Top UK Stocks to Watch: Boohoo buys Debenhams brand

Boohoo buys the Debenhams brand while ASOS confirms it is in talks about purchasing the Topshop, Topman, Miss Selfridge and HIIT brands from struggling Arcadia Group - but neither plan to save stores from closing.


Top News: Boohoo buys Debenhams brand for £55 million

Boohoo said it has bought the intellectual property of Debenhams for £55 million in cash, plus VAT. The deal only covers intellectual property rights and does not include any retail stores, which are set to close for good under the deal.

The company said the Debenhams website is one of the top 10 most visited retail sites in the UK, attracting around 300 million visits a year. Boohoo intends to relaunch the Debenhams platform in the first quarter of 2022 to create the ‘UK’s largest marketplace across fashion, beauty, sport and homeware.’ It will expand the product range and start selling its other brands through the site, and it will also give individual Debenhams brands – like Maine, Mantaray, Principles and Faith - their own website.

The acquisition also represents Boohoo’s entry into the beauty, sports and homeware market as it looks to use Debenhams’ customer base as a springboard into new areas. For example, Debenhams has over 6 million beauty customers alone.

‘The acquisition of the Debenhams brand is an important development for the group, as we seek to capture incremental growth opportunities arising from the accelerating shift to online retail. We have developed a successful multi-brand direct-to-consumer platform that continues to disrupt the markets that we operate in,’ said Boohoo’s chief executive John Lyttle.

‘The acquisition represents an exciting strategic opportunity to transform our target addressable market through the creation of an online marketplace that leverages Debenhams' high brand awareness and traffic through the development of beauty and fashion partnerships connecting brands with consumers,’ he added.

Debenhams has been among the string of retailers to struggle this year. Lockdown and stay-at-home measures have accelerated the decline of the high street and the shift to online shopping. Debenhams generated over £400 million in online revenue in the year to the end of August, but it was not been enough to offset the weakness of its large retail store network that employs around 12,000 people. Online sales only accounted for 20% to 30% of total revenue.

The acquisition has been funded from cash on the balance sheet, which stood at £386.9 million at the end of 2020.

Debenhams will not contribute to Boohoo’s financial performance in the remaining five weeks of the current financial year and another update will be provided when it releases its annual results in May.

Boohoo share price: technical analysis

Boohoo shares are trading within an ascending channel pattern dating back to mid-October, it also trades above its 100 sma and saw the 50 sma cross above 100 sma in early December indicating an established bull trend. 

The price was trading towards the lower band of this channel with the 100 sma offering support. However, today’s 4.5% jump higher has propelled the share price back towards the middle of the channel and it is testing its 50 sma.

A move beyond the 50 sma at 350 could see a move towards 375 January’s high and 400p October’s high.

Failure to push over the 50 sma could see the price retreat back towards 330p the 100 sma and then 320p the lower band of the ascending channel. A break-through here could see the uptrend negated.

FTSE 100 news

Below is a guide to the top news from FTSE 100 shares today.

AstraZeneca gets Calquence approval to treat leukaemia in Japan

AstraZeneca said it has secured approval for Calquence to treat relapsed or refractory chronic lymphocytic leukaemia in Japan.

The approval comes after trials in Japan ‘demonstrated a statistically significant and clinically meaningful improvement in progression-free survival versus a standard treatment of rituximab, a monoclonal antibody, combined with the physician's choice of idelalisib, a PI3-kinase inhibitor or bendamustine, a chemotherapy.’

AstraZeneca said chronic lymphocytic leukaemia is the most common type of leukaemia in adults around the world, but ‘considered a rare disease in Japan and East Asia’ as it accounts for just 1% to 2% patients diagnosed with the disease.

Separately, the company said Calquence met its primary endpoint during a trial of demonstrating non-inferior progression-free survival for adults that have had treated, high-risk chronic lymphocytic leukaemia compared to ibrutinib.

AstraZeneca shares were up 1.2% in early trade at 7847.0.

FTSE 250 news

Below is a guide to the top news from the FTSE 250 today.

TI Fluid Systems paints bright outlook despite tough market conditions

TI Fluid Systems said revenue fell by almost 18% in 2020 as the coronavirus pandemic hit the automotive market, but said it expects to outperform the market as it committed to keep paying dividends.

The company, which makes fluid and thermal management systems used in vehicles, said it expects revenue in 2020 to fall to EUR2.8 billion from EUR3.4 billion in 2019, which it said was ‘in line with the decline in global light vehicle production’.

However, it said its adjusted earnings before interest and tax margin would be better than expected and in the mid-single digit range (compared to 10% in 2019), while adjusted free cashflow was also ‘well ahead’ of its targets. It said it ended the year with net debt of EUR600 million, down from EUR740 million a year ago.

The company said it had ‘solid momentum’ behind it as it entered 2021 as its markets started to recover in the second half of last year and that it expects to outperform the global light vehicle market going forward. It will release its outlook for this year when it releases its annual 2020 results.

TI Fluid said it will pay a 6.74 cent dividend in February for the second half of the year and said it plans to return to its ‘normal’ dividend payout going forward.

‘The group is committed to its stated annual dividend policy (30% adjusted net income) paid on an interim and final basis for each financial year.  However, in light of the significant amount of the interim dividend now being declared and the anticipation that, despite exceptional operating and financial performance during 2020, adjusted net income for the 2020 financial year will be relatively low, the board has decided that it would not be practical to propose a nominal final year 2020 dividend under the dividend policy,’ the company said.

‘The company expects to return to its stated annual dividend policy and normal dividend payment cadence for the 2021 financial year.  The board continues to believe that dividends represent an important part of the group's shareholder value proposition and that the company's dividend policy is both affordable and sustainable within its wider capital allocation framework,’ it added.

TI Fluid Systems shares were up 5.8% in early trade at 248.8.

TP ICAP’s Brexit plans delayed by lockdown

TP ICAP has said lockdown restrictions have delayed its plans to set up a new subsidiary in France to manoeuvre the new post-Brexit rules but said it shouldn’t impact its financial performance.

Since UK-EU trade was overhauled as part of the Brexit deal struck late last year, TP ICAP and others lost their passporting rights that allowed them to provide broking services to EU clients from offices based in the UK. It is still providing services in some countries under temporary measures.

The company has been establishing a new subsidiary in France to manage its broking business in the EU in order to get around the new rules, but said this has been a struggle so far.

‘Due partly to the extraordinary circumstances relating to the COVID-19 pandemic, in particular relating to stay-at-home orders and travel restrictions currently in effect, it has not yet been possible to complete the relocation of staff to the EU 27 or the local hiring of brokers in the EU-based offices of TPIE as quickly as originally planned,’ TP ICAP said.

‘TP ICAP confirms its commitment to complete the relocation of staff to the EU 27 and the local hiring of staff in the EU-based offices of TPIE at the earliest opportunity,’ it added.

TP ICAP said it is not expecting any financial impact and said the new subsidiary will, when ready, ‘ensure a robust and sustainable future operating platform for servicing EU 27-based clients’.

TP ICAP shares were broadly flat in early trade at 217.2.

Sirius Real Estate buys German business park

Sirius Real Estate said its joint venture with AXA IM Alts has purchased the Sigma Technopark in Germany for EUR80 million. The joint venture, named Titanium, has purchased the park from a fund managed by Corestate Group.

The site, located in Augsburg, will be rebranded as the Sirius business park and hosts different tenants in 113,000 square meters of space, boasting 1,500 parking bays and onsite amenities such as a canteen. The site is 90% let to 74 tenants at present.

Sirius Real Estate said the site adds a day one income of 6% based on the EPRA NIY and grows Titanium’s portfolio to EUR317 million worth of assets, almost double the EUR168 million when it was launched in August 2019.

Sirius Real Estate shares were up 2% in early trade at 88.3.

Other UK stock news

Below is a guide to news released by other UK stocks this morning

ASOS in exclusive talks to buy Arcadia brands

ASOS confirmed media reports by revealing it is in ‘exclusive discussions’ with the administrators of Arcadia Group about purchasing Topshop, Topman, Miss Selfridge and HIIT brands.

‘The board believes this would represent a compelling opportunity to acquire strong brands that resonate well with its customer base. However, at this stage, there can be no certainty of a transaction and ASOS will keep shareholders updated as appropriate. Any acquisition would be funded from cash reserves,’ the company said in a short statement.

The Financial Times reported yesterday that ASOS had already placed a bid toward the top end of a £250 million to £300 million price range. ASOS is not expected to take on any physical stores and look to relaunch the brands online.

Next and Boohoo are among bidders that have already dropped out of the race, but the likes of JD Sports and Frasers Group are reported to still be interested. The fact ASOS is in ‘exclusive’ talks suggests it has pulled ahead in the race.

ASOS shares were up 3.4% in early trade at 5014.0.

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