Good morning!

Another avalanche of trading updates today, so I'll do my best in the relatively short time available today - I'll be interviewing the CEO of Proactis (PHD) at 11:30 today, the audio of that I'll publish tonight. Any last questions for him, here is the link again (closes at 11am today).


Firstly, my topical retailers update (not small caps, so skip this bit if you're only interested in small caps)

Home Retail (LON:HOME)

Share price: 157.8p (up 5% today)
No. shares: 813.4m
Market cap: £1,283.5m

(At the time of writing, I hold a long position in this share)

Trading update - mildly disappointing, but that's hardly a surprise, given the widespread reports of lower footfall on the High St. The exceptionally mild weather undoubtedly had some impact, but also increased online competition. Although note that Argos is at the forefront of the push for online - with about half its sales originating online, and its click & collect option being increasingly popular.

Argos (about three quarters of group sales) achieved a lacklustre sales performance, LFL of -2.2% in the 18 weeks to date of H2. That's not good enough, because of course costs are rising, and will continue to rise (e.g. the Living Wage).

Homebase (about a quarter of group sales) sales were better, with LFL of +5%.

Overall, profits are down, but not catastrophically so;

"As a result of the most recent trading period, we expect that Group benchmark profit before tax for the financial year ending February will be around the bottom of the current range of market expectations of £92m to £118m."

My opinion - it could have been a lot worse, so I think this is satisfactory, given low expectations.

Offer for Homebase - probably of more interest, was the news last night that negotiations are at an advanced stage for the disposal of Homebase to large Australian group, Wesfarmers, for £340m. This looks a very good price, so let's hope it proceeds. It also smooths the way for the sale of Argos to Sainsbury - a deal which looks likely to go ahead, in my opinion.

Few divorces are cheap, but this one looks particularly expensive - of the £340m proceeds, shareholders are only likely to receive £200m (or 24.6p per share), see this table in the RNS last night;

56975b855f782HOME_separation.PNG

My opinion - Reports…

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