Maitland/AMO Morning Monitor – Wednesday 22 December 2021

22nd December 2021

In the news

  • The Prime Minister has urged people to test for Covid-19 before meeting relatives for Christmas as he ruled out new restrictions before next week.
  • NatWest has admitted one count each of wire fraud and securities fraud in a US federal district court and has agreed to pay US authorities roughly $35m.
  • The stock market fortunes of THG have been revived following renewed deal speculation.
  • Chancellor Rishi Sunak will hand pubs and restaurants a £1bn taxpayer bailout to cover losses after Government scientists urged the public to scale back Christmas plans.
  • Turkey’s lira jumped sharply after President Recep Tayyip Erdogan unveiled a savings scheme that analysts described as a backdoor interest rate rise that could erode public finances.

Politics today

  • Parliament is in recess until 5 January.

Stock market moves

  • In the US, the S&P 500 rose 1.78%, while the Nasdaq 100 rose 2.29%.
  • In Asia, Hong Kong’s Hang Seng Index rose 0.3%, whilst Japan’s Topix Index fell 2.17% and China’s Shanghai Composite Index fell by 0.07%.
  • In Europe, the FTSE 100 is trading up 1.3%.

Corporate announcements

* Maitland Client

Camellia PLC* Trading Update
  • Whilst the majority of agricultural operations have continued to operate broadly as normal, India has seen a significantly reduced crop due to dry weather and Covid plucking restrictions, offset by higher production and improved prices in Bangladesh. An oversupply of avocados in the European market meant that the prices achieved for Hass crop are likely to be well below expectations. In Malawi, favourable weather conditions resulted in a higher than expected tea crop and in Brazil, better than expected yields and prices were achieved on arable crops.
  • Further to the announcement made on 17 November 2021, with regard to the acquisition of Bardsley England where Camellia indicated volumes were lower than hoped, the Group has now undertaken a major cost-cutting and restructuring exercise in order for the business to reach its full potential, the benefits of which will be seen next year. Cost saving initiatives and productivity improvements across the Group have yielded better than expected results.
  • Following a period of improved trading as the hotel and leisure sector opened up over the summer, the rising cases of the Omicron variant have resulted in a slow down in the hospitality sector in the lead up to Christmas, stalling the recovery in the food service businesses.
  • These changes have resulted in improved margins for a number of the agriculture businesses which coupled with the rigorous cost-saving measures implemented across the Group, leads the Board to believe that the underlying profit before tax for the year is likely to be substantially above market forecasts in the range of £7-9m on revenue which is now expected to be 4-5% below market expectations.
Impact Healthcare REIT PLC* New Long-Term Institutional Debt
  • The Board of Directors of Impact Healthcare REIT PLC  announced that it has agreed £75m of new long-term debt provided by two large UK insurance companies.
  • Impact has entered into an agreement with these institutional investors to issue £75m of senior secured notes, comprising two tranches with a weighted average coupon of 2.967%, and a weighted average maturity of 14 years.
  • The two tranches comprise: £37m of Notes at a fixed coupon of 2.932% which were issued on 21 December 2021 and mature in December 2035; and £38m of notes at a fixed coupon of 3.002% which will be issued on 20 June 2022 and mature in June 2035.
  • Rupert Barclay, Chairman, said: “We are delighted with the attractive rates and competitive terms that have been achieved, and how this transaction reflects both the high level of resilience the Group has demonstrated during an exceptionally challenging period, and support from institutional investors for Impact and its strategy.”
Syncona Limited Gyroscope Therapeutics to be acquired for up to $1.5 billion
  • Agreement reached for Gyroscope Therapeutics to be acquired by Novartis for up to £1.1bn. with an upfront cash payment of £604m and up to £528m in cash potentially due upon the achievement of certain milestones.
  • Upfront cash proceeds for Syncona at closing anticipated to be £334m, which will represent a £180m uplift (27p per share) to the current holding value; a 3.0 multiple of original cost and 55% IRR.
  • Ongoing exposure to Gyroscope’s development based on the achievement of milestones, with the potential to generate a further £255m of proceeds for Syncona; if received in full, proceeds anticipated to be £589m, a 5.2 multiple of original cost.
  • Chris Hollowood, CIO, said: “This transaction further demonstrates the success and pace of the Syncona model to deliver for all our stakeholders. We have a growing track record of founding and building globally competitive life science companies with product-focused strategies in areas of high unmet need. On closing this will mark the third sale of a portfolio company over the last three years, generating total potential proceeds, assuming full receipt of milestones from the sale of Gyroscope, of up to £1.2bn, an aggregate 5.8 multiple of cost. We are excited that the proceeds will further strengthen our capital base, enhance our growing portfolio companies as they scale, and fund exciting new opportunities as they emerge.”

 

LondonMetric Property PLC LondonMetric Acquires Savills IM Income Growth Fund For £122 Million
  • LondonMetric has acquired Savills IM UK Income and Growth Fund in a corporate transaction valued at £122.2m, reflecting a blended yield on cost of 4.3% and an anticipated reversionary yield of 4.9%.
  • The Fund owns a portfolio of 15 assets across 482,000 sq ft with 75% in urban logistics and the remainder comprising long income assets. It generates £5.35m of rent per annum with 43% of the income benefitting from contractual uplifts.
  • The portfolio has a WAULT of 11.0 years (9.2 years to first break) and key occupiers include Decora, Fujitsu, Grafton, HSBC, Iveco, MKM and Volkswagen.
  • Andrew Jones, CEO, said: “Following our equity placing last month, we are pleased to have quickly invested a substantial proportion of the proceeds into this high quality portfolio. Reflecting their London & South East weighting, we expect these assets will continue to perform strongly as high occupier demand and diminishing warehouse supply drive rental growth higher.”
UK Commercial Property REIT Ltd UKCM acquires industrial/business park for c. £94m
  • UKCM has acquired an industrial/business park with a focus on life sciences & tech focus for c. £94m.
  • This purchase takes the Company’s total committed investment for the year to almost £233m, 80% of which was transacted in the last three months.
  • The acquisition forms part of a strategy to maintain a portfolio with a solid bedrock of assets, with strong real estate fundamentals and durable income streams, supplemented by assets with tactical risk to drive enhanced performance.
  • Kerri Hunter, Interim Lead Manager, said: “It is part of a strong pipeline of additional interesting assets UKCM is looking to invest in and builds on the Company’s strong portfolio of recent acquisitions, which includes the income-accretive medium term industrial development site in West London and the forward funding of Sussex Junction.”

 

Croda International PLC Agreement to Sell Majority of PTIC Announcement
  • Croda International PLC announced that it has signed a definitive agreement to sell the majority of its Performance Technologies and Industrial Chemicals businesses to Cargill Velocity Holdings Limited, a wholly owned subsidiary of Cargill Inc for an enterprise value of €915m (approximately £778m) on a cash-free, debt-free basis following a comprehensive strategic review of PTIC, announced in May 2021, to determine the best ownership structure to ensure the future success of the business.
  • The divested business, which represented 77% of PTIC’s 2020 revenue, is comprised of five manufacturing facilities, including the Gouda plant in the Netherlands, the Hull plant in the UK and Croda Sipo in China, together with additional laboratory facilities supporting key aspects of the divested business’ activities in Smart Materials, Energy Technologies and Industrial Chemicals.
  • The divestment delivers Croda’s transition into a focused Life Sciences and Consumer Care company with these two sectors accounting for well over 90% of the Group’s 2020 adjusted operating profit following completion.
  • Steve Foots, CEO, said: “Today’s announcement completes our transition into a pure-play consumer and life sciences company. We will focus our capital and resources on delivering sustainable solutions and scaling our consumer, health and crop care technologies, leading to consistent sales growth and an even stronger profit margin. Cargill is a company with a distinguished history and strong values. Under its ownership, the divested business and our talented, hardworking employees can look forward to a bright future.”