(Alliance News) - WH Smith on Thursday unveiled plans to expand further in the US with the purchase of travel retailer Marshall Retail for USD400 million, or around GBP312 million.
The acquisition, announced alongside the books and stationery seller's annual results, will broadly double the size of WH Smith's international travel business, it said, with an annual cost synergy run-rate of USD11 million expected by the third full year following completion.
WH Smith intends to raise GBP155 million, representing 7% of the FTSE 250 company's existing share capital, via an accelerated bookbuild to part fund the deal. The bookbuild is being run by Barclays and JP Morgan.
Marshall Retail operates 170 stores in North America, with 59 of these inside airports. The firm is expected to deliver revenue of USD204 million and earnings before interest, tax, depreciation and amortisation of USD31.5 million in 2019, WH Smith said.
This acquisition comes almost exactly a year after WH Smith announced the purchase of US-based travel retailer InMotion Entertainment for USD198 million.
The integration of InMotion is now complete, WH Smith said on Thursday, and its performance has been ahead of initial expectations. Digital and travel accessories retailer InMotion operates from 116 stores across 43 airports in the US.
Turning to the London-listed firm's annual results, revenue for the year to August 31 rose 11% to GBP1.40 billion from GBP1.26 billion, while pretax profit edged up to GBP135 million from GBP134 million. Travel total revenue was up 22%, or 8% higher when stripping out InMotion, and 3% higher on a like-for-like basis.
WH Smith's dividend for the year amounted to 58.2 pence, up 8% from 54.1p a year ago, after also an 8% hike in its final dividend.
The stock was up 0.8% in early trade Thursday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.1% at 7,173.46
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Hang Seng: up 0.5% at 26,784.57
Nikkei 225: closed down 0.1% at 22,451.86
DJIA: closed down 22.82 points, 0.1%, at 27,001.98
S&P 500: closed down 0.2% at 2,989.69
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GBP: down at USD1.2770 (USD1.2834)
EUR: flat at USD1.1067 (USD1.1063)
Gold: up at USD1,490.78 per ounce (USD1,487.79)
Oil (Brent): soft at USD58.88 a barrel (USD59.33)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Thursday's Key Economic Events still to come
0930 BST UK Bank of England credit conditions survey
0930 BST UK BoE bank liabilities survey
0930 BST UK monthly retail sales figures
1100 CEST EU construction output
0830 EDT US new residential construction - housing starts and building permits
0830 EDT US Philadelphia Fed business outlook survey
0830 EDT US initial jobless claims
0915 EDT US industrial production and capacity utilization
0945 EDT US Bloomberg consumer comfort index
1030 EDT US EIA weekly natural gas storage report
1100 EDT US EIA weekly petroleum status report
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UK Prime Minister Boris Johnson has been dealt a major blow shortly before the crunch EU summit after Democratic Unionist Party leader Arlene Foster said she could not yet back his Brexit plans. Johnson is hoping to bring back a deal from the Brussels meeting of European leaders while winning the backing of the DUP, which also wields influence over some Tory Brexiteers. But Foster and her deputy, Nigel Dodds, released a joint statement hours before the summit was due to begin on Thursday, highlighting three major obstacles. "As things stand, we could not support what is being suggested on customs and consent issues, and there is a lack of clarity on VAT," they said. "We will continue to work with the government to try and get a sensible deal that works for Northern Ireland and protects the economic and constitutional integrity of the UK." Johnson has been in close and continued contact with the pair as he tries to shore up their support ahead of Saturday's key deadline to prevent a delay to Brexit.
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The partial trade bargain struck last week with China is now being formally put down in writing, US President Donald Trump said. "It hasn't been papered yet but it is being papered," Trump told reporters at the White House. He insisted that China had already bought USD40 to USD50 million worth of American agriculture products last week. He reiterated that China committed to greater purchases of US farm exports, and made concessions because of economic pressure by Washington. "They want to make a deal. They have to make a deal. Their economy has been hurt very badly by what we've done and the tariffs," Trump said.
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Less than stellar US growth in recent weeks has caused many businesses to lower their outlooks and they now expect the economy to weaken, the Federal Reserve said. The Fed later this month is widely expected to cut interest rates for the third time this year as policymakers work to provide support for an economy that has begun to sag – even though for the moment it continues to outshine the rest of the industrialized world. "The US economy expanded at a slight to modest pace...as business activity varied across the country," the central bank said in its Beige Book report on the economy.
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Trump has dispatched his deputy Mike Pence to Turkey to demand a ceasefire in Syria, as Ankara rebuffed international pressure to curb its deadly offensive against Kurdish forces. President Recep Tayyip Erdogan vowed on Wednesday that Turkey's operation – which has been facilitated by the withdrawal of US troops from northern Syria – would continue. That came as an extraordinary letter emerged in which Trump warned Erdogan: "Don't be a fool". Sent the day Turkey launched its incursion into northeastern Syria, Trump said history risked branding him a "devil". On Wednesday, Kurdish forces struck a desperate deal with Damascus and stepped aside to allow Syrian regime troops and allied Russian soldiers enter the border town of Kobane, according to the Syrian Observatory for Human Rights.
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BROKER RATING CHANGES
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INVESTEC RAISES AVIVA TO 'BUY' ('ADD') - TARGET 455 (385) PENCE
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CREDIT SUISSE RAISES NATIONAL GRID TO 'OUTPERFORM' (NEUTRAL) - PRICE TARGET 970 (810) PENCE
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COMPANIES - FTSE 100
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Anglo-Dutch consumer goods giant Unilever said it continues to expect annual underlying sales growth in the lower half of its 3% to 5% range. Underlying sales growth for the third quarter of 2019 was 2.9%, and 3.4% for the nine months to the end of September. Emerging markets underlying sales growth was 5.1%, comprising volume growth of 2.2% and price growth of 2.8%. Developed Markets underlying sales growth dipped 0.1%. "We have maintained momentum in the quarter, with a good balance between volume and price. Emerging markets and Home Care have been the key growth drivers. We will step-up competitive top line performance through innovation and portfolio evolution to serve the faster growing geographies and channels," said Chief Executive Alan Jope. "For the full year, we continue to expect underlying sales growth to be in the lower half of our multi-year 3-5% range, an improvement in underlying operating margin that keeps us on track for the 2020 target and another year of strong free cash flow," he added.
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Hygiene and pest control firm Rentokil Initial was "pleased" with its third-quarter results as sales grew. Revenue for the third quarter amounted to GBP727.2 million, up 13% year-on-year at actual exchange rates and 9.6% on a constant currency basis. Ongoing revenue was up 9.8% at constant rates, with 5.5% of this organic, a sharp acceleration from the 4.2% reported in the first half of 2019. Ongoing revenue is the performance of Rentokil's continuing operations after stripping out disposed or closed businesses. "I am pleased with our Q3 results and our group organic growth of 5.5% is our highest level of quarterly organic growth in over a decade. Pest Control has performed well, growing organically by 5.9%, and Hygiene has demonstrated further momentum, growing organically by 4.8%," said Chief Executive Andy Ransom.
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Australian miner BHP Group retained its production guidance for financial 2020 despite recording a decline in first quarter production for all commodities, except copper. For the three months to the end of September, BHP's copper production was 429,500 tonnes, up 5% from 409,100 tonnes the year before, following record concentrator throughput as the Escondida mine in Chile. Due to the unexpected throughput lift, the company has kept its full-year copper production guidance at 1.16 million tonnes to 1.23 million tonnes.
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COMPANIES - FTSE 250
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Domino's Pizza Group said it has decided to exit its struggling International unit as it reported a "solid" third-quarter performance in the UK & Ireland. UK & Ireland system sales for the 13 weeks to September 29 amounted to GBP288.2 million, up 3.9% year-on-year. International sales, however, slipped 2.7% to GBP25.3 million. For the group as a whole, system sales were up 3.4% to GBP313.5 million. Domino's said its review of its International business has concluded, and it will exit the markets - which include Switzerland, Iceland, Norway and Sweden - in an orderly manner. "Although the financial results have stabilised, the performance of our international business remains disappointing. Over the past six weeks we have completed a review with external consultants, assessing each of our four international markets and the future prospects for our businesses. We have concluded that, whilst they represent attractive markets, we are not the best owners of these businesses," explained David Wild, chief executive. The core UK & Ireland performance was solid, he added. "Normal working practices continue to be impacted by our franchisee dispute. As we said at our interim results, this situation is complex, and we expect a resolution to take time, certainly into 2020. We remain committed to working with our franchisees to agree sustainable win-win solutions," said Wild.
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COMPANIES - OTHER MAIN MARKET AND AIM
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Johannesburg-listed real estate investment trust Growthpoint Properties said it has reached an agreement with Capital & Regional for Growthpoint to invest around GBP150.4 million for a 51% interest in the UK real estate firm. The first part of the investment is for Growthpoint to acquire 219.8 million existing shares in Capital & Regional for 33 pence per share, at a total of GBP72.5 million. The price is at a 55% premium to Capital & Regional's closing price in London on Wednesday of 21.25 pence. The 219.8 million shares to be acquired directly make up 30% of Capital & Regional's currently issued share capital. The second part is for Growthpoint to subscribe for 311.5 million new Capital & Regional shares, at a price of 25p each to raise GBP77.9 million before costs for the company. Capital & Regional said that at least GBP50 million of the proceeds raised through the subscription will go towards reducing leverage and funding capital expenditure, giving the company more room to move forward with its project pipeline.
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COMPANIES - INTERNATIONAL
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Nestle said it is planning to launch a share buyback programme early next year following a strong performance in the first nine months of 2019. The Swiss food and drink company reported organic growth of 3.7% in the nine months to the end of September, despite decreasing coffee prices. Year-on-year growth acceleration was supported by the US and Brazil, Nestle said. Europe, the Middle East and North Africa also contributed to the improved momentum, the company noted, with strong mid single-digit real internal growth in the third quarter. The company intends to distribute up to CHF20 billion to its shareholders over the period 2020 to 2022, while maintaining the company's longstanding sustainable dividend practice, it said.
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General Motors and the United Auto Workers announced a tentative labour agreement that could end a month-long strike that has paralysed the auto giant. The UAW GM National Council, which includes local union chapters, will convene on Thursday to consider the agreement struck between GM and UAW leadership, the union said in a statement. A majority of UAW members would then need to ratify the agreement. The strike will continue until the council approves the proposed agreement. But union leaders also will decide Thursday whether to continue striking until all members vote, the UAW said.
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International Business Machines maintained its annual outlook despite a weak year-to-date performance. IBM said earnings per share from continuing operations totalled USD1.87 in the third quarter, taking EPS for the nine months to USD6.45, down 12% from USD7.37 reported for the first nine months of 2018.
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Netflix shares rallied after its latest quarterly update showed robust subscriber growth and better-than-expected profit ahead of a major escalation in the streaming television war. The American media-services provider reported a net income of USD665 million in the recently ended quarter, jumping up from USD403 million in the same period last year and topping most analyst forecasts. Revenue and subscriber growth, however, came in just shy of market consensus. The California-based company saw revenue up 31% at USD5.25 billion and added 6.8 million subscribers worldwide to reach a total of 158.3 million. Netflix shares climbed 10% in after-market trading in New York on Wednesday.
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Thursday's Shareholder Meetings
Watches of Switzerland Group
Tlou Energy
BHP Group
Rank Group
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By Tom Waite; thomaslwaite@alliancenews.com
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