Our top picks of the news for 9th November 2015

09-11-2015 - Modwenna - 0 comments

BUSINESS LAW ONLINE LEAD SPONSOR AND PANEL MEMBER OF THE 2015 INVESTOR FORUM

Breaking down the barriers of traditional legal services

Business Law Online has announced it is to be the lead law firm sponsor at this year’s VCT and EIS Investor Forum held at 200 Aldersgate, St Pauls, London on the 26th November 2015.

Business Law Online will participate as a panel member in the morning session; ‘Why Scaling-up provides more Investor choice’, and in the afternoon session, ‘Hot Investment Sectors’. The company will actively showcase its knowledge and expertise in all areas of business law.

Business Law Online provides UK companies trading in the UK and/or overseas with cost effective legal services, across all areas of business law, on a fixed fee annual contract so that legal costs can be budgeted for in advance.

Robert Taylor, Business Law Online’s CEO and General Counsel comments:

“The VCT and EIS Investor Forum, which is now in its sixth year, is the UK’s must-attend event for VCT and EIS Investors. Our aim is to demonstrate to attendees how we can ensure their investments are protected, legally compliant, well governed, and trade in a controlled risk adverse manner.”

UK plc profits from strong economy at home, while multinationals feel the pinch

UK plc revenues pulled down 5% by slump in the mining sector
Excluding miners, revenues rose 12.9%, up £8.3bn year on year, courtesy of a strong UK economy
Multinationals felt the chill of global economic volatility, while companies exposed to UK economy performed strongly
Companies serving the UK consumer did best, as consumer spending soared
Mid-cap companies saw like-for-like sales rise 13.9% while top 100 revenues fell 12.1%
Pre-tax profit rose by a fifth to £8.8bn, excluding mining companies, whose pre-tax profits fell by two thirds
Most sectors enjoyed impressive double-digit pre-tax profit growth
Ten sectors saw pre-tax profits rise against four that saw them fall, the best ratio since 2012
Outlook remains more favourable for companies whose operations are more sensitive to the strongly growing UK economy, favouring mid-caps over top 100

The latest batch of results from UK plc was decidedly upbeat, according to the latest Profit Watch UK from The Share Centre.

Over the summer, companies reporting annual results, with year ends up to the end of June, posted better results than peers reporting at any time over the last twelve months, once plunging revenues and profits at mining giant BHP Billiton were excluded from the figures. Overall revenues fell 5.0% year on year to £100.6bn, but excluding the miners, they soared 12.9% to £72.4bn. This impressive result reflected the domestic focus of the majority of companies reporting, and the disproportionately large share of them that came from the mid-cap 250 index, rather than the UK’s top 100.

Among the multinationals, companies ranging from BHP Billiton to personal goods manufacturer PZ Cussons and drinks producer Diageo, all saw their financial results under severe pressure.

At home, the economic climate was balmy. Consumer services companies made the largest contribution, with every one of them growing their revenues year on year. Companies as diverse as Dixons Carphone, Sports Direct, Stagecoach and Greene King all benefited substantially from rising consumer spending. Consumer goods companies followed suit as almost all companies reporting in the sector posted rising sales too.

The UK housebuilders were the stars in this group, raising their revenues an impressive 24.6%, as the demand for housing ratcheted higher. The construction sector also saw its revenues expand dramatically, while support services enjoyed strong demand too. 12 sectors saw revenues rise compared to two that saw them fall.

With the mid-cap index less exposed to international pressures, revenues rose 13.9% on a like-for-like basis, +2.7% headline. Top 100 company revenues fell 8.3% to £67.6bn, a like-for-like decline of 12.1%.

Collective pre-tax profit fell by just over a third to £13.5bn. Mining profits fell by almost two thirds however, this was almost solely due to the impact of BHP Billiton. Excluding mining companies, pre-tax profits climbed by 19.8% to £8.8bn. This was faster than revenues, meaning that companies translated rising sales into higher margins.

Pre-tax profits fell for personal goods (PZ Cussons) and software, where in particular Micro Focus International had higher finance costs and other items related to acquisitions it undertook. Profits also fell in financial services. Just Retirement made a loss as change to pensions law undermined its business.

Every other sector grew pre-tax profits at double digit rates which is a very impressive result. Barratt Developments was a large contributor, increasing its pre-tax profits 47.5% to £516m, with its growth closely matched by other housebuilders. Furthermore, support services and retailers grew their profits by 32.0% and 21.7% respectively.

Top 100 pre-tax profits fell 38.5% to £10.8bn. Mid-cap pre-tax was £2.7bn, a headline decline of 2.6% owing to Barratt’s promotion to the top 100. Like-for-like mid-cap growth was 11.3%. Ten sectors grew pre-tax profits against four that saw them fall, the best ratio since 2012.

Helal Miah, investment research analyst at The Share Centre, said: “With so many more mid-cap firms reporting over the summer, the strength of the UK economy is shining through. It’s really encouraging to see such a terrific collection of results from the UK’s domestic stalwarts. As household incomes rise, and inflation sleeps, consumer spending has taken off, propelling sales and profits higher for a whole host of sectors.

“However, it’s quite a different picture abroad. With commodity markets slumping, currencies in Asia and emerging markets in a tailspin and economic headwinds blowing in many regions of the world, multinationals are failing to thrive. Worryingly, it is not just this latest cohort of companies that show that. The oil sector is enduring multi-year lows, while banks like HSBC and Standard Chartered have felt the chill too.

“The UK stock market is unusual for the size and dominance of a number of huge multinational corporations, in a limited number of sectors. A portfolio of shares that follows the index will leave investors unduly exposed. Diversification reduces risks in a portfolio, but to be properly diversified investors need to look beyond the top 100.”

Like-for-like takes into account changes in the list of top 350 companies in the UK

Polaris Private Equity divests Skånska Byggvaror

Polaris Private Equity divests Skånska Byggvaror Polaris Private Equity (Polaris) divests its holding, equivalent to 75 percent of all shares, in Skånska Byggvaror to Byggmax. Byggmax pays a consideration of SEK 741 million for all the shares in the company. In addition to the initial purchase price there is a possibility to get an additional payment of SEK 110 million, based the financial performance for Skånska Byggvaror during 2016.

Skånska Byggvaror is an online based retailer of refined do-it-yourself products. The Company has operations in Sweden and Norway with an assortment focused on the building's interior and exterior environments, ranging from windows and doors to storage and conservatories. Over the past 12 months Skånska Byggvaror had net sales of SEK 690 million, growing by approximately 20 per cent year-on-year, and EBITA of SEK 47 million (excluding nonrecurring items).

"During the autumn we have prepared a change of ownership where a sale to a larger industry player has been an option. This is an attractive deal for all parties, in which Skånska Byggvaror is able to continue to develop under its own brand, but from Byggmax's strong Nordic platform. This is an important deal for Polaris and we are proud of the company's development under our active ownership." says Peter Ankerst, Polaris Private Equity.

Polaris acquired Skånska Byggvaror in 2012 and has since then worked actively with the company's omni-channel strategy, including the establishment of six physical stores - four in Sweden and two in Norway. The product range has also been expanded, which combined has resulted in an increased annual average growth rate of 20 percent, with good profitability, the past three years.

"We are impressed by Skånska Byggvaror's ability to grow turnover over time, while the company has been profitable. We see significant synergies between the companies, mainly that we can benefit from each other's assortments to boost sales. Skånska Byggvaror's conservatories, which they assemble and sell under their own brand, is their largest category. Conservatories have positioned Skånska Byggvaror as a strong brand that combines good quality with low prices. The market for conservatories is expected to have good growth in the foreseeable future. " Says Magnus Agervald, CEO Byggmax Group.

"Together with Byggmax we get an opportunity to extend our offer and at the same time increase our sales through Byggmax strong presence on the Nordic market. We know that our customers purchase building material when they finalize their DYI-projects and we are happy to be able to provide this in the future. We look forward to continue our journey and strengthen our brand together with Byggmax." says Anders Johansson Eickhoff, CEO of Skånska Byggvaror.

Potential additional purchase price is based on Skånska Byggvaror's financial performance during 2016. The transaction is subject to approval by the Competition Authority.

The transaction is expected to be completed in the fourth quarter 2015. Skånska Byggvaror Polaris Private Equity have been advised by Carnegie and Mannheimer Swartling and Byggmax has been advised by Danske Bank, Lindahl and EY.

Palamon Capital Partners acquires The Rug Company

Palamon Capital Partners ("Palamon" or the "Firm"), a pan-European growth investor, has acquired a majority stake in The Rug Company (or the "Company") from its founders Christopher and Suzanne Sharp, who will continue to hold a significant stake in the Company, and minority shareholder Piper. The terms of the transaction were not disclosed.

The Rug Company is a leading global brand in luxury handmade rugs with an established international sales presence through 10 own showrooms and a number of franchisees and concessions worldwide, generating sales of £23 million. Founded in 1997 by husband and wife team Christopher and Suzanne Sharp, the Company sells a range of more than 300 high-quality, contemporary rugs which are crafted entirely by hand, using traditional weaving techniques. The Company has built a strong reputation for design, based on its own in-house collection and through ranges developed in collaboration with iconic designers such as Alexander McQueen, Diane von Furstenberg, Kelly Wearstler, Paul Smith and Vivienne Westwood. Following the transaction the founders will remain actively involved in the Company.

The Rug Company operates in the £3 billion luxury & affordable luxury segment of the global rug market. Palamon's investment stems from the Firm's ongoing thesis work to identify well-positioned brands that can capture the shift in consumer demand toward authentic, artisanal products. The Rug Company has proven success in three of the world's largest rug markets, US, Germany and UK; and with a rich heritage of high-quality design-led rugs, is ideally positioned to accelerate growth.

Pascal Noth, Partner of Palamon Capital Partners, said, "We are delighted to be partnering with The Rug Company - a market leading brand in a niche retail sector with excellent growth dynamics. The Company has established a strong brand name in key global markets and is consistently recognized by interior designers for leading design and quality. With consumers increasingly seeking hand-crafted quality products with heritage we see fantastic potential in scaling the business from the strong base established by Christopher and Suzanne, into a truly global company."

Christopher Sharp, Founder and CEO of The Rug Company commented, "We are immensely proud of the excellent reputation The Rug Company has achieved in the world of interiors, design and fashion and with the progress we have made during the past 18 years. We are delighted to be partnering with Palamon for the next stage in our development and look forward to working together. They clearly share our vision for expansion and a belief in the values that have been fundamental to the company's success."

Palamon's investment strategy targets founder-led, services sector businesses across Europe with the potential to grow revenue at more than 20% per annum. The Rug Company is Palamon's third investment during 2015. In June, Palamon acquired luxury Italian leather goods brand Il Bisonte as part of the same investment thematic into affordable luxury retail. In August, Palamon signed an agreement to acquire Currencies Direct, one of the UK's leading international payments providers.

EIS and SEIS statistics - statistics on companies raising funds. October 2015

HMRC has issued the latest statistics on EIS and SEIS which make for interesting reading.

Here are the key points

Enterprise Investment Scheme

Since the Enterprise Investment Scheme (EIS) was launched in 1993-94, just over 22,900 individual companies have received investment through the scheme and over £12.3 billion of funds have been raised.
Data for 2013-14 shows that 2,770 companies raised a total of £1,529 million of funds under the EIS scheme. In 2012-13, 2,470 companies raised £1,033 million of funds.
Data for 2013-14 shows that companies raising funds for the first time under the scheme raised a total of £840 million compared with £576 million in 2012-13.
In 2013-14, companies from the Hi-tech, Energy & Water Supply, and Business services sector accounted for over £1bn of investment (65% of all EIS investment).
London and the South East continued to account for the largest proportion of investment with companies in these regions receiving 69% of investment in 2013-14.

Seed Enterprise Investment Scheme

In 2013-14, 2,030 companies received investment through the Seed Enterprise Investment Scheme (SEIS) and £166 million of funds were raised. This compares with 1,160 companies raising a total of £86 million under SEIS in 2012-13.
Over 1,700 companies of these companies were raising funds under SEIS for the first time in 2013-14 - representing £150 million in investment.
In 2013-14, companies from the Hi-tech, Business services, and Distribution, restaurants and catering sector made up 66% of the amount of SEIS investment received.

You can read the full report here

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