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Dowlais (DWL), Boeing (US:BA), WH Smith (SMWH), Pennon (PNN), EKF Diagnostics (EKF), NewRiver Reit (NRR), Pennon (PNN) and Raspberry Pi (RPI)
FTSE 250 automotive engineer Dowlais (DWL) has agreed terms on a £1.16bn cash and shares takeover offer from American Axle & Manufacturing (US:AXL).
The offer from the Michigan-headquartered American Axle values Dowlais at 85.2p per share, a quarter higher than the closing price yesterday. Dowlais shareholders would own 49 per cent of the combined group and receive 0.0863 new American Axle shares, 42p in cash and up to 2.8p through a final cash dividend.
The deal is expected to complete this year and would create a new global driveline and metal-forming technologies supplier. In a joint statement, the companies said they expected the combination to deliver annual run rate cost synergies of $300mn (£241mn).
Dowlais shares have lost 40 per cent of their value since the entity was spun off from Melrose Industries (MRO) in 2023, with its ePowertrain arm struggling with challenges in the electric vehicles market. The shares were up 10 per cent in early trading. CA
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Boeing falls to historic loss
Boeing (US:BA) posted its second-worst-ever annual loss after the plane manufacturer suffered a worse than expected performance in the fourth quarter.
For the year to 31 December, the company reported a net loss of $11.8bn (£9.5bn) as revenue tumbled 14 per cent to $66.4bn in a period hit by safety issues and worker strikes. The loss was only beaten by the pandemic-hit 2020. Free cash flow was a negative $14.3bn, compared to an inflow of $4.43bn in 2023.
Boeing disclosed $2.8bn of fourth-quarter charges, driven by the strikes and higher costs, in an update last week. Revenue fell by almost a third in the final quarter as the company burned through $3.5bn of operating cash flow.
The volatile outlook was highlighted by the lack of forward guidance. But the shares rose by 1.5 per cent in New York yesterday, suggesting investors are willing to give chief executive Kelly Ortberg time to turn the plane around. CA
High street a drag on WH Smith’s growth
WH Smith (SMWH) reported “a good start” to the financial year, with like-for-like revenue up 3 per cent in the 21 weeks to 25 January.
However, growth in the company’s travel retail arm of 7 per cent was weighed down by the performance of its UK high-street business, where sales contracted by 3 per cent.
Like-for-like growth in the travel arm, which operates 1,200 stores in 32 countries, was driven by the company’s UK operations, which are its largest. There was also an improvement in its North American arm, though, where like-for-like sales grew by 3 per cent (in the last financial year they were flat).
On Monday, WH Smith confirmed reports over the weekend that it had entered into talks about a potential sale of the high-street business, which it described as “profitable and cash-generative”. It made no further comment on the sale in today’s trading update, but the contraction in sales “clearly demonstrates why WH Smith has pulled the plug on its ailing UK High Street operations after more than 200 years”, said Julie Palmer, a partner at insolvency firm Begbies Traynor. MF
Pennon to raise £490mn for 2025-30 spending and cut dividend growth
South West Water owner Pennon (PNN) will go to investors for £490mn in new funding for the 2025-2030 period of spending under Ofwat rules, out of a total of £3.2bn in capital plans. The underwritten rights offer will allow shareholders to subscribe for 13 new shares for every 20 shares held, at a price of 264p. This is a third below the share price on Tuesday.
Pennon said on Wednesday it had agreed to Ofwat’s final determination for the K8 period. The share issue will “maintain robust balance sheet resilience”, the water company said. It said gearing would remain at 60-65 per cent. This was at 65 per cent as of 30 September.
To reflect the higher share count, Pennon will “rebase” its dividend to factor in the higher share count, and will also drop from an annual increase of inflation plus 2 per cent to just raising the payout by the rate of inflation, using the CPI plus housing costs measure. AH
EKF Diagnostics’ vague strategy outlook is punished
The market took an instant dislike to a trading update from diagnostics testing company EKF Diagnostics (EKF) after it delivered an update on its margins and strategy, sending the shares down 7 per cent.
The company has flagged for a while that it intends to focus on higher-margin products. This change in approach was felt on the top line, with full-year revenues falling by nearly 5 per cent to £50.2mn. Management pointed out that gross margins for the full year were better than the 45 per cent recorded for 2023, with cash profits expected to come in at no less than £11mn as administration expenses fall.
What was less certain was what the company intends to do with its improved cash balances, with the possibility of internal investment, M&A or an additional share buyback programme.
EKF will release its full-year results in late March. JH
NewRiver reports increased consumer spending
NewRiver Reit (NRR) reported higher spending in its retail holdings in the three months to December, despite a slowdown in overall retail sales in December.
In-store spending in NewRiver’s portfolio increased by 5.3 per cent year on year in the three months to December. The best-performing sectors were discount and value, opticians, health and beauty, home, food and beverage, and leisure.
NewRiver also completed the acquisition of Capital & Regional for £151mn, increasing the size of its portfolio by 65 per cent to £0.9bn. The real estate investment trust (Reit) said that it expected the transaction to deliver “mid-to high-teens accretion to [underlying funds from operations] per share” through £6.2mn of annual cost synergies to be unlocked within 12 months of completion. NV
Raspberry Pi recovers after cold summer
‘Cost-efficient’ computing specialist Raspberry Pi (RPI) said high inventory levels seen over the summer had come down and product launches had boosted demand in 2024 but has still forecast a lower adjusted cash profit than the year before.
The company said “elevated customer and channel inventory levels continued to normalise in the second half of the year” and monthly shipment levels rebounded in autumn in winter, but adjusted Ebitda will be $36mn (£29mn), down on the $43.4mn reported in 2023. The full 2024 results will be released in April.
“Looking ahead, Raspberry Pi expects demand to build gradually through the year, despite a challenging macroeconomic backdrop and market conditions reported by the wider industrial sector,” the company said. The shares fell 2.6 per cent on the update, but the company’s share price remains far higher than its IPO price in June, almost doubling to 720p. AH
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