In an interview on Monday, the head of the US Federal Communications Commission (FCC) confirmed he does not expect to review AT&T’s planned purchase of Time Warner. FCC Chairman Ajit Pai told the Wall Street Journal he did not foresee a role for the FCC in the takeover. This comes after Time Warner announced last Thursday it plans to sell a broadcast station in Atlanta to Meredith Corp for $70mn. This could help speed up the planned tie-up. The station Time Warner is selling, WPCH-TV, is the group’s only FCC-regulated broadcast station. By disposing of this station before the merger, the deal is expected to bypass the FCC completely, as the companies would not need permission to transfer any Time Warner licenses to AT&T.
Royal Bank of Scotland shed 4.49% on Friday after the group reported its 9th consecutive full-year loss. Losses at the UK-based lender now total around £58bn since its 2008 bailout. For 2016, the group’s net loss more than tripled to £6.95bn, up from the £1.98bn loss recorded in 2015. However, it must be noted, this figure was inclusive of £10bn in once-off payments, including litigation and cost-cutting charges. The group also announced on Friday it plans to cut another £750mn in operating expenses during 2017, as it attempts to turn profitable in a low-interest rate economy. Lastly, despite the cut in operating expenses, RBS does not expect to report a profit in 2017, but expects to swing back to black in 2018.
Massmart surged 10.28% yesterday, to close at R145.25 per share, following the release of its results for the 52 weeks ended 25 December 2016. During the period, Massmart saw total sales increase by 7.7% to R91.3bn, while comparable store sales growth came in at 5.4%. Product inflation increased sharply to 6.7%. In addition, good margin management helped Massmart to increase its trading profit by 11.9% to R2.6bn. Overall, headline earnings per share rose by 15.8% to 597.8 cents, up from the 516.3 cents reported in 2015. The board declared a final dividend of 224.80 cents per share.
On Wednesday, Elon Musk’s Tesla released a mixed set of quarterly results. The group reported a wider-than-expected loss, despite sales coming in higher than expected. During the fourth quarter of 2016, the group saw sales surge to $2.28bn, up from the $1.21bn recorded a year ago. This is slightly higher than estimates of an increase to $2.19bn. In addition, Tesla’s net loss declined to 78 cents per share, much lower than the $2.44 loss recorded in the previous corresponding period. However, on an adjusted basis, the group recorded a loss of 69 cents per share, worse than expectations of a loss of 43 cents per share. Looking forward, Tesla is ready to start production of its Model 3 sedan, with the group stating that they have enough cash on hand to bring it out. The market was previously concerned about the companies need to raise additional capital.
On Tuesday, Imperial released interim results for the six months ended 31 December 2016. During the period, revenue increased by 2% to R61.3bn, while operating profit rose by 4% to R3.2bn. However, if you exclude the current year’s acquisitions, both total revenue and operating profit would have declined by around 3%. Overall, core earnings per share fell by 8% to 795 cents, while earnings per share dropped by 23% to 679 cents. Headline earnings per share slumped by 15% to come in at 682 cents, down from the 587 cents recorded previously. Since 2015, Imperial Holdings has disposed of, or is busy disposing of, 42 businesses with a total revenue of R11.9bn and operating profit of R937m. The group has also sold off, or is in the process of selling, 82 properties worth around R5.1bn. All this in an effort to improve capital allocation in very difficult operating environment. The board declared an interim dividend of 320 cents per share. It also announced that the dividend would be tied to HEPs in future. Imperial previously had no formal dividend policy.
Shoprite and Steinhoff released a joint SENS yesterday withdrawing the cautionary announcement around their proposed merger. The companies announced the termination of negotiations after the PIC, Titan and Steinhoff failed to reach an agreement on the ratio that would apply to the share exchange. Accordingly, shareholders of both Steinhoff and Shoprite have been advised caution is longer required by shareholders when dealing in their securities. In response to the announcement the share prices of Shoprite and Steinhoff ended up +8.64% and +4.96% respectively. While details were always sketchy around the transaction, it’s likely the upward movement of both counters is related to the uncertainty premium unwinding. Speculation from analysts pegged to potential dilution at larger than 5% and the fear around the treatment of minority shareholders was significant. You can email the desk on firstname.lastname@example.org for our 12 month target prices on the stocks.
After a whirlwind few days, Warren Buffett backed Kraft Heinz, announced yesterday it had withdrawn its $143bn merger proposal for Unilever PLC. This comes after Kraft Heinz made a formal offer for its larger rival on Friday, which the global consumer goods giant flatly rejected. According to reports, Kraft Heinz withdrew its offer because it felt it was too difficult to negotiate a deal following a public disclosure of the bid so early on in its approach to Unilever. This comes after the group was forced to publicly disclose the offer on Friday in order to comply with Britain’s takeover regulations, as rumours of its tie up with Unilever started circulating among traders. You can expect both stocks to be lower today.
Yesterday news broke that German economy minister, Brigitte Zypries, expects the PSA Group’s proposed acquisition of General Motors’ Opel business to go ahead. Rumours of the acquisition of GM’s European arm by PSA, which controls Peugeot and Citroën, were first confirmed on 14 February. This has prompted alarm in both Berlin and London over possible job cuts. Since then, there have been conflicting reports over whether or not the plan is to close plants in the UK and Germany. At this stage, little is known about the terms of the proposed PSA-Opel deal, or whether GM would even keep a stake in the combined entity. The potential deal would create Europe’s second-largest car-maker, challenging the market leader Volkswagen, which is still vulnerable after the emissions scandal.
On Wednesday, PepsiCo released its latest quarterly results. The group beat estimates on both earnings and revenue. During the period, the group reported a 5% increase in net revenue to $19.52bn, just topping expectations of $19.51bn. The increase was primarily due to an 8% increase in net revenue from its North American beverages unit, which is PepsiCo’s biggest business. Furthermore, excluding items, earnings for the 4th quarter came in at $1.20 per share, higher than estimates of $1.16 per share. Lastly, the group forecast adjusted earnings of $5.09 per share for 2017, marginally lower than analysts’ expectations of $5.16 per share.
On Tuesday, Adcock Ingram added 1.97% after it released a second trading statement for the six months ended 31 December 2016. After releasing its initial trading statement on 19 January 2017, the group has now confirmed it expects earnings per share to increase by between 65% and 71%, to between 164 cents and 170 cents. This is up from the 99.6 cents reported previously. Headline earnings per share are set to come in at between 145 cents and 149 cents, representing an increase of between 45% and 49%, up from the 99.8 cents recorded in 2015. The group’s results for the period are set to be released 22 February 2017.