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Novo Nordisk (DK:NOVO.B), J Sainsbury (SBRY), Alliance Pharma (APH), GSK (GSK), Team Internet Group (TIG) and Clarkson (CKN)
Terry Smith has dismissed the recent woes of Novo Nordisk (DK:NOVO.B) and other longstanding holdings as a 'blip' as he defended a fourth year of underperformance for his flagship fund.
Smith noted in his latest annual letter to Fundsmith Equity (GB00B4Q5X527) investors that 'old friends' Novo, L'Oreal (FR:OR) and Idexx (US:IDXX) had detracted from returns this year but added: "If anything I would regard this as a blip in their long-term record and we intend to (mostly) patiently await a return to form".
Smith failed to address the disappointing weight-loss drug trial that recently sent Novo shares tumbling but argued it remained the market leader in that space and reiterated points made to the IC late last year about its 'radical approach to drug discovery', among other advantages.
Smith also reiterated concerns that weight loss drugs would dent alcohol sales as he explained last year's sale of Diageo (DGE). DB
Argos still a drag on Sainsbury
J Sainsbury (SBRY) was the latest retailer to see its share price fall despite reporting decent trading over the Christmas period.
Sales for the supermarket business were up 3.8 per cent for the six weeks to 4 Jan. Both grocery and general merchandise sales did well, and the Argos business was back in positive territory, up 1.1 per cent. However, over the entire third quarter decent grocery sales (up 4.1 per cent) were dragged down by a 1.4 per cent decline at Argos, meaning total retail like-for-like sales came in at 2.8 per cent, below consensus forecasts of 3.3 per cent.
Although Sainsbury’s maintained full-year guidance of generating a 7 per cent increase in retail underlying profit of between £1.01bn-£106bn, the share price slipped by 2 per cent, with investors increasingly cautious about how the sector will contend with rising labour costs in a harsher economic environment. MF
Read more: Where to find bargains (and growth) among struggling retailers
Alliance Pharma approves £350mn bid
Shares in consumer medicines specialist Alliance Pharma (APH) leapt 38 per cent after the company disclosed that it had accepted a bid valuing the company at nearly £350mn from Aegros Bidco, a vehicle indirectly owned by investment funds DBAY Affiliates and ERES IV. The deal values the shares at 62.5p each in an all-cash transaction.
Shareholders who do not want to take up the offer will be given the option of an unlisted alternative by exchanging some or all their shares for loan notes which will ultimately be exchanged for ordinary B shares in the new company.
The takeover is essentially in-house as DBY, which has been building a stake in Alliance Pharma for the past two years, was already the largest shareholder in the company with an existing 27 per cent stake. ERES IV stands for Edmond de Rothschild Equity Strategies IV, a French fund that invests in mid-sized companies in Europe and North America.
Alliance Pharma has been battling with its identity over the years, as it seemed wedded to its legacy prescription medicines business. Before the takeover, the market had been expecting an update on its strategy.
Broker Peel Hunt described the deal as an “inevitable conclusion”, as “Alliance has seemingly been in the shop window for some time, yet the shares have been stuck”. “We have, for a while, struggled to see how the company could extract full value from its acquired assets and doubted it could leverage further,” the broker said. JH
GSK shingles treatment gets FDA review
GSK (GSK) announced that the US Food and Drug Administration (FDA) has accepted for review the regulatory application for Shingrix (GSK's Zoster Vaccine) for the prevention of shingles (herpes zoster). The key difference is that this will be offered in a pre-filled syringe, which removes the need for mixing separated vials prior to injection.
Management described this as an important regulatory milestone for GSK's shingles vaccine, which has been approved in the US for the prevention of shingles in adults aged 50 and older since 2017. JH
Team Internet shares drop as TowerBrook abandons bid
Shares at Team Internet Group (TIG) fell nearly 12 per cent this morning after private equity firm TowerBrook Capital Partners pulled out of the bid process. TowerBrook was one of two suitors vying for the Aim-traded advertising technology company, with each bid valuing TIG at 125p a share, or around £315mn.
Now as the sole bidder, fund manager Verdane has until the end of play on 4 February to make a firm offer or walk away under the ‘put up or shut up’ takeover rules. VM
Clarkson profits to beat market expectations
Shipping giant Clarkson (CKN) said its results to 31 December will be “slightly ahead” of current market forecasts, pushing its share price up by 9 per cent.
In a brief trading update, the FTSE 250 company said underlying profit before tax, subject to audit, for 2024 is expected to reach at least £115mn. This surpasses the consensus estimate of £111.3mn and marks an increase from the £109.2mn reported in 2023. Clarkson will release its final results on 10 March. VM
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