Whitbread and Sage

“The FTSE 100 looks set to end the week on a downbeat note with a threat from Donald Trump to pull the US out of the World Trade Organisation helping to revive fears over global trade,” says AJ Bell Investment Director Russ Mould.

Whitbread

“After being told they would have to wait two years for a spin-off of Costa Coffee to complete when it was announced earlier this year, a £3.9bn bid from Coca-Cola provides shareholders in Whitbread with a short-cut to realising value for this part of the business.

“This will likely be music to the ears of the activist investors who were pushing for the group to be broken up.

“With the deal expected to go through in the first half of 2019, and most of the proceeds being returned to investors, the market will have an earlier than expected opportunity to assess the standalone merits of Whitbread’s other core brand, Premier Inn.

“Sterling weakness and strong inbound tourism are helping this hotel franchise in the short-term in the UK and the group is also making good progress in Germany where it faces more limited competition in the branded hotel segment.”

Sage

“Even if their track record has been patchy the immediate exit of a chief executive is never a great look for a company. So, somewhat inevitably, the departure of Stephen Kelly from Sage is not being received well by the market.

“Sage may be a big fish in a relatively small pond in the UK software space, but strong competition has been an obstacle to the group boosting organic growth from the historic run rate of 6% and it looks like Kelly may be paying the price.

“Nonetheless, today’s statement suggests the company will stick with Kelly’s strategy of boosting recurring revenue by shifting to a more subscriber-driven business model.

“And with the hunt for Kelly’s replacement underway, the new man will face the challenge of cutting out the sales execution issues which have helped contribute to 2018’s growth disappointments.”

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