City round-up: Unilever; Pebble Group; Yourgene Health

Alan Jope

Shares dropped by nearly 7% as consumer goods group Unilever announced it has approached GSK and Pfizer about a potential acquisition of the GSK Consumer Healthcare business.

It says the business is a leader in the attractive consumer health space and would be a strong strategic fit as Unilever continues to re-shape its portfolio.

However, it adds that there can be no certainty that any agreement will be reached.

Weekend reports claimed that Unilever has offered £50bn for the business, but that Glaxo and Pfizer were holding out for an offer of at least £60bn.

The group, which operates a key home and personal care manufacturing site at Port Sunlight, Wirral, brought forward a planned update to today, on the back of the GSK Consumer Healthcare announcement.

It declares that, following a strategic review, the board believes Unilever’s future strategic direction lies in expanding its presence in health, beauty, and Hhygiene, categories which offer higher rates of sustainable market growth and with significant opportunities to drive growth through investment and innovation.

The board also concluded that major acquisitions should be accompanied by the accelerated divestment of intrinsically lower growth brands and businesses, which would provide funding.

Unilever, headed by chief executive Alan Jope, said it benefits from a strong balance sheet and cash generation, and remains committed to maintaining an A-band credit rating. Following any acquisition, the company would target a return to current levels of gearing over the short to medium term.

Consumer Health is a highly complementary category for Unilever, it said, with good potential for synergies and a number of routes to build scale.

GSK Consumer Healthcare would be a strong strategic fit – 45% of GSK Consumer Healthcare is in Oral Care and VMS, categories in which Unilever already has presence and substantial capabilities. It said the acquisition would create scale and a growth platform for the combined portfolio in the US, China, and India, with further opportunities in other emerging markets.

The group said that later this month it will announce a major initiative to enhance its performance. After a comprehensive review of its organisation structure, it intends to move away from its existing matrix to an operating model that will drive greater agility, improve category focus, and strengthen accountability.

During 2021 Unilever started to see the results of the operational initiatives in its growth momentum, despite the challenges in markets posed by the COVID pandemic. At the trading update in October, Unilever reported third quarter year to date growth at its fastest rate for eight years. The group will update on its fourth quarter performance, and the full year, on February 10.

Russ Mould, investment director at AJ Bell, said the negative share price reaction reflects investors’ fears that Unilever is going to come back with a higher offer and “potentially pay too much.”

He said: “Unilever looks to be bidding for the unit because it needs to inject some excitement into its business, having recently disappointed with sales and profit margins.

“This really is a Marmite situation for GlaxoSmithKline’s shareholders – they’re either hoping for a quick return now through a sale or better returns in the future through the planned demerger.

“GlaxoSmithKline chief executive Emma Walmsley would be delighted if someone came and paid top dollar for the unit, as she’s been under pressure from investors to deliver some good news for a long time.

“Some long-term GlaxoSmithKline investors may not want a sale, as they might have been looking forward to the consumer goods unit being demerged later this year.”

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Pebble

Stretford-based corporate promotions specialist, The Pebble Group, announced that its full year results, up to December 31, 2021, will exceed market expectations following a strong close to the year.

Both its Facilisgroup and Brand Addition traded well throughout the year and it said full year revenues will be around £115m, compared with £82.4m in 2020, and £107.2m in 2019. This will generate adjusted EBITDA of not less than £15m, up from £9.8m in 2020, and against £15.2m for 2019.

On highly attractive profit margins, Facilisgroup’s annual recurring revenue is expected to be approaching $17m in fiscal year 2021, being circa 40% ahead of the prior year.

At Brand Addition, 2021 revenue is expected to be more than £100m, against £72.6m in 2020, and £97.9m in 2019, which represents an immediate and full recovery over 2019 levels following the demand challenges which impacted revenue in 2020. This rapid recovery has been delivered despite the major supply chain disruptions experienced in 2021.

Cash generation was stronger than expected in the fourth quarter of 2021, with net cash at December 31, 2021 of £12.1m, up from £7.1m the previous year.

The group said: “We remain confident in delivering upon our strategy and look forward to updating stakeholders further on the announcement of our fiscal year 2021 final results on 22 March 2022.”

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Lyn Rees

Yourgene Health, the AIM-listed Manchester biotech group, said it will probably exceed already upgraded market expectations for the year to March 31, 2022.

It said the strong trading performance seen in the first half of the year has continued into the second half. Yourgene’s high throughput COVID-19 testing laboratory in Citylabs 1.0, Manchester, has been deployed heavily over the winter season to assist in the UK’s response to the new wave of infections caused by the Omicron variant.

In addition, the company’s new COVID sequencing service has launched and was awarded a contract by the UK Health Security Agency. This service has made a strong contribution and Yourgene is now scaling up this service for additional volume.

Having upgraded guidance in October 2021 and again in December 2021, the board said it believes that full year revenues and adjusted EBITDA will exceed already upgraded market expectations. The Company has already recorded year to date revenues that will meet existing market expectations for the full year and expects, with a further strong contribution in the final quarter, to report full year revenues of at least £37m, significantly above current market expectations of £29m.

Adjusted EBITDA margins are expected to be at least 10% which will deliver a substantial positive swing of more than £5.5m from the previous year’s position.

Chief executive, Lyn Rees, said: “The continued strong performance in COVID-19 testing is a testament to our team’s ability to mobilise our core lab services quickly and scale resources to meet this urgent need. Whilst we are seeing substantial growth in COVID-19 testing, our long term strategy remains focused on building a diverse offering across both Genomic Technologies and Genomic Services that apply our core competencies and capacity into other areas where molecular diagnostics can positively impact people’s lives.”

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