M&S asks shareholders for £600m to buy stake in Ocado and cuts dividend. Marks & Spencer Group (MKS) has agreed a joint venture with Ocado Group (OCDO) in which it will buy half of the online grocer’s UK business for £750 million. The deal will fill the gap in M&S’s online food delivery service and move Ocado closer to becoming a pure technology company. M&S said that it would raise £600 million through a rights issue to fund the deal. It also cut its dividend by 40% to a “more sustainable” level. Steve Rowe, chief executive of M&S, said: “I have always believed that M&S Food could and should be online. Combining the strength of our food offer with leading online and delivery capability is a compelling proposition to drive long-term growth.”
Metro Bank (MTRO) shares fell by almost 20% this morning after it announced plans to tap investors for £350 million. The shareholder cash call came a month after it revealed a sharp rise in exposure to higher-risk mortgages as part of a £900 million accounting mis-statement. The high street banking group also announced plans last night to scale back its aggressive growth plans and overhaul its board. About £250 million has been wiped off its market value this morning, with shares down 254p, or 19.5%, at £10.46. Short-sellers are in line for huge profits on the back of this drop. The company has one of the highest short positions of any UK company, with at least 8.8% of its shares out on loan.
Metro Bank in £350m bid to plug capital hole. City watchdogs investigating loans blunder. Metro Bank (MTRO) has been forced to tap investors for £350 million, scale back its aggressive growth plans and rejig its board as it seeks to plug a capital hole caused by a serious accounting error. The high street banking group also revealed last night that it had been told by both the Bank of England’s Prudential Regulation Authority and the Financial Conduct Authority that they were investigating events that led to the error, which was exposed last month. Metro, a member of the FTSE 250 share index, said that it had struck “a standby underwrite agreement” with RBC Capital Markets, Jefferies and KBW banks as a prelude to raising £350 million of equity capital in the first half of 2019.
Marks & Spencer holds talks with Ocado Group (OCDO) to create joint online venture. Marks & Spencer Group (MKS) is considering launching a rights issue as it closes in on a deal to buy half of Ocado’s domestic online grocery business. Sources said that the M&S board was “debating and discussing” a bumper cash-call to fund the acquisition, which would transform the high street group from an internet laggard into a substantial force in online retail. M&S and Ocado are in a race against time to finalise talks and could announce their joint venture as soon as today, according to City and industry sources. The online grocer has until the end of the month to trigger an 18-month break clause with Waitrose, which has supplied its warehouses since it launched home deliveries nearly two decades ago. Under the terms of the mooted deal, M&S would pay Ocado between £800 million and £900 million for half of its British grocery business, according to the London Evening Standard. The tie-up would be the largest acquisition in M&S’s 135-year history and a key part of the strategy of Archie Norman, the former Asda boss who became its chairman in 2017. Britain’s online grocery industry is forecast to grow by 52% to £16.7 billion by 2023.
Regulator steps into Provident Financial battle. The competition regulator has intervened in Non-Standard Finance (NSF) £1.4 billion hostile bid for Provident Financial (PFG) over concerns about the market impact of such a takeover. The Competition and Markets Authority said yesterday that it had started to examine the mooted tie-up of the doorstep lenders and had served an initial enforcement order blocking any integration of the two companies. The move comes amid worries that their merger might harm competition.
Persimmon tries to build bridges by demolishing chief’s pay packet. The new chief executive of Persimmon (PSN) will be one of the lowest-paid bosses in the FTSE 100 after the housebuilder announced reforms to tackle allegations of poor standards and excessive boardroom bonuses. Dave Jenkinson, 51, was appointed as Persimmon became the first British housebuilding group to report an annual profit of more than £1 billion. The York-based company is Britain’s second biggest housebuilder. It sold 16,449 homes last year, a 3% increase on 2017. Its average selling price rose by 1% to £215,563, while revenues climbed 4% to £3.7 billion and operating margins advanced from 29.7% in the first half to 31.8% in the second half. Interim and final dividends of 125p and 110p a share, respectively, were declared.
Standard Chartered to slash costs by $700m. Standard Chartered (STAN) has pledged to improve its balance sheet dramatically in the next three years by slashing costs by $700 million and focusing on underperforming countries. The emerging markets bank will focus on improving returns in India, Korea, the United Arab Emirates and Indonesia and several other countries as it attempts to remove a “drag” on its revenues and profits. Standard Chartered also set out a new target to achieve a return on tangible equity of at least 10% by 2021, up from 5.1% last year, driven by targeted income growth of between 5% and 7%. Capital strength improved, with the common equity Tier 1 ratio — a capital measure introduced as a precautionary means to protect the economy from a financial crisis — standing at 14.2%, in line with the bank’s guidance of wanting to hold between 13% and 14%. It will pay a final dividend of 15 cents a share, up 36% on 2017.
Not plain sailing for Babcock or Meggitt. Two of Britain’s biggest engineering groups have warned about the costs of continuing to do business in the European Union amid uncertainty surrounding Britain’s departure from the bloc. Babcock International Group (BAB) said that it would take a one-off £10 million regulatory and administrative hit this year and would have to pay an extra £10 million a year in running costs to ensure that its fleet of 480 helicopters used by emergency services can still fly around Europe. Meggitt (MGGT), the aerospace and defence components manufacturer, said that it was racking up £5 million of extra costs stockpiling one month’s additional supply of spare parts at warehouses in the Midlands and on the south coast in case of supply chain or trading dislocation between Britain and Europe.
Fresnillo can’t see a silver lining as its profits slide. Profits at the world’s largest silver producer have dropped by more than a third amid rising costs and problems with contractors at its mines. After profits fell by 35% to $483 million last year, Fresnillo (FRES), which mines silver and gold in Mexico, warned that it expected 2019 to be even more “challenging” because of cost inflation and lower precious metals prices. Its shares were the heaviest fallers in the FTSE 100 yesterday, sliding 81½p, or more than 8%, to almost 894½p. Fresnillo was founded in 1887 and was floated in London in 2008. It operates six mines in Mexico, including the eponymous Fresnillo site. It produced 61.8 million ounces of silver last year, up 5.3% on 2017, and 922,527oz of gold, up 1.3%.
Land Securities Group (LAND) loses its head as retailers feel the pressure. The head of retail property at a FTSE 100 property company has resigned as valuations in the sector come under pressure because of the challenging retail climate. Scott Parsons, 49, managing director of Landsec’s £6.1 billion portfolio of shops, shopping centres and retail parks, will leave after serving 12 months notice to help with his replacement. He joined the business in 2010 and was head of property in London before becoming managing director of the retail portfolio in 2014. The departure is a blow to Rob Noel, 54, chief executive of Landsec, who said yesterday that Mr Parsons had made a “significant contribution” to the company. Along with its peers, the group is contending with the challenge of falling retail property valuations as valuers and investors wake up to the impact on retailers of rising wage bills, higher business rates and disruption from online shopping.
Wickes recovery lifts Travis Perkins. Travis Perkins (TPK) dropped to a £49 million loss last year as it counted the cost of tumbling profits at its 245 Wickes do-it-yourself stores and a shake-up that will lead to its heating and plumbing businesses — and probably Wickes, too — being put up for sale. However, news that its main builders’ merchants businesses are holding up in the face of uncertain consumer spending and the apparent staunching of heavy losses at Wickes helped to lift shares in Travis Perkins to a near-12-month high, closing up 159p, or 12.5%, at £14.29, making the stock the largest riser on the stock market.
Aston Martin Holdings (AML) raced close to the top of the FTSE 250 leaderboard yesterday as traders bet that the £3 billion luxury carmaker would have some reassuring news with its full-year results tomorrow. Short-sellers closing out their positions ahead of the final figures were seen as responsible for the price surge. The growing possibility of a delay to Brexit may have helped to boost the shares. Petrolheads also expect a big splash at the Geneva Motor Show next week. Mark Wilson, Aston Martin’s chief financial officer, told MPs in 2017 that a no-deal outcome would be “semi-catastrophic” for the company, which relies on components imported from the Continent. However, it is less exposed to the European Union than some other carmakers, with most of its exports going to America and China. While other carmakers’ sales growth has ground to a halt in China, in November Aston Martin said that sales there were still robust.
BT Group (BT.A) was out of favour after Berenberg cut its recommendation from “buy” to “hold”, citing concerns over rising debt. If Philip Jansen, the new chief executive, chooses to raise capital expenditure it would put pressure on cashflow, it said. The shares slid 7.4p to 220p. They yield 6.9% . . . for now.
Allied Minds (ALM), the technology incubator fund, revealed that Hawkeye 360, one of its more promising portfolio companies, had commissioned three pathfinder satellites for its maritime radio signal business. Allied has had a grisly time since the shares peaked at 725p in April 2015, but yesterday the shares rallied 4½p to 56½p.
Morses Club (MCL), a doorstep lender, has bought the company trading as WagedayAdvance, a provider of online loans, out of administration, paying £8.5 million in cash for the business.
Investors set for £150m payout. Croda International (CRDA) was out of favour with investors yesterday, despite announcing a special dividend of 115p per share. Shares in the chemical manufacturer, which supplies Unilever, Proctor & Gamble and L’Oréal among others, closed down 179p, at £48.81, making it one of the biggest fallers on the FTSE 100. For 2018 the group reported a 1.2% rise in pre-tax profit to £317.8 million on a 1 per cent increase in annual sales to £1.4 billion. In addition to the special dividend, Croda raised the ordinary payout by 7.4% to 87p a share. It said that it was stockpiling goods in mainland Europe and was adapting its trading model in preparation for Brexit. “An orderly transition of the UK out of the EU is expected to be manageable for Croda,” it said. “However, we have progressed contingency plans for a hard Brexit.”
Tempus – Pershing Square Holdings Ltd NPV (PSH): Buy. A quality listed hedge fund that has rediscovered its investment roots and begun to outperform
Tempus – Drax Group (DRX): Avoid. There’s a limited amount of its fate it can control
