TheChek News Flow

*VW SEES FY AUTOMOTIVE NET CASH FLOW EU2B, SAW EU2.5B TO EU4.5B

*VW SEES FY VEHICLE DELIVERIES 9M UNITS, EST. 8.1M

*VW SEES FY VEHICLE DELIVERIES 9M UNITS, EST. 8.1M

*VW SEES FY OPERATING ROS 5.6%, SAW 6.5% TO 7%, EST. 6.51%

Deal allows Remo Ruffini to increase his shareholding in Italian company

LVMH has struck a deal with the chief executive of Moncler to take an up to 22 per cent stake in the investment vehicle that controls the Italian luxury outerwear specialist. 

Bernard Arnault’s group has bought a 10 per cent stake in Double R, the entity through which Moncler chair and chief executive Remo Ruffini owns 15.8 per cent of the business, via a special purpose vehicle. It has the option of increasing that stake to up to 22 per cent. 

Under the terms of the agreement, using LVMH funds, Double R will increase its stake in Moncler to up to 18.5 per cent over the next year and a half, reinforcing Double R’s position as its biggest shareholder.

Ruffini will continue to control Double R, but under the agreement LVMH can appoint two of its board members, plus one at Moncler. 

Ruffini will remain chair and chief executive of Moncler and “will continue to define and drive Moncler Group’s plans for future development”, LVMH said in a statement. LVMH will remain a “stable long-term minority shareholder of Double R, [and] will support the deployment of Ruffini’s future vision”, it added. 

“This partnership reinforces Double R’s position in Moncler and provides the stability needed to execute my vision for the future,” Ruffini said in a statement. 

“Moncler has been one of the most significant entrepreneurial success stories in the industry over the past 20 years. Remo Ruffini’s vision and leadership are remarkable and I am delighted to invest in his holding company to reinforce his position as leading shareholder,” Arnault said.  

The Italian group, which also owns men’s outdoor clothing brand Stone Island, has been one of the strongest performers as a pandemic-era luxury boom has given way to slowdown.

Moncler’s like-for-like sales in the first half of the year increased 11 per cent to €1.23bn.

It has also maintained its growth in China, according to analysts’ estimates from Barclays, at a time when sales at many luxury groups, including LVMH, have fallen as the economy worsens. 

This is not the first time that LVMH, the world’s biggest luxury group with a market value of €337bn, has taken a minority stake in an Italian company in the industry.

Diego Della Valle, chief executive of Tod’s, struck a deal with LVMH to take a minority stake in the company in 2021. It was delisted from the Milan stock exchange this year in a deal with LVMH-backed private equity firm L Catterton.

LVMH owns more than 75 brands, including Louis Vuitton and Dior.

Hizbollah’s exploding walkie-talkies likely among many counterfeits, says radio maker

Director at Japan’s Icom stresses company discontinued devices 10 years ago

The Hizbollah walkie-talkies that detonated across Lebanon were likely among tens of thousands of counterfeits, said a director of the Japanese radio equipment maker Icom.

The detonation of walkie-talkies and pagers across Lebanon last week killed at least 35 people and injured hundreds more. Some of the walkie-talkies bore Icom labels.

After the attacks, which came as Israel stepped up its offensive against Hizbollah, Icom launched an investigation into the devices and said its IC-V82 handheld radio “was produced and exported, including to the Middle East, from 2004 to October 2014”.

“We made and shipped 160,000 of those V82 radios in the 10 years before we discontinued them about a decade ago,” Icom executive and board member Yoshiki Enomoto told the Financial Times. “It is possible that the same number of counterfeit models is circulating today.”

Icom said the devices had “not been shipped from our company” since they were discontinued and that those pictured after the attack appeared to be missing a holographic seal used to distinguish counterfeits. The company added that it had also discontinued production of batteries for the devices.

“We are 99.9 per cent sure our products were not involved . . . and we can’t know exactly how many counterfeits are out there,” said Enomoto, underlining risks posed by supply chain security.

Following the attacks, Icom pledged to strengthen its counterfeiting measures, though there are limits to what the company can achieve.

Icom has in the past shut down some counterfeit factories with the help of local authorities. The company also discontinues and upgrades its products every few years, said Enomoto.

The attacks have put the focus on the origins of the exploding devices and how they were weaponised, said Ken Kotani, a professor and defence expert at Nihon University in Japan.

“It is extremely difficult to try to control the supply chains of counterfeit devices, but we have to try to find solutions, probably through technology,” said Kotani.

It is not the first time Icom’s walkie-talkies have been in the spotlight. During the Afghanistan war, reports showed the Taliban using the devices, or copies of them.

Founded and based in a suburb of Osaka, Japan’s third-biggest city, Icom is preparing to celebrate its 60th anniversary this year.

Icom controls about 40 per cent of the amateur radio market, more than 25 per cent of the maritime radio market and 5 per cent of the land mobile market, according to the company. Net sales were $245mn in the fiscal year ending in March 2024, $90mn of which was made in North America.

Icom, which has one Israeli distributor, said the Japanese trade ministry had contacted the company in connection with the attack.

The UK long-term savings and retirement business has built up a closed book of life insurance policies

The stock market runs on aphorisms and golden rules. There’s one for every type of situation and many an investor has been saved from costly traps by heeding them.

One widely used adage, if it looks too good to be true then it probably is, is often applied in the case of high-yielding shares. If you’re tempted, at the very least expect to do some research to ensure the yield is at that level for the right reasons and appears affordable and sustainable.

Healthy levels of cash generation is a reassuring sign; an expensive debt pile isn’t — cash might need to be funnelled into interest payments. There’s little comfort either in a high yield caused by a steep fall in the share price.

That tells you investors have concerns about the company and its ability to maintain payouts. Beware dividend cuts — they are usually punished harshly. Even Shell, a dividend-paying stalwart that cut its dividend for the first time in eight decades in the middle of the pandemic oil crisis, saw its share price ruthlessly marked down in response, although in struggling Vodafone’s case, the dividend cut it made earlier this year had long since been priced into the shares.

But the rules change when there’s no mystery about how the dividend is being funded. Phoenix, the long-term savings and retirement business, offers a juicy 10 per cent yield but that’s well supported by the streams of cash being thrown off by the closed book of life insurance policies it has built up in recent years.

BUY: Phoenix (PHNX)

Adverse movements in the hedging position made the reported results for Phoenix difficult to interpret as the insurer uses hedging primarily to ensure the stability of its cash and the dividend. The downside is that adverse movements make the IFRS accounts deceptively grim reading, with a knock-on effect on shareholder attributable equity that management acknowledged was a problem in the short term.

Nevertheless, the results on their own terms were a qualified success as the company clearly looks on course to meet its target of cash generation of £1.4bn-£1.5bn for 2024 after generating £950mn during the half; organic cash generation was up 19 per cent to £647mn.

Broker Peel Hunt said: “We remain positive long term on Phoenix, as its business model transitions towards becoming a broad-based pension provider, and the back book continues to throw off a significant amount of cash (cash yield c20 per cent).” We agree with that view, with the shares trading at 1.1 times tangible assets and a hefty 10 per cent dividend yield.

HOLD: Oxford Metrics (OMG)

A profit warning from Oxford Metrics sent shares in the smart sensing and software group down to a six-year low.

The directors report that customers are being more cautious, which has lengthened buying cycles and pushed opportunities in the sales pipeline into the new financial year. They are now guiding shareholders to expect annual revenue of £40mn-£42mn in the 12 months to September 30, below both the consensus estimate of £48.6mn and last year’s revenue of £44.2mn.

The life sciences and engineering segments, accounting for around half of Oxford Metrics’ revenue, are performing slightly down on last year. However, the entertainment sector has been hit by the slowdown in the global games industry and a contraction in content creation. The segment accounts for more than a third of group revenue.

The group’s financial position remains robust. Closing net cash of £50mn provides firepower to make bolt-on earnings-accretive acquisitions. Analysts still expect the full-year payout per share to be raised 10 per cent to 3.02p.

HOLD: Card Factory (CARD)

Card Factory shares fell by more than 15 per cent earlier this week after the greeting cards and gifts retailer reported a 43 per cent decline in interim pre-tax profits, a painful reminder of wage inflation pressures even if management had previously guided that earnings growth would be weighted to the second half.

It was the scale of the profit decline that unnerved investors, as the bottom line was hit by the 9.8 per cent jump in the national living wage in April and freight inflation. Gross margin fell 420 basis points to 32.6 per cent, hit by store and warehouse wages coming in at 28 per cent of revenue compared with 24 per cent in the same period last year.

But full-year expectations were kept unchanged, as were medium-term targets of £650mn of revenue, pre-tax profit margins of 14 per cent and 90 net new stores by 2027. A rating of nine times forward consensus earnings, combined with a 7 per cent forward free cash flow yield per Panmure Liberum forecasts, is an attractive proposition. But cost pressures remain challenging.