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FTSE 100 higher, National Express advances on €1bn contract win and BT faces Ofcom probe

Published 23/01/2023, 10:37
Updated 23/01/2023, 10:40
© Reuters. FTSE 100 higher, National Express advances on €1bn contract win and BT faces Ofcom probe

© Reuters. FTSE 100 higher, National Express advances on €1bn contract win and BT faces Ofcom probe

Proactive Investors -

  • FTSE 100 higher, up 14 points
  • National Express advances after €1bn deal
  • BT faces Pfcom probe

10.37am: Royal Mail (LON:IDSI) boss could face MPs again

Royal Mail boss Simon Thompson could be hauled back before a committee of MPs on allegations of misleading Parliament, according to the Mail.

A report said the business select committee is due to meet tomorrow to set its agenda, which could include calling the chief executive back for further questioning following a bruising appearance last week that saw him quizzed about strikes, his £140,000 bonus and plans to stop delivering letters on Saturdays.

Committee chairman Darren Jones said Thompson's answers raised 'grave concerns' over the running of the business and reminded him that misleading Parliament would 'not be appreciated' if his responses were proven untruthful.

Royal Mail is owned by Intermediate Capital Group (LON:ICP) PLC and shares were 1.7% higher on Monday.

10.18am: BT faces Ofcom probe

BT Group PLC (LON:BT.A) is to be investigated by industry regulator, Ofcom, over compliance with its obligation to provide customers with clear and simple contract information before they sign up to a new deal.

Since 17 June 2022, telecoms providers have been required to give customers contract information and a short – usually one-page – summary of the main contract terms before signing up, the regulator said.

The summary must include key information about the price, length of the contract and the terms and conditions if a customer decides to end their contract early.

Ofcom has already launched an investigation into EE but has “since received information giving us reason to suspect that Plusnet – another BT subsidiary – may also have failed to comply with these requirements.”

“As a result, our investigation will now consider if BT has breached Ofcom’s rules because of suspected breaches by each of these subsidiaries” the regulator said.

9.43am: MGM could bid again for Entain (LON:ENT) - reports

According to The Mail, casino giant MGM Resorts is mulling another takeover bid for the FTSE-100 gambling group Entain PLC which owns Ladbrokes (LON:LCL), Coral and Gala Bingo, later this year, citing City sources.

The US company previously made a swoop in January 2021. However Entain, led by Danish businesswoman Jette Nygaard-Andersen, rebuffed the £8.1bn approach on the grounds the price was too low.

Analysts believe the bid is likely to be revived once the UK Gambling Commission has published its long-delayed white paper.

Shares in Entain were a touch higher, up 0.4%, today.

9.32am: The Times fuels Asda/EG merger talk

Another big deal in the offing?

The Times reported on Saturday that the billionaire owners of Asda are exploring a merger of the supermarket and their UK petrol forecourts business in a blockbuster deal that would create a retail giant worth more than £10bn.

The merger talks are being held before a crunch refinancing at EG Group, which has £7bn of debt falling due in 2025.

The merged group would have more than 581 supermarkets, 700 petrol forecourts and 100 convenience stores in Britain, the report said.

Brothers Zuber and Mohsin Issa and London-based private equity group TDR Capital have owned EG Group together since 2016.

They later bought Asda.

9.00am: Measured start by Footsie

Blue-chips remain in demand in the early exchanges with the FTSE 100 now up around 18 points to 7,789 while the FTSE 250 is 89 points higher at 19,792.

Richard Hunter, head of markets at interactive investor described the progress as “measured but cautious” noting UK markets had “followed the lead of the US” to notch “early gains to leave the FTSE100 ahead by 4.5% so far this year.”

Shares in Fuller, Smith & Turner plc slumped 7.3% after warning full-year earnings will be below market expectations as train strikes hit trade.

Victoria Scholar, head of investment, interactive investor noted “The pub group enjoyed a pick-up in sales thanks to a boost from the FIFA World Cup, but train strikes over Christmas meant that sales have struggled to push beyond pre-pandemic levels.”

“It estimates that industrial action reduced sales by around £4mln” she added.

Associated British Foods PLC (LON:ABF) held firm, up 1.3%, with positive comments from Credit Suisse (SIX:CSGN) adding to the upgrade from Deutsche Bank (ETR:DBKGn) (see 8.27am).

Credit Suisse reiterated an ‘outperform’ rating and 2,150p price target.

Saga PLC (LSE:SAGA) rose 2.5% after confirming it was in talks to sell its underwriting business as it bids to pay down its debt pile and shares in funeral services provider, Dignity (LSE:DTY) PLC, were another firm feature, up 8.4%, as it confirmed it had agreed to be taken over by a consortium in a deal with an enterprise value of £789mln which valued each share at 555p.

Meanwhile, over in the currency markets sterling rose to push up to a fresh one-month high against the dollar with the “bullish trend” remaining in place, according to Neil Wilson at markets.com, “while the euro rose to its highest since April as the dollar faded further as the market bet on a less aggressive Fed”.

8.27am: AB Foods lifted by Deutsche upgrade to 'buy'

Shares in Associated British Foods PLC received a boost as Deutsche Bank which has moved the stock to ‘buy’ from ‘hold’ and raised its price target to 2,180p from 1,600p as well.

“Our upgrade to buy is based on our view that earnings expectations will start to recover as the headwinds that have been faced during 2022 start to reverse especially with regards to energy prices, FX and Primark will benefit from both trading down and new space growth” analyst Adam Cochrane said.

“Sentiment has improved for AB Foods from its lows with a re-rating from September lows but there is still scope for both a re-rating and earnings upgrades in our view” he continued.

Cochrane said he expects management to take a less bearish view on the Primark EBIT margin guidance at the first quarter trading update while a robust balance sheet and ongoing share buyback provides some technical support.

He has increased his fiscal year 2023 EPS estimate by 8% and for 2024 by 12%.

8.14am: Bright start for Footsie

The FTSE 100 has made a steady start to the week with the blue-chip index up around 17 points in the early exchanges.

Gains in the US on Friday provided support while a couple of big contract wins also boosted the underlying mood.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown (LON:HRGV) said “The FTSE 100 has opened marginally higher, as quiet optimism continues to swirl.”

She also highlighted “investor confidence has jumped 12% according to the Hargreaves Lansdown survey which tracks sentiment every month.”

In corporate news, National Express PLC was firmly on track in early dealings with shares up over 6% after it which has secured a contract worth €1bn to operate the RE1 and RE11 Rhein-Ruhr-Express lines in Germany to 2033 (see 7.58am).

Analysts at Peel Hunt said “this contract award is a clear vote of confidence in the group's operational skills.”

“Sentiment towards the stock has been incredibly negative given downgrades from ongoing challenges to recruit and retain drivers, and reintroduce school bus routes to support a reduction in net debt, and this award should be seen as positive.”

Reaction to Balfour Beatty’s £1.2bn contract win (see 7.53am) was more muted with shares up 0.3%.

Positive broker comment boosted Associated British Foods PLC which rose 1.7% as Deutsche Bank upgraded to ‘buy’ from ‘hold’.

The bank also increased its price target for the Primark owner to 2,180p from 1,600p.

7.58am: National Express nets €1bn deal

Another big contract win for National Express Group PLC (LON:NEX) which has secured a contract worth €1bn to operate the RE1 and RE11 Rhein-Ruhr-Express lines in Germany to 2033.

The company took over the operation of the two lines in February 2022 through an emergency contract award, successfully mobilising in a short timeframe.

Following this new contract award, National Express now operates all three asset light RRX lots under long term contracts.

The award of this contract establishes National Express as the second largest rail transport company in the region, delivering an anticipated 20mln train kilometres in 2023, the company said in a statement.

7.53am: Balfour Beatty (LON:BALF) wins £1.2bn contract

A good start to the week for Balfour Beatty plc.

The international infrastructure group has won a £1.2 billion contract from National Highways to deliver the 'Roads North of the Thames' package of works for the proposed Lower Thames Crossing.

The Lower Thames Crossing will create a new connection under the River Thames to increase capacity and ease congestion in the South of England.

Leo Quinn, group chief executive of Balfour Beatty, said: "The Lower Thames Crossing is a significant scheme - one that will stimulate local, regional and national economic growth, create employment opportunities and new, sustainable methods of construction for the future of our industry.

The full value of the contract will then go into Balfour Beatty's order book, with main construction scheduled to commence shortly after. Completion is expected between 2029 and 2030.

7.29am: Saga aims to sell underwriting arm

Saga PLC, which offers cruises, package holidays, insurance, and financial services to the over-50s, has confirmed it is in talks to sell its underwriting business, Acromas Insurance.

The London-listed company was responding to a report in The Sunday Times.

Sage said it remains committed to providing a “best-in-class insurance offer” to its customers but has looked at opportunities to optimise its operational and strategic position in the market, alongside plans to reduce debt.

The company concluded that a potential sale of its underwriting business was consistent with strategy and would crystalise value and enhance long-term returns for shareholders.

Sage noted Acromas Insurance currently underwrites approximately 25-30% of Saga's insurance business.

The report in The Sunday Times said the group was aiming to raise £90mln to help pay down its huge £721mln debt mountain.

7.00am: FTSE to open the week higher

The FTSE 100 is set to start the week on the front foot after a strong finish last week in the US.

Spread betting companies are calling London’s blue chip index up by around 14 points.

Michael Hewson chief market analyst at CMC Markets UK said: “financial markets appear to have a rising conviction that central banks are on the cusp of a significant pivot on monetary policy sometime later this year, a view that appears to be getting additional traction now that a number of Fed policymakers appear comfortable with the idea of another step down in the central banks rate hiking cycle to 25bps next week.”

On Friday, US markets closed higher with the Nasdaq up 2.7% to finish at 11,140 points. The S&P 500 was up 1.9% at 3,973 and the Dow had risen 1% to close at 33,375.

Back in London and results from BAE Systems (LON:BAES) take centre stage.

Read more on Proactive Investors UK

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