Just a brief update today on the back of Morrison's (MRW) trading update and the announcement of UBM's rights issue which they had flagged up previously.
Taking Morrison's first the sales continue to decline but the rate seems to be slowing and the comparatives get easier in Q4. They say they are still in line with their plan announced earlier in the year and have tightened their forecast for this years pre tax profits to £335 to £365 million. So some reassurance there and Mr Market seems to have been pleasantly surprised (not as bad as feared presumably) as the shares have bounced today along with the rest of the sector. I see also that Netto's return to the UK via a JV with Sainsbury's has launched today and their offers of Prosecco at £5.50 and Lego at £3 seem somewhat eclectic.
Looks like a relief / bear closing rally in the short term - not sure I'd be brave / clever enough to call the bottom of the food retail sector here ahead of the crucial Christmas trading period. Anecdotally I notice that we have been shopping more at Morrison's than Tesco's recently so their improved offering seems to be gaining some traction in our household at least.
Meanwhile UBM have announced a heavy 4 for 5 fully underwritten rights issue at 287 pence. All in line with their planned US acquisition although I do worry about that a bit given the record of UK companies going into the US and making a hash of it - think Tesco most recently and Sainsbury's before them to name just two. In the statement they also say that the dividend will be adjusted to take account of the extra shares being issued (around 44%) and they will target 2x cover going forward. So I reckon based on an ex-rights price calculated today this will mean it may end up on around a 3.6% yield with limited growth in short term while cover is built - so may be not that attractive at these levels, but might get more interesting if it falls heavily over the rights period, but probably no rush as you might also want to wait and see how thing pan out for them in the US first.