brexit look laughable – come and buy us, everything is for sale here.
Elsewhere in large financial player and macro economic news, there have been updates from; Lloyds Banking Group PLC (LON: LLOY), Jo Johnson quitting, Hilary Benn’s Brexit delay bill, Parliament being prorogued, Barclays (LON: BARC) and Deutsche Bank (ETR: DBK).
Integumen stung by losses despite 540% revenue hike
Vertically integrated skin product test services company Integumen PLC (LON: SKIN) saw their shares dip as the Company made a consecutive loss, despite a notable spike in revenues.
The Company posted 540% revenue growth in a year-on-year comparison of the first half, up to £0.35 million. This figure excluded revenues revenues from (their subsidiary) RinoCloud of £178,000 and H2 contracted recurring revenues of £134,785.
Despite reducing gross losses by 28% during the period, the Company still came in at negative £0.93 million, narrowing from negative £1.29 million on-year. Further, the Company’s EBITDA loss contracted 32% on-year, but remained a loss nonetheless at negative £0.37 million.
Integumen did add they had raised £2.52 million through a share placing and subscription (before expenses) and warrant share exercises raised £0.25 million. It also performed an all-share acquisition of RhinoCloud for £3 million and strategically reduced its indebtedness by a total of around £1.3 million.
Integumen comments
Gerard Brandon, CEO, said,
“We have seen a transformational 12 months from when I joined as CEO. Since the strategic review announced in August 2018, a fundamental restructuring of the Group and business model has taken place. Having initiated the disposal of underperforming subsidiaries in December 2018, we have now disposed of the final underperforming subsidiaries and this, along with other cost reduction measures has eliminated short-, medium- and long-term debts in excess of £2m. In addition, we have completed our first acquisition of Rinocloud, enabling Integumen to offer an automated, real-time, real-world skin-testing digital data platform service, brought in 4 new LabskinAI clients, announced development of our own Cannabidiol (CBD)-infused diabetic wound product range, as well as ramped up our facilities and senior management team, and, we have raised sufficient funding to enable this accelerated growth to continue. We very much look forward to building on this momentum in the coming months and to building Integumen’s reputation as the the skin testing partner of choice.”
Investor notes
After a slight recovery, the Company’s shares are down 6.77% or 0.13p to 1.79p per share 11/09/19 13:30 BST. The Group’s p/e ratio is 2.40, their dividend yield is not available. Elsewhere in health and medical news, there have been updates from; Medica Group PLC (LON: MGP), EMIS Group (LON: EMIS), OptiBiotix Health PLC (LON: OPTI) NMC Health (LON: NMC), Astrazeneca plc (LON: AZN) and ValiRx Plc (LON:VAL).British Airways apologises, strike threats prevail
British Airways said on Wednesday that it is “very sorry” for the disruption caused by the strikes earlier in the week and that it is working to recover from the events.
The British Airline Pilots’ Association (BALPA), which represents over 10,000 pilots, went ahead with strikes on 9 and 10 September and caused a large amount of flights to be cancelled.
British Airways, which was hit with a data breach fine back in July, said that it is “very sorry” for the disruption caused by the strikes and that it is “working hard to get back to normal and to get our customers to their destinations”.
Shares in the owner of British Airlines, International Consolidated Airlines Group SA (LON:IAG), were trading over 2% higher on Wednesday morning.
“The nature of our highly complex, global operation means that it will take some time to get back to a completely normal flight schedule so there will be a knock-on effect over the next few days,” British Airways warned.
“We are offering all affected customers full refunds or the option to re-book to another date of travel or an alternative airline.”
British Airways cancelled almost all of its flights over the past two days affected by the strike, which the BALPA said is a dispute over pay and benefits.
On Monday, the BALPA General Secretary Brian Strutton insisted that “pilots are standing firm and have shown just how resolute they are”.
“British Airways needs to start listening to its pilots and actually come up with ways of resolving this dispute.”
On Tuesday, the BALPA urged British Airways to negotiate with “meaningful proposals” in order to avert the next strike scheduled at the end of September.
The pilots’ union has threatened the airline with further strike dates if it refuses to negotiate.
“Surely any reasonable employer would listen to such a clear message, stop threatening and bullying, and start working towards finding a solution,” Brian Strutton added on Tuesday.
Shares in International Consolidated Airlines Group SA (LON:IAG) were trading at +2.27% as of 11:53 BST Wednesday.
Kantar: BrandZ 2019 reveals fastest growing UK brands
Deliveroo, Costa Coffee and BrewDog are the nation’s fastest growing brands, according to new data released on Wednesday.
The BrandZ Top 75 is a ranking of the UK’s brands that meet a specific criteria – they were originally created in the UK and they are owned by a publicly listed company traded on a stock exchange, or its financials are published in the public domain.
Announced by WPP and Kantar, the 2019 BrandZ Top 75 Most Valuable UK Brands shows that Vodafone (LON:VOD) remains the nation’s most valuable brand – worth £21.5 billion – with HSBC and Shell coming second and third respectively.
Shares in Vodafone Group were down during trading on Wednesday morning.
However, Kantar said that the rate of growth for UK brands continues to fall behind those in the global rankings, in addition to those in other European markets.
Kantar added that there are three newcomers in the ranking – WHSmith, Aston Martin and Halifax.
“Consumers perceive the fastest-growing UK brands as innovative and dynamic, with a sense of momentum and a clear point of difference,” said David Roth, CEO of the Store WPP EMEA and Asia and Chairman on BrandZ.
“They have built strong emotional connections and have great communicative power to tell their story. However, to keep up with accelerated growth of other global brands these brands must now work to build on their strengths and continue to deliver a fantastic customer experience, one of the key drivers of success for disruptive brands,” David Roth added.
“This is a wake-up call for UK brands that have been over-reliant on their fame,” warned Martin Guerrieria, Global BrandZ Research Director.
“Economic uncertainty – including around Brexit – has led to a lack of investment in long-term brand building, and a focus on short-term outcomes such as driving sales,” the Global Brandz Research Director continued.
“The sheer profile of UK brands has bolstered their success thus far, but this is not sustainable without meaningful difference, which can only be created through brand building. To avoid losing more ground, brands must reinvigorate their offer and revitalise their connection with consumers – building on their salience to prove their continued relevance.”
Epwin avoids this week’s UK construction shares dip
Manufacturer of building products Epwin Group PLC (LON: EPWIN) began trading positively this morning, avoiding the slump suffered elsewhere in the UK construction sector and continuing its rally as the week progresses.
Though hardly groundbreaking performance, the Company can celebrate being the successful odd-one-out this week, especially after a mixed couple of years and seeing its share price fold in half in 2017.
Today’s rally can at least in part be attributed to the Company’s largely positive financial results for the first half of 2019. While the Company’s H1 revenues contracted modestly by £0.5 million (to £140.0 million) on a year-on-year comparison for the first half, their profit indices all indicated positive movement. The Group’s underlying operating profit rose from £7.5 million to £9.4 million, alongside their adjusted operating profit before tax moving from £6.8 million to £7.3 million and their underlying operating profit margin increasing from 5.3% to 6.7%.
Epwin shareholders saw similar progress, with their adjusted EPS at 4.20p and their basic EPS at 3.78p, up from 3.78p and 3.29p respectively. Similarly, the Company’s dividend per share increased from 1.70p to 1.75p on-year.
The Group added that it had made further progress in its site consolidation and rationalisation (particularly at its Telford site), had continued investment to enhance its product portfolio and was trading in line with expectations.
Epwin comments
Jon Bednall, Chief Executive Officer, said,
“The Group delivered a robust trading performance in the first half of 2019, in line with expectations in what continues to be challenging market conditions.”
“We have made good strategic progress on all fronts – the acquisition of PVS provides further routes to market and supports the investment we made to develop our decking system; the new aluminium window system was launched on time and has been well received by our customer base and the wider market.”
“Operationally, our site consolidation programme has continued to plan, including important steps forward on our new warehousing and finishing facility in Telford, where the transactions will significantly reduce the Group’s debt. We also successfully exited from our Northampton glass-sealed unit manufacturing operations.”
“Current trading is line with expectations, and the Board retains its positive view of the medium-term prospects for the market given the continued under investment in RMI, long-term new build demand and pent up demand in social housing markets.”
Investor notes
The Company’s shares rallied 3.44% or 2.60p on Wednesday morning, up to 78.20p per share 11/09/19 08:05 BST. The Group has a p/e ratio of 10.00 and their dividend yield is generous at 6.48%. Elsewhere in construction and development news, there have been updates from; Ashtead Group plc (LON: AHT), SIG plc (LON: SHI), Alumasc Group plc (LON: ALU), Somero Enterprises Inc (LON: SOM), Barratt Developments Plc (LON: BDEV), Wincanton plc (LON: WIN) and Travis Perkins Plc (LON: TPK).Anpario trades sheepishly on mixed first half fundamentals
Producer and distributor of animal feed additives Anpario PLC (LON: ANP) saw its share price dip on Wednesday morning, with the company reporting a varied set of financial results.
The overview wasn’t too positive this morning, with their headline statistic being a dip in first half sales in a year-on-year comparison, down from £14.8 million to £14.3 million.
However, Anpario did see progress in its profit indices, with a 2% on-year increase in gross profits, up to £7.1 million, and a 1% advance in profit before tax, up to £2.3 million.
Further, the Group’s shareholders enjoyed some progress, with a 3% lift in EPS to 8.88p, and a 14% hike in interim dividends, up to 2.5p per share.
The Company added that it had performed strong sales recovery in Latin America and the Middle East, that it had completed a £1 million investment in automated bottling and had launched Anpario Direct Online to access smaller customers.
Anpario comments
Peter Lawrence, Chairman, commented: “The board is encouraged by the continued recovery in a number of our markets which struggled during 2018. Latin America and the Middle East delivered strong performances and the United States continued its double-digit sales growth. As expected, China and certain territories in South East Asia experienced weak trading, where the impact of African Swine Fever put farmers under significant strain. As our improved profitability demonstrates, the geographic and species diversity of the Group is a major strength when facing such external challenges and we have been able to mitigate some of the impact by focusing on higher value-added products and developing more direct routes to market, which have helped to improve gross margins.” “Expanding profitable sales and distribution channels around the world remains our priority. Our strong balance sheet and cash generation capability provide Anpario with a firm platform from which to invest in new products and to develop the exciting Anpario Direct opportunity. Our business development initiatives, backed by the quality and ability of our employees worldwide, give me confidence that we are in line for our full year management expectations.”Investor notes
After a slight recovery and second dip, the Company’s shares are down 1.92% or 6.35p to 323.66p per share 11/09/19 10:03 BST. Analysts from Peel Hunt reiterated their ‘Hold’ stance on Anpario stock. The Group’s p/e ratio is 17.46, their dividend yield is modest at 2.18%. Elsewhere in food and agribusiness, there have been updates from; Bakkavor Group Plc (LON: BAKK), Avangardco Investments Public Limited (LON: AVGR), Loungers PLC (LON: LGRS), The Coca-Cola Co (NYSE: KO), Devro plc (LON: DVO), Greencore Group plc, (LON: GNC) and NWF Group plc (LON: NWF).Zara owner sees sales rise in half year results
Owner of the Zara brand, Inditex, saw its sales rise on Wednesday in its half year results.
Shares in the company were down during trading on Wednesday morning.
Inditex said that it achieved a “strong” operating performance.
From 1 February to 31 July, Inditex said that net sales amounted to €12.8 billion – 7% higher than the figure recorded during the same period a prior.
The Spanish multinational clothing company added that it continues to expand its physical and online stores.
“Like-for-like sales grew 5% in 1H2019 on 4% in 1H2018 and were positive across all concepts and all geographies, in both stores and online,” Inditex said in its results.
“The like-for-like calculation includes store sales (i.e. sales in stores opened for the whole of first half fiscal years 2019 and 2018) and online. This represents 89% of total sales,” the company added.
The owner of Zara added that it has started the second half of the year well, and its autumn/winter initial collections have been “well received”. For the first few weeks, store and online sales in local currencies rose 8%, and the company expects like-for-like sales growth to lie between 4-6% for the overall year.
In March, Zara online sales were launched in Brazil. This was followed by the launch of Zara online sales in May in Saudi Arabia, United Arab Emirates, Lebanon, Egypt, Morocco, Indonesia, Serbia and Israel.
In addition to the Zara brand, Inditex owns other high street fashion names such as Pull&Bear, Bershka and Stradivarius.
The fashion retail sector has experienced difficulties in the past year as businesses struggle for survival amid a gloomy trading environment to hit the wider high street. Physical shops are often sidelined by shoppers who turn to online stores for money saving offers.
Retailers across the UK have been left struggling as job cuts and store closures prevail.
Elsewhere on the UK high street, the leading trainer and sports fashion retailer, JD Sports (LON:JD), posted its half year results yesterday, beating the high street gloom.
Shares in Industria de Diseno Textil SA (BME:ITX) were trading at -2.41% as of 11:11 CEST Wednesday.
US-China trade war: is the sun setting on the inverted yield curve?
As markets open on Wednesday morning, it appears the sun is shining and the birds are singing. US-China trade war tensions look to be moving in the right direction, a No-Deal Brexit is looking less likely, and market indices are happier for it. This isn’t to say that we haven’t heard this kind of chatter come to nothing before, but just for this morning we can enjoy a political outlook that’s positive enough to turn around the UK’s GDP (a few days ago), and inspire a turnaround in US bond yields.
Speaking on the performance of different indices and clamour of US-China trade war progress, Spreadex Financial Analyst Connor Campbell said the following,
“With bond yields starting to rise, the European markets were able to indulge in some solid optimism on Wednesday morning.”
“However easy it is to by cynical about the shift in sentiment, the appearance of positive movement in regards to the US-China trade war – bolstered by the latter exempting 16 products produced by the former from a new round of tariffs next week – and hopes of averting a no-deal Brexit on October 31st have seemingly been cause enough for Europe to start a session with a smile on its face. That and the potential for some ECB stimulus on Thursday, a goodbye kiss from the departing Mario Draghi.”
“The DAX and CAC climbed 0.7% and 0.5% respectively. That leaves the German index above 12350 for the first time since the end of July, and its French counterpart at its best price for around 7 weeks.”
“With the yield on UK 10-year gilts specifically hitting a 6-week high, the FTSE was allowed to strike its own 5-week peak as it rose 0.6%, crossing 7300 in the process. It has struggled to close beyond that level, however, so it will be interesting to see how the rest of the day pans out.”
“Reflecting both a prorogation-related comedown from the UK’s recent political madness, and a lack of headline-worthy data, the pound was pretty quiet after the bell. Cable was unchanged at a 6-week high of $1.235, while against the euro sterling was up 0.1%.”
Other news and macro financial updates have come from; Jo Johnson quits, Hilary Benn’s Brexit delay bill, Parliament being prorogued, No-Deal Brexit preparations, UK GDP during the second quarter, the London Stock Exchange Group (LON: LSE), and analysts’ outlook for markets and currencies.Bakkavor rallies but earnings dip leaves sour taste
International food manufacturing company Bakkavor Group Plc (LON: BAKK) shares made good progress during trading on Tuesday, despite regression in its earnings fundamentals.
Group revenue growing 1.4% and like-for-like revenue rising 2.0% in a year-on-year comparison of H1, up to £923 million and £977.9 million respectively.
Despite this, Adjusted EBITDA pre IFRS 16 contracted 6.5% to £73.5 million and adjusted operating profit narrowed by 11.5%, from £57.3 million, to £50.7 million. Even more notable, Bakkavor operating profits dived 45.8% on-year, from £54.1 million to £29.3 million.
Further, the Company’s interim dividend per share remained flat at 2.0p, while their basic EPS contracted by 4.0p and their adjusted EPS narrowed by 1.5p, to 3.0p and 5.9p.
Bakkavor Group comments
Agust Gudmundsson, CEO, said,
“During a challenging period, I’m pleased by the resilience we’ve shown across the business to deliver a solid first half performance. While the trading environment in the UK is still uncertain, we remain positive of our long-term prospects and the demand for fresh prepared food.”
“Our UK operations have never been stronger and we’re the clear market leader across all four of our core categories. I’m encouraged by developments made across our US business; improving efficiencies, streamlining our customer proposition and building sales across new sites. Our business in China continues to go from strength to strength, expanding both our customer base and product offering.”
“Despite a subdued start to the second half, we currently expect an uplift in performance, boosted in the UK by the impact of new business and an easing of raw material inflation. Our International business is making further progress and therefore the Group remains confident in delivering full-year performance broadly in line with 2018.”
“Looking further ahead, we believe that our strategy, combined with our scale and expertise, leaves us well placed to capitalise on future growth opportunities.”
Investor notes
The Company’s shares rallied 8.01% or 8.60p per share despite today’s – at best – mixed update, up to 116.00p per share 10/09/19 16:35 BST. Analysts from Peel Hunt reiterated their ‘Buy’ stance on Bakkavor stock. The Group’s p/e ratio is 7.31, their dividend yield stands at 3.45%. Elsewhere, there have been updates from other food and drink retailers; Avangardco Investments Public Limited (LON: AVGR), Loungers PLC (LON: LGRS), The Coca-Cola Co (NYSE: KO), Devro plc (LON: DVO), Greencore Group plc (LON: GNC), NWF Group plc (LON: NWF) and Cranswick plc (LON: CWK).Pebble Beach Systems impressive fundamentals following turnaround programme
Software and broadcast automation company Pebble Beach Systems Group PLC (LON: PEB) made good progress in its first half fundamentals, which the Company considered ‘pleasing’, especially when we consider the turnaround measures it undertook in 2018.
The Company’s revenue grew 51% on a year-on-year basis for the first half, up from £3.7 million for H1 2018, to £5.6 million for H1 2019. Similarly, adjusted EBITDA widened from £0.6 million to £2.0 million during a comparison of the same periods, and net debt narrowed from £9.4 million to £9.0 million.
Pebble Beach Systems shareholders saw similar progress, with adjusted EPS growing from 0.2p to 1.3p.
The Group added that its orders received during the first half rose 23.6%, from £4.2 million to £5.2 million.
Pebble Beach Systems comments
John Varney, Non-Executive Chairman, said:
“We are greatly encouraged with the results for the first half of 2019. At the start of 2018, the Board put in place an aggressive plan to turn around the Company. The work that was done during 2018 was both necessary and detailed but, as is normal in turnaround situations, the numbers that we produced at the end of the year, whilst encouraging, did not reflect the scale of the progress we had made. It is therefore very pleasing indeed to be able to report such an impressive set of results for the first half of 2019. These are a huge testament to both the quality and hard work of the people within the business. Whilst the first part of the turnaround is complete, the marketplace in which we operate is fast moving and competitive and whilst we have improved our reputation and our market position, there is still a lot to do.”
“Looking into the second half of 2019 and beyond our focus is to continue to build on the trading performance improvements delivered in 2018 and capitalise on the opportunities presented by the changes in the broadcast market.”