Maitland/AMO Morning Monitor – Wednesday 23 September 2020
In the news
- As pressure mounts, Chancellor Rishi Sunak is said to be drawing up a new programme to subsides wages once the furlough scheme ends in October.
- The Treasury expect a very weak fourth quarter for the UK economy.
- Deutsche Bank is planning to cut one in five branches in Germany, reducing the total to about 400.
- Zambia is headed for Africa's first COVID-19-related debt default.
- Donald Trump blamed China for the COVID-19 pandemic at the UN General Assembly. China's Xi Jinping rejected his criticism and pledged that China would be carbon neutral before 2060.
- Citigroup has closed its market making business in retail options.
- The Prime Minister will be holding PMQ's in Parliament at midday today.
- Cabinet Office Minister, Michael Gove, is up in the Commons at around 1 pm. to give a ministerial statement on the end of the transition period.
- Informal Brexit talks between negotiating teams will be happening in London today and tomorrow.
- Overseas Operations (Service Personnel and Veterans) Bill is set to receive its second reading today.
- Ahead of the looming deadline, the Commons Brexit committee is set to meet at 9:30 am.
Stock market moves
- S&P 500 index gained 1.1% yesterday, clawing back most of the 1.2% fall on Monday, while the Nasdaq composite closed 1.7% higher.
- The FTSE 100 opened up 0.43%.
Corporate announcements* Maitland Client
Relx PLC RELX announces new Chair
- The Group announces the appointment of Paul Walker to succeed Sir Anthony Habgood as Chair.
- Mr Walker is expected to take up his new role in the first half of 2021, at which time Sir Anthony will step down.
- Mr Walker is Chair of Ashtead Group PLC (since 2018). He is also Chair of Halma PLC (since 2013). He was previously Chair at Perform Group (2011-2018); Wandisco (2014-2016); and European Directories (2011-2012). He has held Non-Executive Director positions at Sophos Group (2015-2020); Experian (2010-2019); Epicor Software Corporation (2011-2016); and Diageo (2002-2011).
- Wolfhart Hauser, RELX Senior Independent Director, said: “Paul has a strong record of value creation as a FTSE100 Chair and Chief Executive, has a deep understanding of corporate governance, and brings extensive international experience in sectors relevant to RELX’s business.”
- The Group announces that Paul Walker has indicated his intention to retire from his role as Chair of Halma plc, and step down from the Board by July 2021.
- When he steps down, Paul will have served as Chair for eight years and as a non-executive director for over eight years.
- The Nomination Committee has established a process, led by Tony Rice, Senior Independent Director, to identify and appoint a new Chair as his successor, which will be announced in due course.
- Halma has delivered a resilient performance during the period in line with the Board’s expectations.
- The Group has continued to benefit from the long-term growth drivers in its markets, the breadth of its portfolio and the agility of its business model.
- The Board continues to expect Adjusted profit before tax for FY2021 to be 5%-10% below FY2020 and more weighted to the second half than in previous years.
- The Group’s financial position remains robust, with committed facilities totalling approximately £750m at current exchange rates. The earliest maturity in these facilities is for £73m in January 2021, with the remaining maturities from 2023 onwards.
- Hg today announces the sale of A-Plan Group (APG), one of the UK’s largest specialist insurance intermediaries, to Howden, the international insurance broking group.
- Hg partnered with APG in 2015, recognising the business’ best-in-class customer success model – a personal, service-oriented approach, leading to very high levels of customer satisfaction alongside strong organic growth.
- APG has more than doubled its revenues under Hg’s ownership and now has 1.3m policies compared with 600,000 at acquisition. Renewal rates are strong.
- Thorsten Toepfer, Partner at Hg, said: “We would like to thank Carl and the team for the great partnership and exceptional performance over the last 5 years. The company has delivered excellent organic growth, whilst also executing 56 accretive M&A transactions and building an MGA capability.”
- Carl Shuker, CEO of APG, said: “Today we employ over 2,000 staff, a number which has almost doubled during Hg’s investment…This transaction values HGT’s current investment in APG at £21.5m This would represent an uplift of £3.2m or 1 pence per share over the carrying value of £18.3m in the Net Asset Value of the Company at 31 August 2020.”
- The Group announces an investment in The Citation Group, a leading provider of tech-enabled, subscription-based HR and Employment law, Health & Safety, and ISO services to SMEs. The terms of the transaction are not disclosed.
- The Group will invest approximately £22.0m in The Citation Group, with other institutional clients of Hg investing alongside HGT through the Hg Genesis 8 Fund.
- HGT’s liquid resources available for future deployment are estimated to be £294m.
- Chris Morris, CEO of Citation Group, said:”To attract the backing of two world-class investors is a huge achievement for the business and is a testament to the hard work from the Citation team over many years. Not only does it demonstrate conviction in the company’s trajectory, but this combination of scale with specialist know-how in our sectors, means that Citation has never been in a better position to offer best-in-class services as a trusted partner to our UK SME clients.”
- Nick Jordan and Jaris Van Gool, Partners at Hg, said: “Citation is very simply a high-quality business, demonstrated by around 20 years of year-on-year growth. Our experience of the business and its sector means that we recognise further opportunities for transformational growth, and we’re excited to make this new investment in the business.”
- Revenue from continuing operations decreased by 2.4% to £587.2m (2019: £603.0m) largely driven by Nigeria and the mixed impact of COVID-19 on our business.
- Adjusted profit before tax from continuing operation decreased by 14.5% to £62.0m (2019: £72.3m).
- Balance sheet significantly strengthened, with net debt of £49.2m versus £153.8m compared to last year, a net debt to adjusted EBITDA ratio of 0.6 times and external financing headroom at 31st May 2020 of £198m.
- Despite the renewed momentum of our business in the first quarter of FY21 the Group expects volatility and risk to continue as well as increased investment in our brands and capabilities as we prepare for a multi-year turnaround of the business, starting with a comprehensive review of our strategy.
- Caroline Silver, Chair, said: ”There is no doubt that this was one of the most challenging periods that the company has faced across its long history… Overall, it was a mixed year in terms of performance. We have taken key steps towards returning the Group to growth, including welcoming Jonathan Myers, our new Chief Executive Officer on 1 May 2020. We have made progress against the strategy that we set out last year, but there is more to do.”
- Q1 Revenue growth of 23% with Focus Brands growth of 37% at constant rates of exchange.
- Driven by top-line focused interventions and strong demand for hygiene brands.
- Continued excellent performance in the UK and Indonesia.
- Balance sheet further strengthened with net debt lower than year-end.
- Jonathan Myers, CEO, said: “The first-quarter results have given us a good start to the year with growth in all three regions and an improvement in profitability. The majority of our Focus Brands are now in growth, led by Carex in the UK. In the second quarter, we plan to increase investment further in building our brands and capabilities.”