The Times 11/09/19 - Vox Markets | Vox Markets

The Times 11/09/19

Opposition to Advent’s £4 billion takeover of Cobham (COB) has grown after a big shareholder in the British aerospace and defence company said it was minded to reject the bid. Sanderson Asset Management, which owns 2.4% of Cobham, has said that it is “inclined to vote against” the 165p-a-share cash offer from the American private equity firm at an investor meeting to approve the deal on Monday. Sanderson is Cobham’s tenth largest shareholder, according to data compiled by Refinitiv, and its intervention comes after Silchester International Investors raised concerns about the deal hours after the takeover was announced in July. Silchester is the second biggest Cobham investor with an 11.8% stake. It said that it did not regard “the current offer as being compelling” and urged the company to seek other bidders.

JD Sports Fashion (JD.) claimed yesterday that its “vibrant retail theatre” is the reason for soaring sales and a boost in profits as the sportswear retailer highlighted its success compared to Mike Ashley’s Sports Direct. The company reported a 6.6% rise in pre-tax profits to £129.9 million for the six months to August 3, better than expected, as sales jumped by 47% to £2.7 billion. In stark contrast with the rest of the high street, it achieved a 10% rise in UK like-for-like sales, which measure income at stores open for more than a year.

Bovis Homes Group (BVS) is poised to become the fourth biggest housebuilder in Britain after revealing that it is in talks to buy Galliford Try (GFRD) housebuilding business for more than £1 billion. Bovis sold nearly 4,000 homes last year, will be able to increase its output to more than 10,000 homes a year if the purchase goes ahead, putting its sales closer to those of Britain’s three leading builders — Barratt Developments, Persimmon and Taylor Wimpey. The deal has been masterminded by Greg Fitzgerald, 55, chief executive of Bovis, who formerly ran Galliford. He established Galliford’s partnerships housing division, which builds homes for housing associations and local authorities. Under the proposed offer, Galliford will receive 0.574 Bovis shares for each of its own, worth £651.4 million based on last night’s closing price. Bovis also will take on £100 million of Galliford’s debt. Unlike the terms of a rebuffed offer Bovis made for the business three months’ ago, Galliford will receive an additional £300 million cash payment.

The resilience of Britain’s electricity system may need to be improved in the wake of the worst blackouts in a decade, National Grid (NG.) has admitted. The group yesterday called for a review of security standards to assess whether it should hold more back-up power plants and said that work to prevent small power plants failing may need to be accelerated. It revealed fresh details of the recent blackouts, including the failure of a valve at a gas power plant and problems with factory settings on Siemens Gamesa wind turbines. More than a million homes were left without power in the blackouts on August 9, which triggered chaos on the rail networks, with 23 trains being evacuated and hundreds cancelled. National Grid blamed most of the transport disruption on incorrect settings on Siemens trains.

The gold price could push past its all-time record and progress beyond $2,000 an ounce over the next three years, according to Citigroup. The prospects for gold were strong because of political uncertainties, recession risk and the expectation that global interest rates are going lower for longer, the American investment bank said in a note to clients. It also pointed to strong buying of gold by central banks. Aakash Doshi, a Citi analyst, said in his most bullish scenario that the spot price could reach $2,150 by the end of 2022. Gold is seen as the ultimate safe-haven asset. However, it yields nothing and is costly to insure and store. At present at $1,497 an ounce, it hit an all-time high of $1,918 in August 2011. It fell to as low as $1,060 in December 2015. Since May it has been on a tear, soaring from $1,275 to $1,550 before drifting lower.

BP (BP.) has recorded Britain’s longest commercial drone flight amid a drive to measure methane leakage from its operations around the world. The oil group said that the drone had flown a 185km (115-mile) round trip from Papa Stour in the Shetland Islands to its Clair platform, where it circled, measuring methane using sensors designed by Nasa for use on Mars. BP group with profits of $10 billion last year, is trying to bolster its green credentials under pressure from investors and climate activists. It has resisted calls to set targets for reducing emissions from customers using the oil and gas it sells and is focusing instead on reducing those produced during its own operations.

Thomas Cook Group (TCG) £900 million rescue deal faces a possible challenge from hedge funds that hold credit insurance on the travel group. According to Bloomberg, hedge funds including Sona Asset Management and XAIA Investment may vote against the rescue led by Fosun Tourism Group, of China, at a creditor meeting next week.

One of the main suppliers of fresh foods to Britain’s big supermarkets saw profits tumble in the first half of this year amid “very challenging” UK market conditions. Bakkavor Group (BAKK) counts Tesco and J Sainsbury among its core customers, reported a 59% fall in pre-tax profits to £19.5 million yesterday as it struggles with fragile consumer confidence and the rising costs of raw materials. UK revenue, which represents just under 90% of the group’s total figures, fell by 0.3% to £813.5 million. Total sales rose 1.4% to £923 million, buoyed by growth in the US and China. Sales were up 2% on a like-for-like basis, but this figure jumped 12.7% to £105.7 million overseas.

BT Group (BT.A) threw open its doors to some of the Square Mile’s finest minds on Monday night, hoping to reassure them that its turnaround plans were on track after a dismal run of late for the shares. The invited analysts failed to toe the company line, claiming instead that the share price was unlikely to recover much in the next few months. Among the concerns is how BT will fund an expanded fibre broadband rollout after Philip Jansen, its new chief executive, recently pledged to reach at least 15 million premises by the mid-2020s, up from ten million previously. Investors fear that a big cut to the dividend is on the way, something mooted earlier in the week by Bank of America Merrill Lynch, which suggested a 40% chop to the payout. Other issues include the possibility of a British ban for Huawei, which is a key supplier to BT and other telecoms companies, as well as Brexit. “BT acknowledged significant uncertainties remain and until there is visibility we think it will be difficult for the share price to re-rate in the near-term,” analysts at UBS said in a research note. Berenberg’s team agreed: “While BT looks increasingly cheap on valuation, it is hard to see the shares performing until the uncertainties are to some extent addressed.”

Cairn Energy (CNE) topped the mid-cap leaderboard as it bounced back to profitability in the first half of the year. The oil explorer and producer swung to an operating profit of £49 million in the six months to June as production came in better than expected. It increased its full-year guidance and is now targeting daily production of between 21,000 and 23,000 barrels, up from 19,000 to 22,000 barrels previously. The cost of producing each of those barrels also will be a bit cheaper than first thought.

Investors tucked into Restaurant Group (RTN), following the lead set by Andy Hornby, the new boss of the Wagamama owner. It rose 4¾p to 133¼p after Mr Hornby, the former chief executive of HBOS who joined last month, bought shares worth £300,000. The purchase is unlikely to make much of a dent in the 52-year-old’s pocket, though; his pay package is worth up to £3.9 million this year.

The value of I3 Energy (I3E) almost halved to 30½p after a well at its Liberator oilfield in the North Sea completely missed its target. The company had hoped to use the pilot well to help it to decide where to put a future production well, but drilling failed to find the reservoir that the I3 Energy had thought was there.

The Woodford fund suspension crisis has hit valuations and constrained funding, IP Group (IPO) has warned. In its first-half results, IP Group, said that “market sentiment towards the sector in which the group operates was impacted by the well-publicised difficulties experienced by Woodford Investment Management”. Woodford is one of the industry’s most prominent supporters.  IP Group’s net asset value was 110.6p per share, down from 115p at the end of 2018 and 121.1p a year ago. Its shares have fallen by about a fifth since the Woodford fund was suspended on June 3.

Tempus – Meggitt (MGGT): Buy. Not overly expensive for a good growth opportunity that is increasingly efficient operationally

Tempus – Paragon Banking Group (PAG): Hold. High-quality lender, but clouded by Brexit uncertainty

 

 

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Mentioned in this post

BAKK
Bakkavor Group
BT.A
BT Group
BVS
Bovis Homes Group
CNE
Cairn Energy
COB
Cobham
GFRD
Galliford Try
I3E
I3 Energy
IPO
IP Group
JD.
JD Sports Fashion
MGGT
Meggitt
NG.
National Grid
PAG
Paragon Banking Group
RTN
Restaurant Group
TCG
Thomas Cook Group