Proactive Investors -
- FTSE 100 puhses higher, up 37 points
- Shares in IDS rise as Royal Mail (LON:IDSI) strikes pay deal with CWU
- Network International soars on bid approach
CFOs mood brightens according to Deloitte
Sentiment among CFOs has improved significantly since the start of the year helped by lower energy prices, falling inflation and easing of concerns over Brexit.
That was the findings of Deloitte’s quarterly survey of finance chiefs.
Confidence rose sharply in the first quarter, to above its long-term average, and perceptions of uncertainty have fallen at the fastest rate since the survey began more than 12 years ago.
CFOs reported a marked easing of supply chain and recruitment problems while expectations for inflation in one year’s time have declined from 5.8% to 4.2%.
But despite the improved sentiment, CFOs maintain a defensive strategy stance.
Risk appetite is below normal levels and CFOs are heavily focussed on cost control and building up cash.
Ian Stewart, chief economist at Deloitte said: “The economic unpredictability that marked the beginning of 2023 has started to clear, with CFOs reporting the largest decline in perceptions of uncertainty to date.”
“Business confidence has rebounded, helped by a decrease in energy prices, an easing of Brexit concerns and an improving inflation backdrop.”
“Crucially, finance leaders report little change in credit conditions, suggesting that March’s events in the global banking system have not affected the pricing and availability of credit for UK corporates.”
Stewart said CFOs foresee artificial intelligence helping to drive UK productivity, an outcome that could provide a lasting boost to business growth.
But they are divided, however, on how AI will affect the number of jobs in the economy, highlighting the need to ensure the gains from new technologies are widely shared.
IDS rises after striking pay deal with CWU
The Footsie has continued its strong early progress, now up 35 points at 7,907 while the broader FTSE 250 is up 141 points at 19,384.
Royal Mail owner, International Distributions Services PLC’s shares rose 5.6% after it reached an agreement with unions to end the long-running pay dispute.
In a joint statement, Royal Mail and the CWU said: "After almost a year of talks, Royal Mail and the Communication Workers' Union are pleased to announce they have reached a negotiators' agreement in principle.”
"The proposed agreement will now be considered by the executive of the union before being voted on by the union's membership.”
CWU general secretary Dave Ward and deputy general secretary Andy Furey said: "On the basis that the negotiators' agreement is endorsed by the postal executive, we will put in place a full communications plan to engage members.”
Analyst Gerald Khoo at Liberum said an agreement to end the dispute is likely to be well received.
However, he noted details of the deal on pay and restructuring have yet to be revealed and he expects Royal Mail to have made significant concessions.
“We see the execution risk as very high and continue to see an ongoing risk of value leakage from GLS into Royal Mail,” Khoo commented.
He pointed out Royal Mail management’s recent track record on implementing restructuring and delivering productivity improvements is poor, and that was before the year long dispute.
“It will take a long time for productive working relationships to be re-established between staff and managers at the local level,” he added.
Khoo reiterated a sell rating on IDS with an unchanged sum of the parts based target price of 135p.
Elsewhere John Wood remained firm, up 7.5%, after it said it was going to engage with Apollo Management over its recent 240p per share bid approach.
Victoria Scholar at interactive investor noted "this deal adds to the flurry of private equity M&A activity in recent days alongside Dechra Pharmaceuticals (LON:DPH), Network International and property company Industrials REIT."
"There is a sense among international investors that the UK is ripe with takeover targets," she suggested.
"The recent rebound for the pound suggests opportunistic buyers need to make the most of sterling’s weakness before it appreciates further and is too late as the FX discount subsides," she added.
FTSE 100 makes strong early progress
The FTSE 100 pushed higher, and back above 7,900, as trading for the week got off to a positive start in London.
At 8.15am, London’s lead index was up 29.10 points, or 0.37%, at 7,901.01 while the FTSE 250 was also in an upbeat mood at 19,299.99, up 57.30 points, or 0.30%.
Susannah Streeter, head of money and markets, Hargreaves Lansdown (LON:HRGV) said: “’Cautious optimism is the Monday motivation mantra, as stronger US corporate news and signs of consumer resilience help to mask ongoing worries about the knock-on effect of higher interest rates.”
UK banks opened higher after the positive results from a number of leading US banks on Friday with JPMorgan (NYSE:JPM), Citi and Wells Fargo (NYSE:WFC) all posting encouraging numbers.
Elsewhere, shares in Network International Holdings PLC (LON:NETW) soared 21% after it confirmed it has received a non-binding proposal from CVC Advisers Francisco Partners Management regarding a possible cash offer of 387p pe rshare.
The proposal follows a series of prior approaches to acquire Network, which were rejected.
Network International said it would be minded to recommend a bid at that level should a firm offer be made.
The bid saga surrounding John Wood Group PLC took another another twist with the oil and gas engineering firm deciding to engage with suitor, Apollo Management, over its last 240p per share offer.
The firm said it had taken the decision after talks with shareholders. It had previously rejected a number of approaches.
Shares advanced by 7%.
But Pagegroup PLC (LON:PAGE) eased 1% after it reported first-quarter gross profits slumped by nearly 10% in the UK in the first three months of 2023, which followed a 1.9% decline in the final three months of last year.
Page added it was also seeing challenging trading conditions continue in Asia and North America, where gross profits down by 21% and 14% respectively in the quarter.
Overall, group gross profits dropped 2.4% on a constant currency basis in the first quarter.
Heading the other way were shares in QinetiQ Group PLC (LSE:QQ.) which rose 4% after it forecast financial year 2023 results will be ahead of its previous guidance and towards the upper end of market consensus.
The defence group said it had delivered strong operational performance during the fourth quarter which saw it finish the year with full year order intake up by 40% at a record-high of more than £1.7bn.