The week's big news: Galliford Try, Mothercare and Serco
Investors were excited by the prospect of merger activity potentially heating up across the UK housebuilding sector with shares in Galliford Try (GFRD) gaining 5.6% to trade at 568.5p on 28 May after the Uxbridge-headquartered company rejected an approach for its Linden Homes and regeneration businesses from rival Bovis Homes (BVS).
Apparently, ‘preliminary’ talks took place between the pair but they came to nothing. Bovis informed investors that its proposed deal would have been worth £950m, involved £100m of Galliford Try’s debt and seen Bovis issue shares to Galliford Try shareholders.
That would have left Galliford Try as a UK-listed construction-only concern. And while the deal looks dead in the water, investors are maybe rethinking the value of Galliford’s overall business, as well as the scope for corporate activity across a challenged industry.
Shares in international baby goods purveyor Mothercare (MTC) spiked 17.7% to 24p on results (24 May) for the year to March. Albeit delayed by a day due to their sheer complexity, the numbers confirmed progress with the embattled retailer’s turnaround with the cost base reduced beyond initial guidance.
Chief executive Mark Newton-Jones also flagged ‘some improving UK trends’ in the early stages of the new financial year.
Though the retailer remains in loss, it has completed its UK store closure programme and sold both its Watford HQ and Early Learning Centre business in order to ‘greatly reduce’ its debt.
In a year of major restructuring, group revenue fell 13.5% to £566m and Mothercare reported widened adjusted losses with UK like-for-like sales down 8.9%, although encouragingly, the international arm is showing signs of moderate recovery.
Shares in outsourcing group Serco (SRP) rallied 10% to 133p, their biggest one-day gain in 2019, after it announced (23 May) the acquisition of US ship and submarine design company Naval Services Business Unit (NSBU) for $225m.
The deal, which is being financed through a mix of new shares and debt, is expected to be completed in the second half and to add to earnings straight away.
The transaction immediately gives Serco greater scale in the US, taking its share of revenue from the Americas from 20% to 26% of the group total and taking the non-UK share of revenue close to 70%. It also takes the share of Defence revenue up from 30% to 35% of the group total.