The Times 11/06/19 - Vox Markets | Vox Markets

The Times 11/06/19

The prospect of supermarkets delivering fruit and vegetables within hours of them being picked has moved a step closer, with Ocado Group (OCDO) ploughing £17 million into a new “vertical farming” venture. The online grocer said yesterday that it had agreed two deals in the nascent industry, which involves producing food indoors with crops grown on stacked levels. Its proponents say that it has advantages over traditional farming methods, including low wastage and lower water use, minimal land use and no pesticides. The “extreme density” of the sites also means that they can be located closer to warehouses and supermarkets. Ocado said it meant that customers have “tastier and fresher products all year round, picked when ripe and virtually untouched by human hands”.

The investment trust run by Neil Woodford risks raising new scepticism about its true value because it may ignore future “fire sale” transactions by his separate open-ended fund, with which it owns many unlisted company shares in common. Traditionally, unlisted shares are valued at the level of the most recent significant transaction, but Woodford Patient Capital Trust (WPCT) and its advisers are set to invoke European rules that allow it to ignore transactions at “distressed prices” so long as there is no change to the circumstances of the investee companies. Doubts about the real value of the trust intensified yesterday as its shares were marked down by another 6% to 59p, valuing it at £538 million. That represents a 32% discount to the official most recent estimate of net asset value per share of 86¾p. An estimated 60% of the holdings in Patient Capital are also held in Mr Woodford’s main fund Equity Income, which was gated last Monday, effectively locking in its investors indefinitely. Mr Woodford has pledged to sell all the fund’s unlisted holdings, raising the spectre of a forced sale of assets.

Neil Woodford’s investment firm has removed the full list of stocks it holds from its website as the fund manager seeks to restructure its suspended portfolio in the face of pressure from hedge funds. Woodford Investment Management, which was launched in 2014, previously had disclosed the list of its holdings across its three funds. Since dealings in the Woodford Equity Income Fund were suspended last week, hedge funds have been circling. Short-sellers have been betting against stocks in Woodford’s funds, positioning themselves for further declines in share prices as they expect Woodford to be forced to reduce and exit holdings. Shorted Woodford stocks include NewRiver REIT (NRR), the property investor, AA (AA.) and Countryside Properties (CSP).

Chinese shareholder has its eye on larger slice of Thomas Cook Group (TCG). Thomas Cook could fall into Chinese ownership after the troubled travel group confirmed that it has received an approach from Fosun International for its tour operator business. Thomas Cook is understood to have received between seven and ten preliminary offers for some or all of the company, including one from an undisclosed private equity firm. Fosun, which is Thomas Cook’s biggest shareholder, is interested in its tour operator business. It is precluded by European ownership rules from owning the airline. In a statement to the stock market yesterday, Thomas Cook said that it was in talks with Fosun after an approach. The company added: “There can be no certainty that this approach will result in a formal offer. However, the board will consider any potential offer alongside the other strategic options that it has, with the aim of maximising value for all its stakeholders.”

Ferguson falls short as growth in US drains away. Revenue at Ferguson (FERG), the plumbing and heating group, fell short of expectations in the latest quarter amid a slowdown in American growth. The FTSE 100 company reported that sales rose 6.2% to $5.27 billion (£4.16 billion), shy of City forecasts in the region of $5.36 billion. Shares in Ferguson slipped by 248p, to £51 on rising concern over its operations in the United States, which generate four-fifths of its revenue and 90% of its profits. American sales grew 3.3% on an organic basis in the three months to April 30 “but moderated across the country”, Ferguson said on Monday.

A housebuilder has fired its long-serving chief executive in a row over his demands for a significant pay rise and over succession planning. Jolyon Harrison, 71, left MJ Gleeson (GLE) with immediate effect and a near-£600,000 payoff after the board concluded that it was “not possible to find a mutually acceptable basis” for him to continue in the role he had held for almost seven years. Mr Harrison, who took home £2.9 million in the past financial year, is understood to have been seeking a package of as much as £12 million over a period of up to two years as part of an agreement for his eventual departure. The board is said to have considered offering Mr Harrison as much as £10 million but ousted him after he held out for more. The company said that James Thomson, 51, former chief executive of Keepmoat Homes, would join as interim chief executive with immediate effect while it searched for a permanent replacement.

Shake-up at Woodford-backed tech investor as pressure grows. A technology incubator that is backed by Neil Woodford and under siege from an activist investor has announced the departure of its chief executive and scrapped a bonus scheme for bosses. Allied Minds (ALM) said yesterday that Jill Smith, 61, had retired immediately as chief executive and president of the company. She will be replaced by Michael Turner and Joseph Pignato, who will become co-chief executives. The company has also ended a multimillion-pound long-term incentive plan that it had in place for executives and other employees. The changes come as Crystal Amber, the activist fund, which has proposed taking over Allied Minds’ portfolio and selling its assets, steps up its pressure.

Vectura Group (VEC) searching for new leader. A respiratory drug company has announced the unexpected departure of its chief executive, despite having no permanent replacement lined up. Vectura said James Ward-Lilley, a former executive at Astrazeneca who was appointed in September 2015, would be stepping down at the end of the month after the board agreed it was “time for a new leader”. Mr Ward-Lilley, 54, has been replaced in the interim by Paul Fry, 52, Vectura’s chief financial officer, while the board searches for a new boss.

Aston rallies City with £150,000 4×4. About 20 analysts from investment houses and stockbroking firms pitched up at three giant converted Ministry of Defence superhangars at the old RAF St Athan, south of Cardiff, which Aston Martin Holdings (AML) is transforming into Britain’s newest automotive manufacturing facility. The analysts saw production trials of the new DBX, the car that will change Aston Martin Lagonda entirely. The first 4×4 and the first family car that Aston Martin has ever produced, the DBX at a stroke will become the company’s biggest selling model after a century in which it has built only high-performance sportscars and gone bust seven times. Forecasts from Andy Palmer, chief executive, indicate that DBX volumes out of St Athan will be 5,000 a year from 2021 after full production begins in spring. For context, the company made 6,400 cars last year at its plant at Gaydon in Warwickshire. The DBX is central to Mr Palmer hitting his pledge of Aston Martin Lagonda producing 14,000 cars a year early in the next decade. That is about 30 per cent more than is produced by Bentley in Crewe each year and more than three times the number of Rolls-Royces coming off the assembly line in Sussex.

Shares in Scapa Group (SCPA) jumped by almost 12% yesterday after the Aim-listed medical products supplier revealed that it had persuaded its chief executive to stay — only three weeks after he had said that he was leaving. Scapa said that Heejae Chae, 50 would remain at the company to help it to fight a legal battle in the United States over the loss of a key contract. Analysts welcomed the “very positive” news and Scapa’s shares rose 19½p to 183p. More than £200 million, about half of its market capitalisation, had been wiped off its stock at the start of this month after it revealed that one of its leading customers was planning to terminate a five-year contract three years early. Convatec Group (CTEC), the medical equipment maker, had informed Scapa that it was ending its master supply contract with its American subsidiary via a legal process, which would strip about £28 million in revenue and £13 million in profit from Scapa’s accounts. Scapa has said that Convatec does not have grounds to terminate the deal and has instructed lawyers to contest the legal action in New Jersey.

 

Confirmation that Helical (HLCL) has received multiple takeover approaches sent shares in the commercial property group up by almost 10% yesterday. The company, which now has a market valuation of £466 million, said that none of the unsolicited offers reflected its “fair value”. “The board always acts in the best interests of its shareholders and therefore has been open to engaging with these potential offerors, including allowing due diligence to be conducted,” the company said in a stock market statement.

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Mentioned in this post

ALM
Allied Minds
AML
Aston Martin Holdings
CSP
Countryside Properties
CTEC
Convatec Group
FERG
Ferguson
GLE
MJ Gleeson
HLCL
Helical
NRR
NewRiver REIT
OCDO
Ocado Group
SCPA
Scapa Group
TCG
Thomas Cook Group
VEC
Vectura Group
WPCT
Woodford Patient Capital Trust