Merlin Entertainments (MERL) the theme park operator behind the London Eye and Madame Tussauds has become the latest company to come under pressure from activist investors after its second-largest owner called on it to seek out a buyer to take it private. The FTSE 250 group confirmed to the stock market today that it had received the demand from Valueact Capital, a US-based activist known for its turnaround campaign at the engineer Rolls-Royce. Valueact has a 9.3% stake in Merlin, behind Kirbi, the investment vehicle controlled by the Kirk Kristiansen family, which owns the toymaker Lego. It said in an open letter to Merlin that it could be worth roughly £4.50 a share to a buyer that would take it private. That represents a premium to the prevailing share price of about 30%.
One of Britain’s biggest investment platforms has posted a rise in profits and revenues in its maiden set of results as a listed company. The flotation of AJ Bell (AJB) has been one of the few success stories of the London stock market in recent months. The company said today that pre-tax profits climbed 27% to £17.7 million in the six months to the end of March on revenues that increased by 17% to £50.1 million. Assets under administration were up 3% to £47.7 billion and the number of retail customers rose by 9% to 214,853.
One of Britain’s biggest discount retailers shook off the crisis gripping the sector as it reported a sharp rise in annual profits and said that it planned to open 50 additional shops this year. B&M European Value Retail S.A. (DI) (BME) reported a 17.1% increase in revenues today to just under £3.5 billion over the year to the end of March. Pre-tax profit for the period increased by 8.7% to £249.4 million. Despite the strong performance in its domestic UK market, however, concern among B&M’s investors about a slowdown in its continental markets hit the shares.
TalkTalk Telecom Group (TALK) declared that it had returned to “sustainable” growth as more of its customers streamed videos on YouTube and binge-watched dramas on Netflix. The no-frills broadband supplier said that subscribers were upgrading to faster services owing to the explosion in online television, film and video streaming. “There has been a big switch away from copper lines to fibre,” Tristia Harrsion, chief executive, said. Data usage is increasing by 40% annually, with video accounting for 60% of the growth, she said. “It’s YouTube, then Netflix followed by the free-to-air broadcasters and Amazon. Gaming is enormous too,” Ms Harrison, 46, added. The surge in fibre subscriptions helped Talktalk to cut its pretax losses to £5 million in the 12 months to the end of May, from £100 million the year before. Turnover fell from £1.65 billion to £1.63 billion, but rose slightly after stripping out sales from its shuttered mobile phone wing.
Marks & Spencer Group (MKS) has played down the impact of falling out of the FTSE 100 for the first time in its history after another sharp fall in its share price left it teetering on the brink of tumbling out of the index of Britain’s biggest listed companies. More than £410 million was wiped off the value of the high street retailer yesterday after its shares dropped by 25½p to 245¾p amid the news of a near-10% decline in annual profits and a deeply discounted £601.3 million rights issue to pay for a venture with Ocado, the online grocer. The shares closed at their lowest point since December and near their weakest level in a decade, shrinking the market value of the retailer to just under £4 billion. The decline puts M&S in danger of being relegated to the mid-cap FTSE 250 at a reshuffle next month. Demotion would deprive it of the much-coveted “blue chip” status. However, Archie Norman, 65, the chairman, who was previously the chairman of ITV, appeared to be unperturbed by the prospect of relegation. “When I went to ITV we dropped out of the FTSE 100, the sky didn’t fall in,” he said yesterday. “The business was the same business the day after.”
Marks & Spencer Group (MKS) is to close more shops as part of an attempt to revive its prospects. Steve Rowe, chief executive, said that the group would close 25 Simply Food convenience shops in a more wide-ranging revamp than had been announced before. The revamp involves opening bigger grocery shops, which led to claims that M&S was moving towards Britain’s supermarket chains. M&S previously had set out plans to close at least 100 sites, but it had not marked any Simply Food shops for closure. However, Mr Rowe, 51, said yesterday: “These are small stores that we don’t think are appropriate for the future.”
Fundsmith Emerging Equities Trust (FEET) said that Terry Smith, 66, would no longer be portfolio manager of the £320 million fund. He would continue to provide advice and support to Michael O’Brien, 47, and Sandip Patodia, 37, promoted to portfolio manager and assistant portfolio manager, respectively. Mr Smith said: “I’m not running away from this, I’ve still got a lot of money personally in the trust, but I think it will get more out of me because of this changing role.” As chief investment officer of the Fundsmith fund management business, he will contine to play a part in the big investment decisions, but will no longer vet every small position change taken by the trust. He said this was the role that he had at Smithson Investment Trust, another investment vehicle run by Fundsmith, and that the arrangement worked well.
Royal Mail (RMG) has warned shareholders to expect lower dividends in future as it ploughs £1.8 billion into a turnaround effort. The former state-owned monopoly reported a sharp decline in underlying operating profits for last year and warned investors that it would be rebasing its dividend. It declared a payout of 25p a share for the 52 weeks to the end of March, 1 per cent higher than last year, but added that the award for the year ahead would be set at 15p a share. The struggling postal delivery business said that it might make additional payouts in future, but only if it generated enough cashflow.
Shares in Babcock International Group (BAB) fell to their lowest level in almost a decade yesterday after the defence group warned that its revenue and profits would fall over the coming year. The defence and engineering contractor, which has come under fire from Boatman Capital, the mysterious and controversial corporate researcher, told investors that market conditions were unlikely to improve imminently. Babcock revealed that its annual profits had risen by only 1.1% on an underlying basis before tax to £517.9 million in the year to March 31. However, on a statutory basis, pre-tax profits fell by 39% to £235 million, including exceptional costs of £161 million from restructuring and adjustments to pension liabilities, while revenue slipped by 3.8% to £5.16 billion.
SSE (SSE) said that it was working on options to offload its energy services division, which supplies gas and electricity to about four million households, after the collapse of a proposed merger with Npower last year. The FTSE 100 group has appointed Katie Bickerstaffe, 52, former boss of Dixons Carphone UK, who had been due to lead the merged supplier, as executive chairwoman of the division and said that it was working “towards a listing or new, alternative ownership by the second half of 2020”. Adjusted operating profits at the supply business fell by 68% to £89.6 million as it was forced to cut prices by the government’s cap on bills and lost 570,000 gas and electricity supply accounts, or almost 10% of its customers. Excluding the supply division that is earmarked for disposal, SSE reported a 38% drop in adjusted pre-tax profits to £726 million as it incurred an unprecedented £285 million loss in its trading business after shorting gas prices before they rose last summer.
The Canadian goldminer that owns most of Acacia Mining (ACA) has proposed buying out its minority shareholders for $285 million. Barrick’s possible all-share offer for the 36% of the troubled Tanzanian goldminer it does not already own is pitched at an 11% discount to Acacia’s market value on Tuesday night. Acacia has been in dispute for two years with the Tanzanian government, which has demanded $190 billion in alleged unpaid taxes. Its shares have fallen by two thirds. Barrick opted to negotiate with Tanzania on Acacia’s behalf and said that it had agreed the basis for a settlement, though Tanzania was “not prepared to enter into a settlement directly with Acacia”.
The levy on sugary soft drinks has not put Britvic (BVIC) off its game. The company, which makes Pepsi in Britain and owns Robinsons, said that it was “accelerating the consumer trend towards our heartland of low and no-sugar brands”. In the six months to April 14, revenues were up by 4.9% to £769.2 million, up 1.9% on an organic basis, while adjusted operating profits grew by 5% to £83.7 million.
Great Portland Estates (GPOR) said yesterday that it was confident in the outlook for London’s property sector, despite a Brexit-related slowdown in the investment market. The office landlord reported a 6.2% rise in annual like-for-like rental income to £100.4 million. Profit before tax fell by 27% to £56.1 million amid slower growth in the value of its holdings. Great Portland, which bought no properties this year, said that 54% of its portfolio had some development potential and, in a downturn, it would be able to deploy up to £1 billion on new sites.
A takeover swoop from an American payments technology group sent shares in SafeCharge International Group Limited (DI) (SCH) up by more than 20% yesterday. Nuvei Corporation, based in Texas, said that it would buy the British online payments company in an all-cash deal valued at $889 million. Safecharge shareholders will receive $5.55 (436p) in cash for each share held, representing a 25% premium to the stock’s closing price on Tuesday. Safecharge said that shareholders also would receive the previously confirmed final dividend of 7.22p per share. Teddy Sagi, the Israeli tycoon, is the majority shareholder, with a 68% stake in the business. “Strategically, the tie-up makes sense as Nuvei is a US, SME-focused business and more offline, while Safecharge is European, online and enterprise-focused, thus creating a global payments business of scale,” analysts at Jefferies, the investment bank, said. David Avgi, 43, chief executive of Safecharge, said: “The acquisition should enable Safecharge to benefit from Nuvei’s North American footprint and sales and marketing capability to fulfil and accelerate its growth ambitions.” He said that the companies had “similar shared entrepreneurial cultures”.
Paper and packaging companies were boosted after Mondi (MNDI) said that it was increasing its containerboard prices. Mondi added 45½p to £17.07. Smurfit Kappa Group (SKG) rose 120p to £23.05 and Smith (DS) (SMDS) advanced 12p to 333p.
Coca-Cola HBC AG (CDI) (CCH) rebounded for a second day, having fallen by almost 6% on Monday after it emerged that a hoped-for deal to buy a majority stake in Coca-Cola’s African bottling business had been taken off the table. Analysts at Deutsche Bank said that the share price reaction had been overdone, helping the shares to recoup 85p to £28.54 yesterday.
Homeserve (HSV) rose for a second session after the home repairs provider reported full-year pre-tax profits ahead of expectations. Jefferies issued a “buy” recommendation. The shares closed up 52p at £12.19.
U And I Group (UAI) fell 11¾p to 160¼p after its annual pre-tax profit tumbled from £48.2 million to £6.3 million. Its net asset value, a key metric for property companies, was down 5.1% at £360.1 million. The company said that it had been affected by “growing political, planning and economic uncertainty”.
The first new face in a new-look board at Superdry (SDRY) was revealed yesterday when Nick Gresham was named as the fashion retailer’s latest chief financial officer. Investors loudly applauded the impending arrival of the 48-year-old finance chief at Wiggle. Mr Gresham, who has held finance roles at Homebase, Debenhams and Oak Furniture Land in the past, will succeed Ed Barker, 46, who resigned last month along with the entire board of directors — including Euan Sutherland, the chief executive — after Julian Dunkerton, Superdry’s co-founder, won a battle to be reinstated after a bitter seven-month campaign. He is the first key hire to rebuild the board since the coup. Dennis Millard, 70, Minnow Powell, 64, Sarah Wood, 46, and John Smith, 62, non-executive directors, also are due to quit on July 1. Mr Dunkerton, 54, said this month that he was still looking for a chief executive.
Tempus – IG Group Holdings (IGG): Buy. Growth prospects overseas are promising, while anxieties about regulation are well discounted.
Tempus – C&C Group (CCR): Buy. 2020 target of double-digit earnings growth and strong cash are attractive.