Private equity giant Kohlberg Kravis Roberts (KKR) has its work cut out for it following the purchase of the US-based Crosby businesses from Melrose Industries. After all, it has paid 1bn pounds - or 10 times earnings before interest, tax, depreciation and amortisation - from what amounts to another private equity business, albeit a more transparent and accountable one, given that it is publicly listed (Melrose Industries that is).
The turn-around specialist's shareholders have little to complain about. The group's shares
have more than quadrupled in five years and the total return over this period has been over three times that for Bloomberg's European sector index. The trick is to keep the pace going. Post-Crosby, the Elster metering business, bought last year, will make up about two-thirds of the group. Despite pressures Melrose need not rush into a disposal. Melrose shares, which had stalled a bit on worries about order levels in some non-Elster parts of the group, perked up on Thursday to trade on 17 times consensus 2013 earnings. That is a premium to the sector but rightly so, the FT´s Lex column says.
The rejuvenation of the South Bank of the Thames, between Tate Modern and City Hall, has been one of the most successful such projects the capital has seen in recent years. Land Securities is now selling its two main remaining Bankside buildings to M&G Real Estate for £315m, giving a yield to the buyer of a respectable 5.2%. The company has been active of late and now owns 95% of X-Leisure, the leisure fund once run by P. Y. Gerbeau, the Frenchman who turned around the Millennium Dome. That chimes with Land Secs' focus on upmarket retail schemes, which these days need their own leisure attractions, cinemas and restaurants, to pull in the shoppers.
About 62% of the portfolio is within the Greater London area, with the focus on redevelopment of properties that offer a decent return rather than investment in completed ones, because of the weight of hot money from outside chasing finished properties. Simply put, Land Secs is looking out for signs the cycle is turning and we may be heading for a glut of space again. The latest published net assets per share, 903p, is well behind the share price after it rose 15.5p to 932p. Land Secs will update the City with its half-way figures in November. For now, the shares rate a 'hold', The Times´ Tempus says.
As the UK's biggest recruitment business, Hays is always inordinately careful with the language it uses to describe current market conditions. Given that Hays' performance is a strong economic indicator, this mood music is worth watching. For the first quarter, the watchword is "improving". The first-quarter figures show that, if you take out Australia and Brazil - which are special cases with their own difficulties - all 31 other countries where it operates saw an improvement in trading and sentiment year on year.
Europe saw an all-time record in fee income, with Germany particularly strong. Even battered Spain managed a 14% increase. In the UK, which accounts for about a third of the business, fees were up by 8%. The shares sell on 20 times earnings, low for the sector. If Tempus were to choose one share among the recruiters it would be Hays, for that potential earnings growth. But it suspects further progress may be limited in the short term.
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