Pizza Express owner makes bid approach to Restaurant Group
Pizza Express owner Wheel Topco has made a rival bid approach to Restaurant Group (LON: RTN), which has previously agreed a 65p/share bid from US private equity firm Apollo Global Management. This valued the Wagamama owner at £506m or £701m including debt.
Restaurant Group says that it will provide due diligence information to Wheel Topco. The group owns the Wagamama and Brunning & Price chains. No potential bid level has been suggested by Wheel Topco and no there is no guarantee that it will make a bid. The share price rose 2.41% to 68.1p.
Restaurant Group agreed to the Apollo Global bid because the current economic uncertainty made the certain value provided by the bid attractive. The bid multiple for 2023 is 33, falling to 22 in 2024. The Apollo Global bid is more than double the share price at the beginning of the year.
Restaurant Group has previously agreed the sale of the Frankie & Benny’s and Chiquito restaurant chains to Big Table Group for £1m. Restaurants Group is also contributing £7.5m to Big Table Group depending on working capital adjustments.
Oil prices drop on an increase in U.S. crude stockpiles and a rise in the dollar
On Thursday, oil prices fell on a rise in the dollar and a climb in U.S. crude stockpiles, as the Middle East conflict continues to unfold.
WTI Crude price is down by 0.71% and Brent Crude 0.57% at the time of writing.
The dollar index experienced a slight increase on Thursday, contributing to the downward pressure on oil prices.
Oil prices also retreated as the Wall Street Journal reported Israel’s decision to postpone an anticipated Gaza invasion.
Ongoing macroeconomic worries continue to affect the outlook for oil demand, particularly as eurozone business activity unexpectedly declined this month.
According to the Energy Information Administration, U.S. crude inventories rose by 1.4 million barrels in the most recent week, reaching 421.1 million barrels.
Susannah Streeter, head of money and markets at Hargreaves Lansdown commented on the trend: “Nerves are still on edge about the potential for conflict in the Middle East to widen. “, she said.
“There has been no let-up in the bombing of the Gaza strip as Israel prepares for a ground invasion, and a lack of agreement on a pause in fighting for more aid to get through. Brent crude prices are hovering around $90 a barrel as concerns continue that supply could be disrupted across the oil-rich region if other countries are drawn into the conflict.”
WPP shares dip on Q3 revenue drop
Thursday’s Q3 data shows that WPP’s revenue dropped by 1.8%. WPP shares are down by 2.12% and are trading at 676p at the time of writing.
In Q3, revenue, excluding pass-through costs, decreased by 0.6%. Growth in the UK, Western Continental Europe, and the Rest of the World was offset by declines in North America, driven by ongoing challenges with technology clients and in the Chinese market.
$1.4 billion in new business was secured during the third quarter, with notable contributions from Estée Lauder, Hyatt, Lenovo, Nestlé, Unilever, and Verizon. The total net new business won year-to-date amounts to $3.4 billion.
Full-year net revenue growth for LFL is now anticipated to range between 0.5% and 1.0%, marking the second downward adjustment in expectations.
In the third quarter, Global Integrated Agencies saw a marginal revenue increase of 0.1%, contributing to a year-to-date growth of 1.5%, excluding pass-through costs. Integrated creative agencies, however, experienced a decline of 1.1% in Q3, with a year-to-date decrease of 0.9%.
GroupM, on the other hand, exhibited growth of 1.6% in Q3, resulting in a year-to-date expansion of 4.6%, driven by low-single-digit growth in the US and UK.
“Communications and advertising giant WPP’s engines have stalled again. Usually, high-spending technology clients in North America have applied the brakes amid an uncertain economic backdrop. China’s also dragging performance down as the macro environment doesn’t lend itself to loose corporate spending. This has culminated in another reduction in full-year expectations. While seeing growth go in reverse isn’t ideal, it’s not wholly unexpected given that advertising activity is a clear-cut barometer of the economy.” said Sophie Lund-Yates from Hargreaves Lansdown.
“WPP is doing what it can to combat these challenges, including consolidating and streamlining its offering. That could mean the business that emerges from all this could be stronger than what it started with, but there are considerable speed bumps to traverse first. As the digital world transforms at pace, this giant will have to move as nimbly as it can if it wants to thrive,”, she added.
AIM movers: Kromek contract and ex-dividends
Kromek (LON: KMK) has been awarded a $5.9m US government contract for the development of a bio-detection system that provides real-tie threat detection. This should generate £874,000 in the 12-month period to October 2024. The share price continues to recover from its recent all-time low and is 14.5% ahead at 4.75p.
Ironveld (LON: IRON) is raising £450,000 from its largest shareholder Tracarta, while other shareholders will invest £550,000. The subscription price of 0.29p is a premium to the market price, which improved 15.6% to 0.26p. Tracarta’s board nominee Dr John Wardle will become executive chairman. The cash will provide working capital and fund critical repairs at the Rustenburg smelter.
Cornish Metals (LON: CUSN) has commissioned and opened its water treatment plant at the South Crofty tin project in Cornwall. Mine dewatering could take 18 months and the plant will treat the water. The share price rose 7.89% to 10.25p.
A positive AGM statement from telecoms equipment manufacturer Filtronic (LON: FTC) pushed up the share price by 4.13% to 16.4p. Performance is in line with expectations and there is significant potential from the Low Eart Orbit satellite market.
FALLERS
Replacement windows supplier Safestyle (LON: SFE) does not expect to secure additional finance and it is more likely that the business will be sold. The share price slumped 63.8% to 0.58p.
Argentex (LON: AGFX) has appointed Jim Ormonde as interim chief executive. He replaces previous chief executive Harry Adams, who is the second largest shareholder with 12.3%. A strategic review has identified areas of the payments sector to focus on. Jim Ormonde was boss of Cardsave, which was bought by WorldPay, and he has been a consultant to Argentex. Current trading is in line with expectations even though activity levels have been lower. The share price dived 20.9% to 76p, which is the lowest it has been for 15 months.
Hummingbird Resources (LON: HUM) third quarter production figures were slightly better than expected. There was 19,000 ounces of gold produced and the same amount was sold. Selling prices were lower than anticipated and profit was lower than expected. Full year production guidance has been trimmed to 90,000-100,000 ounces. The share price fell 8.65% to 9.5p.
R&Q Insurance Holdings (LON: RQIH) has signed a loss portfolio transfer with a UK motor insurer. This covers a net reserve of $80m. There are a further $900m of similar opportunities. Last week, the company revealed that it is selling its program management business. The disposal should generate $300m of net proceeds. Mazar has been appointed as auditor. The share price dipped a further 3.12% to 15.55p, which is nearly three-quarters down on one week ago.
Ex-dividends
Avingtrans (LON: AVG) is paying a final dividend of 2.8p/share and the share price is unchanged at 380p.
BP Marsh (LON: BPM) is paying a dividend of 2.78p/share and the share price is unchanged at 357p.
Mulberry (LON: MUL) is paying a final dividend of 1p/share and the share price is 2p lower at 183p.
Sylvania Platinum (LON: SLP) is paying a final dividend of 5p/share and the share price is down 5.1p to 73p.
Serica Energy (LON: SQZ) is paying an interim dividend of 9p/share and the share price fell 4.4p to 225.2p.
FW Thorpe (LON: TFW) is paying a final dividend of 4.84p/share and the share price declined 5p to 360p.
Unilever shares fall on lower volumes as the company struggles with post-pandemic recovery
Unilever shares are down by 2.88% in early trade on Thursday as volumes dipped by 0.6% in Q3 amid continued efforts to win over consumers during the post-pandemic recovery.
In Q3, underlying prices surged by 5.8%, outpacing analyst expectations, while volumes dipped by 0.6%. In Europe, volumes experienced a significant decline of 10.7%.
Unilever announced a 5.2% increase in underlying sales, aligning with the average forecast from analysts, as indicated by the company’s consensus provided to Reuters.
The group’s sales amounted to €15.2 billion, showing a 3.8% decrease, consistent with anticipated figures.
Unilever’s new chief executive, Hein Schumacher, said that “our performance in recent years has not matched our potential. The quality of our growth, productivity, and returns have all been under-delivered”.
The packaged goods sector was hit hard by COVID regulations and the aftermath of the pandemic in the last couple of years. Prices for products themselves, packaging, and delivery surged, forcing many consumers to switch to cheaper alternatives to Unilever products, both during and after the pandemic.
Matt Britzman, equity analyst at Hargreaves Lansdown, said in a comment to UK Investor Magazine that, in his opinion, “Marmite Maker delivers a decent third quarter, though volumes were a little lower than expected. It looks like consumers are struggling to justify forking out extra for a tub of Ben & Jerry’s as ice cream sales continue to struggle.”
Looking into the future, Matt Britzman added that “aside from the usual trading details, the new CEO, Hein Schumacher, provided further information on his plans to drive performance into another gear. Trimming the portfolio has already been on the cards, so it’s not too surprising to hear a renewed focus on some of the largest brands, which represent over 70% of sales. Getting gross margins moving back in the right direction is the real key”.
Standard Chartered shares tank after disastrous Q3 update
Standard Chartered shares were halted to regulate volatility in very early trade on Thursday after the Asia-focused bank released a disappointing Q3 trading update.
Shares of Standard Chartered were down around 10% at the time of writing on Thursday.
Following Barclays and Lloyds’ updates this week, Standard Chartered said net interest margins (NIMs) fell in the last quarter. This is a trend across London-listed banks and marks the end of the uplift enjoyed by the higher interest rate environment.
However, Standard Chartered is facing a perfect storm of contracting NIMs, rising operational costs, and increased provisions for bad debts.
Operational expenses rose to $2.87bn in the third quarter, an 8% increase on a constant currency basis compared to the same period last year. At the same time, operating income rose only 6% to $4.52bn.
Costs rising faster than income are never taken unfavourably by markets. Compounding the concern, the bank said net interest margins slipped to 1.67% in Q3, down 4 basis points from the prior quarter.
Standard Chartered’s exposure to China saw the bank increase provisions for bad debts related to the Chinese property sector to $292m.
Disruption in the Chinese economy meant the bank’s banking activities experienced lower profitability as group profit for the period sank 87% to $139m.
FTSE 100 marginally higher as earnings season heats up
It was another marginally higher day for the FTSE 100 on Wednesday as investors digested corporate updates from Lloyds, Reckitt Benckiser, and a plethora of US tech companies.
The FTSE 100 was up 15 points at 7,393 at the time of writing after recovering early losses as the index undulated between gains and losses.
“Despite gains in the US and Asia overnight on some solid US corporate earnings and news of Beijing launching a big stimulus package, the FTSE 100 was modestly lower on Wednesday morning,” said AJ Bell head of financial analysis Danni Hewson.
“Microsoft and Alphabet both delivered better than expected earnings although there was some divergence in the reaction, with the former higher and the latter lower on their respective numbers. Microsoft’s head start in AI seems to be paying off, while Alphabet appears to be in catch-up mode on both this and cloud computing.
Microsoft was up 4% in the premarket while Alphabet dipped 5%.
In terms of London-listed corporate updates, Lloyds was up 2% after reversing early losses as profits increased in the third quarter – despite net interest margins falling.
Reckitt Benckiser was among the top fallers after announcing a 4.1% reduction in volumes in the latest quarter and a 4% drop in reported revenues due to adverse currency swings. Reckitt Benckiser shares were 4.8% lower shortly after midday in London.
Ocado shares were the worst performer on Wednesday as the food distribution technology broke to the lowest levels since rumours of a takeover by Amazon surfaced.
Although there was a sense of calm in UK stocks on Wednesday, Russ Mould warned concerns around the Middle East and central bank action could rock the boat before long.
“As tensions remain heightened in the Middle East, US Federal Reserve chair Jerome Powell is set to deliver an address in Washington tonight which will be closely monitored by twitchy markets,” Mould said.
Pirtek integration on course at Franchise Brands
AIM-quoted Franchise Brands (LON: FRAN) is on track with the integration of on-site hydraulic hose replacement services provider Pirtek and overall trading was positive in third quarter despite some weakness in the summer. Investors appear to have focused on the pre-tax profit forecast downgrade due to higher interest charges and the share price slipped 5.71% to 148.5p.
Underlying trading remains in line with expectations, but the decision not to sell the B2C franchise businesses means that the borrowing remain high. The level of interest rate depends on the level of EBITDA in relation to borrowings. Cash generation will reduce the net debt next year, but it is set to be £79m at the end of 2023.
The B2B services, such as drain clearance and kitchen services, are required by customers and are not directly subject to consumer demand. Additional services are being offered and there is potential for cross-selling.
Allenby forecasts an improvement in pre-tax profit from £12.8m to £20.1m this year. Earnings should rise from 8.4p/share to 8.7p/share despite the larger number of shares in issue. A full contribution from Pirtek and costs savings mean that 2024 pre-tax profit could jump to £27.2m. The shares are trading on 14 times prospective 2024 earnings.
The placing to fund the Pirtek acquisition was at 180p/share and the share price has fallen by one-quarter since the beginning of the year. There may be continued short-term weakness in the share price, but the longer-term potential will eventually be recognised in the price.
AIM movers: IG Design margins improve and lower activity at RWS
Eternity Networks (LON: ENET) shares jumped 155% to 1.275p. Yesterday, the technology company said it was in discussions with 5G Innovation over their share subscription agreement.
Giftware and stationery manufacturer IG Design (LON: IGR) says first half sales were lower, but profit and cash generation are better than expected. Sales have improved outside of North America, where unprofitable contracts have been shed. There have been reduced Christmas order quantities and general demand remains weak. Net cash is expected to be $59.6m at the end of March 2023. The interims will be reported on 28 November. The share price improved 14.2% to 128.5p.
Visualisation software developer Oxford Metrics (LON: OMG) did better than expected in the year to September 2023. There was a particularly strong performance from engineering and life science sectors. Pre-tax profit was £6.3m, which is better than forecast and more than double the £2.6m pre-tax profit for the previous year. Net cash is £64.8m, which is more than 50% of the market capitalisation. The new chief executive Imogen Moorhouse has joined the company. The share price moved ahead by 6.1% to 87p, but it remains one-third lower than at the beginning of July.
Empire Metals (LON: EEE) says that it has completed two of the three planned diamond core holes at the Pitfield project. Core from the first hole has shown titanium mineralisation and the same appears to be true of the core from the second hole. There will be more news in the coming weeks. The next phase of drilling will begin before the end of the year. The share price increased 5.33% to 3.95p.
Bradda Head Lithium (LON: BHL) interims show a $6.24m cash outflow leaving $1.5m in the bank at the end of August 2023. Since the year end, an updated mineral resource showing contained metal of more than one million tonnes triggered a Lithium Royalty Company payment of $2.5m to Bradda Head Lithium, which was received in October. The share price firmed 6.25% to 2.55p, which is just above the low.
FALLERS
IP and language services provider RWS (LON: RWS) has a strong long-term track record, but it has been finding trading more difficult over the past year. There have been lower levels of activity in some markets. The launch of the Unitary Patent on 1 June meant that IP work volumes recovered in the second half. Costs are being reduced. Adjusted pre-tax profit will be within the range of expectations of £116.5m-£129m with revenues declining by 2%. Net cash was £23m at the end of September 2023. The share price slipped 17.9% to 195.35p. The full year results will be published on 12 December.
Full year figures from Virgin Wines (LON: VINO) were in line with expectations with revenues declining from £69.2m to £59m, while pre-tax profit slumped from £5.2m to £600,000. Net cash is £5.5m, following a one-quarter reduction in inventory. The active customer base reduced from 186,000 to 173,000. Trading improved in the second half and that continued into the first quarter of this year with 12% growth. Variable costs have been reduced and pre-tax profit could recover to £1.5m this year. The share price continued its recent fall with a 12.2% decline to 36p.
FD Technologies (LON: FDP) shares continue to fall following yesterday’s statement that the software company expects a small decrease in revenue in the year to February 2024. Previous consensus was an 8% increase to £320m. The share price dipped 6.69% to 815.5p.
Sylvania Platinum (LON: SLP) increased PGM production to 20,200 ounces in the latest quarter – this is the highest figure for four years. Grades and recoveries are ahead of expectations. Full year guidance of 74,000-75,000 ounces could prove low. The negative is that prices have fallen, although the PGM basket price has been strengthening in recent weeks. The share price is 5.57% lower at 78p.