Idox contract win

The Company is engaged in the development and supply of software solutions and services to the United Kingdom public sector and asset intensive industries worldwide. It operates in four segments: Public Sector Software, which delivers software service solutions to mainly local government customers across a broad range of departments; Engineering Information Management, which delivers engineering document management and control solutions to asset intensive industry sectors; Information Solutions, which delivers both an information service and consultancy services to a diverse range of customers across both private and public sectors and Recruitment, engaged in providing personnel with information, knowledge, records and content management to a diverse range of customers. It also provides information management, Web development, online publishing and training services. I have a holding in my growth portfolio (epic code: IDOX)

Idox announced today that its Engineering Information Management Division has agreed to supply its McLaren Fusion Enterprise application software suite and related services to PSEG Nuclear of the USA.  The contract in the first year is worth $2.3m equivalent to 2.5% of annual turnover, with an ongoing maintenance contract thereafter. 

Tesco sells Fresh & easy

One of the world’s largest retailers.  I have a holding in my income portfolio (epic code: TSCO)

Tesco announced yesterday that it had disposed of 150 of its 200 Fresh & Easy stores in the USA.  The remainder it will close at a cost of about £70m.  The disposal of the 150 stores (presumably at a benefit of the assumption of the liabilities only) includes a secured £80m loan.

This will conclude Tesco's exposure to the US market, an unhappy affair that never looked like delivering a return on its outlay, culminating in a low cost exit that will also provide 80% of its 5,000 workforce with continuing employment.

GlaxoSmithKline FDA advisory recommendation

A global healthcare company that develops, manufactures and markets pharmaceutical products, including vaccines, over-the-counter (OTC) medicines and health-related consumer products.  I have a holding in my income portfolio (epic code: GSK). 

Following on from their 5 September announcement on MAGE-A3 cancer immunotherapeutic failure to meet first co-primary endpoint in Phase III melanoma clinical trial, Glaxo announced today that the US FDA Advisory Committee recommended approval of umeclidinium/vilanterol for the treatment of chronic obstructive pulmonary disease.

This drug is jointly developed by Glaxo and Theravance and if approved, will be the first, once-daily dual bronchodilator available in the US.

Fenner pre-close trading statement

A manufacturer and distributor of reinforced polymer products. It operates in two segments, conveyor belting and advanced engineered products and is considered a world leader in reinforced polymer technology.  I have a holding in my income portfolio (epic code: FENR).

Fenner issued their pre-close trading statement for the year ended 31 August, disclosing that  its results will be in line with market expectations.

Net debt at £125m is better than expected and shows a substantial reduction from the £171.5m at the half year.  They have also reconfirmed management's expectation of a return to growth for this financial year.

With a yield above 3% and expected to be well covered by earnings at over 2.5x, Fenner with the added benefit of earnings growth this year, is likely to become an attractive addition to income portfolios.  This should result in an improving share price over the next few months  approaching its previous 52 week high of around 440p.  The shares this morning are up over  5% to 390p.

Pan African Resources directorate change

 

 

 

 

A small South African based precious mining group that produces gold and platinum from high grade ore bodies at a low cash cost.  I have a holding in my growth portfolio (epic code: PAF).

PAF this morning informed the market that it had appointed Ron Holding, currently their Interim Joint CEO, as a director & CEO.  Also Busi Sitole has resigned as the Financial Director of Pan African with effect from 30 September 2013,  apparently due to a new addition to her family, to be replaced by Cobus Loots, who had been FD of PAF previous to Busi Sitole's appointment.

Both appointees have considerable experience of PAF's operations, Loots in his previous role of FD, resigning in December 2011 to become a non-exec of the company and, Holding as COO from 2009.

The CEO position became vacant following Jan Nelson's sudden resignation at the end of February.  

With Nelson's sudden resignation and Loots return to an executive role, one wonders whether there were management disagreements that caused those moves.

GlaxoSmithKline disposal

A global healthcare company that develops, manufactures and markets pharmaceutical products, including vaccines, over-the-counter (OTC) medicines and health-related consumer products.  I have a holding in my income portfolio (epic code: GSK). 

GSK confirmed in an announcement today it has reached agreement to sell its drinks brands Lucozade and Ribena to the Japanese company Suntory Beverage & Food Ltd, for £1.35bn in cash with an estimated £0.05bn to be taken for fees. 

Completion is likely to be by the end of the year and the net proceeds of £1.3bn will be used to reduce their net debt, which stood at £15.7bn at the half year. 

Vodafone sale of VZW interest

Vodafone the second largest ( behind China Mobile) mobile telecoms company in the world. I have a holding in my income portfolio (epic code: VOD).

So yesterday Vodafone announce the agreed sale of their 45% interest in Verizon Wireless (VZW) to Verizon  Communications Inc. (VZ) for $130bn (£84bn).  VOD have agreed to distribute $84bn (£54.3bn) back to shareholders.

The distribution (return of capital) will be £38.9bn in the form of VZ shares and £15.4bn in cash, sterling amounts will depend on the US$/£ rate and the VZ share price.  The company have also stated that there will be special provisions for holders of less than 50,000 shares of VOD to enable them to sell the VZ shares in a cost efficient manner.

For any long term income investor this is crystallisation of value of an investment held and a return of capital, requiring reinvestment of the proceeds at an equivalent yield if they wish to maintain their income stream.

The other issue for all long-term investors is the VOD business post sale.  Management state that expected EBIT is likely to be £5bn in 2014 (excluding VZW but including 100% of Vodafone Italy), this compares to a like-for-like EBIT of £5.8bn for 2013.  Free cash flow is expected to be £4.5-5.0bn.  At the current price of 202p the market is placing an EV (enterprise value) of £47bn on the remaining rump, an EV/EBIT of 9.4x 2014 or 8.1x 2013.  This compares to the EV/EBIT of 13.1x for the sale of 45% of VZW, which is probably about right considering VZW's higher expected growth and historical performance.

The consolidation of share capital is likely to be in the region of 5 new shares for 11 currently held to allow for the return of capital that is equivalent to 112p per share, although this may change due to the VZ share price, the US$/£ exchange rate and the VOD share price.

As a rough guide to looking for a home for the capital that I will receive, I need to look for a minimum yield of approximately 4.8%, to be in the same position I expected to be in before the sale of VZW.  This is based on the original 11 shares producing an expected dividend of £1.144 (original market expectation of 10.4p per share) deducting the 11p per share dividend in VOD's statement for the 5 new shares i.e. £0.55 leaving me £0.594 to be  achieved on the £12.32 I have available i.e. 112p returned multiplied by my original 11 shares.

The VZ shares are unlikely to meet my dividend criteria, so I will need to sell them in the open market.

I could of course reinvest the proceeds back in to Vodafone shares that are likely to yield around 5.4%, although there is some considerable time before I need to make a decision.