Maitland/AMO Morning Monitor – Monday 28 June 2021

28th June 2021

In the news

  • New Health Secretary Sajid Javid, has said he wants England to return to normal as "quickly as possible" and will be providing a COVID update today
  • The FCA has ordered Binance, the world's biggest cryptocurrency exchange, to stop all regulated activities in Britain
  • HMRC has launched close to 13,000 investigations into the use of Covid schemes, including furlough, including for possible cases of fraud

Politics today

  • House of Commons sits from 2.30PM with work and pension questions, followed by post-weekend UQs or ministerial statements
  • At 6.15PM MPs will debate a petition with 268,000 signatures calling for Britain's colonial past to be taught in schools

Stock market moves

  • In Europe, the FTSE 100 is trading marginally down in early hours whilst the Stoxx 600 is up.
  • Asian markets finished down with the Hang Seng leading the Shanghai Composite and Nikkei lower.

Corporate announcements

* Maitland Client

NatWest Group PLC UBIDAC agreement to sell commercial lending
  • NatWest and Ulster Bank in the Republic of Ireland announced on 19 February 2021 that they had agreed a non-binding MoU with Allied Irish Banks, in respect of performing commercial lending.
  • UBIDAC and NatWest Holdings Limited have entered into a binding agreement with AIB for the sale of c.€4.2bn gross performing commercial lending and associated undrawn exposures of c.€2.8bn.
  • RWAs in relation to these total balances are estimated at c.€4bn. This transaction is subject to regulatory approvals.
  • Alison Rose, CEO, said: “In line with our strategy of a phased withdrawal from the Republic of Ireland, I am pleased that we have now reached agreement with AIB on the sale of the majority of Ulster Bank’s performing commercial lending portfolio.  Our priority remains to support our customers and colleagues through this period.
JD Sports Fashion PLC Acquisition of Deporvillage in Spain
  • Iberian Sports Retail Group SL, JD Sports’ existing 50.02% intermediate holding company in Spain, entered into a conditional agreement to acquire 80% of the issued shares in Deporvillage SL.
  • Deporvillage is an e-commerce business focussing on the sale of specialist sports equipment. After launching initially in Spain in 2010, Deporvillage has expanded internationally with country specific websites launched subsequently in Italy, France, Portugal, Germany and UK. In the year to 31 December 2020, Deporvillage generated revenues of €117.8m and delivered a profit before tax of €7.7m. The gross assets at 31 December 2020 were €51.1m.
  • Post completion, the Management will retain a 20% holding in the business and will be continuing in their roles as CEO and Chief Purchasing Officer.
  • Total maximum cash consideration for the acquisition of the initial 80% holding in Deporvillage, subject to customary cash / debt and working capital adjustments, is €140.4m, of which €40.4m has been deferred and will be paid contingent on the performance of the business to 31 December 2021.
  • Peter Cowgill, Executive Chairman, said: “Deporvillage has a strong consumer-centric approach and is the market leader in its categories in Spain with significant potential for further international development.”
Glencore PLC Glencore acquires JV partners’ shares in Cerrejon
  • Following notices from JV partners, BHP and Anglo American, offering to sell their entire shares in the Cerrejón mine in Colombia, Glencore has reached agreements with each of them on substantially the same terms to acquire their respective 33.3% interests.
  • The transaction has an economic effective date of 31 December 2020, with an aggregate purchase consideration of c.$588m then being subject to purchase price adjustments calculated at closing.
  • Based on expected operating performance and current forward coal prices, assuming a closing during H1 2022, the Group anticipates the cash generated by the operation to reduce the effective aggregate cash consideration to approximately $230m, making the estimated investment payback period less than 2 years from closing.
  • Ivan Glasberg, CEO, said: “We are confident we can manage the decline of our fossil fuel portfolio in a responsible manner that is also consistent with meeting the goals of the Paris Agreement, as demonstrated by our strengthened total emission reduction targets.”
Coca-Cola HBC AG CCH takes minority stake in Caffè Vergnano
  • Coca-Cola HBC has reached an agreement to acquire a 30% equity shareholding in Casa Del Caffè Vergnano , a premium Italian coffee company.
  • Completion of the acquisition is expected in H2 2021 and is subject to customary closing conditions and regulatory approvals.
  • Coca-Cola HBC and Caffè Vergnano will enter into an exclusive distribution agreement for Caffè Vergnano’s products in Coca-Cola HBC’s territories outside of Italy.
  • CCH Holdings will be represented on the Board of Directors of Caffè Vergnano and have customary minority decision-making and governance rights. The parties have agreed not to disclose financial details of the Proposed Transaction.
  • Zoran Bogdanovic, CEO, said: “With Caffè Vergnano, we are well positioned to build a total coffee portfolio that caters for a diverse range of consumer preferences.”
Burberry Group PLC Board Change
  • Marco Gobbetti has notified the Board of his intention to step down as CEO and leave the Company at the end of 2021.
  • Marco, who has led the transformation of Burberry’s brand and business, will be stepping down after nearly five years with the Company to take up another opportunity that will enable him to return to Italy and be closer to his family.
  • The Board will now begin the search for a successor. The Group anticipates Marco will remain with Burberry until the end of the calendar year and in that time, he will work with Chairman Gerry Murphy to provide full support to the executive leadership team on an orderly transition. 
  • Gerry Murphy, Chairman, said: “he Board and I are naturally disappointed by Marco’s decision but we understand and fully respect his desire to return to Italy after nearly 20 years abroad.”
CRH PLC CRH completes latest phase of Buyback Programme
  • CRH has completed the latest phase of its share buyback programme, returning a further $0.3bn of cash to shareholders.
  • This brings total cash returned to shareholders under the Group’s ongoing share buyback programme to $2.3bn since its commencement in May 2018.
  • Further share buybacks are under active consideration.
Chrysalis Investments Limited Portfolio Update
  • Chrysalis Investments has announced  an investment of £75m in Smart Pension. The investment forms part of a £165m Series D funding round and includes £110m of newly issued primary capital and £55m of secondary equity acquired from existing shareholders of Smart.
  • Chrysalis, which will be providing primary capital, will join a pool of well-established investors in Smart, including Legal & General, J.P. Morgan, the Link Group, Barclays and Natixis Investment Managers, all of whom are considered strategic investors by Smart.
  • The investment by Chrysalis will enable Smart to grow its retirement technology platform offering in the UK, the US, Australia and the Middle East, with additional territories to follow.
  • Richard Watts and Nick Williamson, co-portfolio managers, said: “Just as companies like Wise and Klarna add huge benefits to their users via best-in-class financial technology, Smart offers user experience and technology to transform retirement for savers around the world.”
Serco Group PLC* Serco wins Testing Centres contract rebid
  • Serco has been awarded a contract by the UK Department of Health and Social Care to continue providing support services to Covid-19 regional, local and mobile test centres in England and Northern Ireland.
  • The contract, awarded after a competitive process, is for 12 months with an option to extend for a further 6 months.
  • The value of the award could be up to £322m but actual amount could differ materially from this as the contract is designed to be flexible;
  • The Group will provide test site operations, asset administration support, cleaning and security services at around 20% of sites in England and Northern Ireland;
  • Expectation for the contribution from testing centres is unchanged from the guidance issued on the Group’s trading update on 14 June.
  • Rupert Soames, Group CEO, said: “We are proud of the part we have played in building and operating the UK’s highly successful Covid-19 testing infrastructure.  From a standing start in March 2020, NHS Test & Trace has grown a network of regional, local and mobile sites which have delivered over 18.5 million individual tests, an average of 51,000 tests a day.  We are delighted that the DHSC has selected us to continue to support them in providing these services for at least the next twelve months”
Greggs PLC Trading Update
  • Greggs last reported trading performance on 10 May, at which point the Group had seen a strong recovery in sales levels following the easing of restrictions on non-essential retail across the UK.
  • Since then the Group had expected to see increased competition as cafes and restaurants were allowed to compete more effectively with its largely take-out offer. In recent weeks the impact of pent-up demand for retail has reduced but, nonetheless, LfL sales growth in company-managed shops has remained in positive territory ranging between 1-3% when measured against the same period in 2019.
  • This level of sustained sales recovery is stronger than anticipated and, if it were to continue, would have a materially positive impact on the expected financial result for the year. 
Civitas Social Housing PLC Agreement with E.ON to Reduce Carbon Footprint
  • Civitas Social Housing has entered into a national framework agreement with energy provider E.ON to undertake environmental enhancements that will help to reduce the carbon footprint of the Company’s portfolio.
  • This Agreement is focussed on 55 properties with lower EPC ratings and forms part of the Company’s objective to reach carbon neutrality.
  • It builds on successful pilot projects that have already been undertaken by CSH and E.ON. 
  • Michael Wrobel, CEO, said: “These will reduce our carbon footprint and enable residents to benefit from lower maintenance and energy costs, whilst preserving our target of progressive dividend growth for shareholders.”
Wood Group (John) PLC Wood reaches resolution on legacy investigations
  • Wood announces that agreements have been reached with the Serious Fraud Office  in the UK, the Department of Justice and Securities and Exchange Commission in the US, and the Ministério Público Federal, the Comptroller General’s Office  and the Solicitor General  in Brazil, to resolve their respective bribery and corruption investigations into the past use of third parties in the legacy Amec Foster Wheeler business.
  • Under the terms of the agreements, the Company will pay compensation, disgorgement and prejudgment interest, fines and penalties totalling $177m.
  • In relation to the UK, a three-year deferred prosecution agreement  relating to the use of third-party agents for bribery and corruption in five countries by Foster Wheeler has been agreed with the SFO and was the subject of a preliminary Crown Court hearing today.  
  • Wood has also entered into a three-year DPA with the DOJ, a cease & desist order with the SEC, and leniency agreements with a term of 18 months with the CGU, AGU and MPF, all in relation to the historical use of third-party agents for bribery and corruption in connection with winning a project in Brazil.
  • Robin Watson, CEO, said: “Although we inherited these issues through acquisition, we took full responsibility in addressing them, as any responsible business would.  Since our acquisition of Amec Foster Wheeler, we have cooperated fully with the authorities and have taken steps to further improve our ethics and compliance programme from an already strong foundation.  I’m pleased that, subject to final court approval in the UK, we have been able to resolve these issues and can now look to the future.”
Impact Healthcare REIT PLC* New revolving credit facility & debt repayment
  • Impact Healthcare REIT announces that the Group has signed a new revolving credit facility of £26m with National Westminster Bank plc, with an accordion agreement to increase this facility to £50m, subject to lender approval.
  • The Group has also agreed to repay £10m of its £25m term loan with Metro Bank PLC.
  • The New Facility is for an initial term of three years with an option to extend, subject to lender approval, for up to a further two years. The New Facility has a margin of 190 basis points per annum over SONIA, which is currently equivalent to a total drawn cost of debt of 1.95% per annum.
  • This is the Group’s first facility utilising SONIA and the Group is in discussions with HSBC and Clydesdale on the transition of these facilities from LIBOR to SONIA.
  • The New Facility, after the reduction of the Metro facility, takes the Group’s total committed facilities to £141m, of which £15m is a term loan and £126m are revolving credit facilities.
  • This New Facility will help to ensure that the Group continues to be well capitalised and increases its balance sheet flexibility with further diversification of more attractively priced funding to support the Company’s growth:
  • The Group continues to pursue a number of attractive investment opportunities and expects to announce further updates during the next quarter.