Prudential (PRU) is set to shell out £350million on spinning off its M&G arm into a separate business. The company will pay £75million to its advisers, including investment banks Goldman Sachs and Rothschild, £141million to debt holders and £135million in other costs as it hives off M&G. But investors will reap a £1.3billion windfall in total, as the businesses hand out dividends to keep shareholders on-side following the demerger. The separated M&G business, whose shares begin trading on October 21 when the split takes place, will pay a £310million dividend next May, plus an extra £100million dividend related to the deal. Prudential, which will remain listed on the London Stock Exchange, will pay out £185million next May, which M&G gave it prior to the demerger, as well as the remaining £750million.
Britain’s largest supermarkets have announced a change of tack in the battle to fend off discounters Aldi and Lidl. Sainsbury (J) (SBRY) will close 125 stores to cut costs and shift focus on to convenience stores as a plan B after its failed merger with Asda. Amid struggling sales, it hopes to find £500million of savings over five years by knitting the food business more closely to Argos, which it owns. Tesco (TSCO) said it was converting one of its experimental Jack’s branded stores back to a Tesco. The outlet in Rawtenstall, east Lancashire, is now being turned back into a Tesco, which said it was pressing ahead with the new format elsewhere, opening three more Jack’s stores by Christmas, taking the total number to 12. Both Tesco and Sainsbury’s are under enormous pressure by the march of Lidl and Aldi, who last week posted record sales. Aldi is to expand to 1,200 stores by 2025, just 200 fewer than Sainsbury’s, and launch an assault on the convenience store market.
Aston Martin Holdings (AML) shares fell after the car maker raised $150million (£121million) through a bond sale in a bid to boost its finances and help develop and build its first SUV – the DBX. The group is going to have to pay 12% interest on the bonds each year until they mature in 2022, at which point it will have to pay back the full amount. The car maker also has an option to receive another $100million (£81million) at a rate of 15 per cent interest if needed. But the move has raised questions over the health of the group’s finances, sending shares falling 5.2% to 544.8p in afternoon trading. Russ Mould, investment director at stockbroker AJ Bell, said the ‘very high’ borrowing rates were a sign that the company really needed the money and ‘had to bow to investors’ demands’.
Hornby (HRN) is finally getting its mojo back, issuing a tongue-in-cheek update after its sales climbed between April and August. Hornby, which dates back to 1901, took a swipe at British politics as it said it regretted not producing a Brexit-themed model. It said: ‘Our new grasp of social media has shown us that people are passionate about sharing their views on the topic [of Brexit]. ‘If the situation persists, we have plans for a locomotive that reliably gets stuck between stations.’
Sales at Boohoo.com (BOO) surpassed £1billion over the past 12 months as the company continued to defy the retail sector gloom with an ‘outstanding’ performance. The fast fashion company posted another set of stellar results and boss John Lyttle said Boohoo was entering the second half of the year ‘well placed and confident’. Sales rose to £564.9million in the six months to the end of August, helping full-year revenues top the £1billion mark, while pre-tax profits surged to £45.2million. Lyttle said it had been a ‘fantastic’ first half of the year for the group. ‘We have delivered significant market share gains across all of our key markets, and for the first time in our history, revenue has exceeded £1billion in the last 12 months.’
Shares in Chariot Oil & Gas Ltd. (CHAR) have tumbled despite the explorer successfully managing to narrow losses. The stock fell 0.42p, to 3.2p after the firm booked first-half losses of £1.5million. That was down from a shortfall of £1.7million in the same period a year earlier. The AIM-listed company operates in Namibia, Morocco and in the Barreirinhas Basin, off the coast of Brazil.
Earlier this year, a slew of US business tycoons and other investors ploughed £375million into Metro Bank (MTRO) to shore up its finances. Weeks earlier, the bank had admitted an accounting error that saw it misclassify the riskiness of some loans. Though that confession wiped £1.5billion off its market value, shares have continued to slide. The investors who bought shares through its emergency fundraising in May did so at 500p apiece – the stock is now worth just 169.3p. This means that the value of the new shares has already tumbled almost £250million in just under five months. Vernon Hill, the bank’s American founder, stumped up £5million and is now sitting on a paper loss of £3.3million. But the investors who helped Metro out in May already owned hefty stakes in the lender. In total, Metro’s top nine shareholders who decided to put in more money have seen the value of their combined stakes fall by £407million. Yesterday, there was more speculation that Metro, which in 2010 became the first new bank to open on the UK’s high streets for more than a century, may have to put itself up for sale.
Investors piled into Babcock International Group (BAB) as the defence contractor hailed the continued success of its warship business. Shares rose to 575.6p, making it the biggest riser in the FTSE 350, after it said it has seen ‘increased activity’ across the UK warship arm. The new HMS Prince of Wales aircraft carrier set sail from Babcock’s Rosyth dockyard for the first time last week to undergo extensive sea trials. Babcock is also working on the Royal Navy’s Type 23 frigates and recently won the contract to build five Type 31 frigates for the Royal Navy for £1.25bn. It secures hundreds of jobs at the Scottish dockyard, where the ships will be assembled between now and 2027. With trading ‘in line with our expectations’, Babcock said it was on course to hit sales and profits targets outlined in May.
PZ Cussons (PZC) has said UK sales remain under pressure amid consumer uncertainty and heavy discounting in the market. UK revenues fell in its first quarter and the group added it expects market conditions to ‘remain challenging’ but expects improvement in the second half.
Spitfire and Bishops Finger brewer Shepherd Neame (SHEP) has reported pre-tax profits tumbling to £3.5million in the year to June 29, from £12.1million the previous year. Britain’s oldest brewer saw its bottom line hit by one-off refinancing costs, as well as the end of contracts with grocery chain Lidl and Japanese brewing rival Asahi.
