Proactive Investors -
- FTSE 100 up 50 points at 7.411
- Phoenix rises after lifting cash generation targets
- British Land climbs after half-year numbers
Royal Mail fine shows execution risks remain high
Shares in Royal Mail owner International Distributions Services PLC (LON:IDSI) are down 1.2% after the fine from Ofcom.
Liberum’s Gerald Kho said “This validates our concerns about Royal Mail’s ability to successfully implement restructuring.”
“The execution risk is high, both in management’s plans being implemented fully, and in successfully implemented actions yielding the anticipated effects.”
AJ Bell’s Russ Mould felt the fine showed “confirmation that Royal Mail cannot do its job properly.”
““Last week Royal Mail lost its 360-year monopoly on delivering parcels from Post Office branches as rivals Evri and DPD were added as alternative options for customers,” he pointed out.
“This is the latest in a string of setbacks for the business as competition intensifies and consumers and businesses vote with their feet, realising they don’t have to stick with Royal Mail,” he added.
Mould thinks improving service levels are crucial if IDS wants to stand a chance of returning Royal Mail to profitability but he said the firm seems be in a “constant state of flux.”
“While its overseas parcel arm GLS is taking one step forward, this always seems to be offset by Royal Mail taking one step back.”
BAE's order book gives earnings visibility
BAE Systems (LON:BAES)’ trading update has gone down well in the City with shares up 0.7%.
The stock was one of the few risers on Friday in the sea of red which engulfed the blue-chip index.
Analysts at Berenberg said It was “strong” trading update this morning, with the group continuing the broad-based momentum from the first half.
It highlighted that order intake was ahead of guidance issued at half-way and as a result thinks BAE may end the year with a level of order intake not far below the record high £37 billion achieved in 2022, further improving visibility.
“While we did not expect an upgrade to full-year guidance, we note consensus is at the upper end of the 10-12% EPS growth guidance, and as such there is little scope for upgrades following this update,” the broker said.
AJ Bell’s Russ Moul felt the encouraging thing for BAE and its shareholders is that the contracts it is winning tend to be long term in nature and, as a result, the company has good visibility on revenue, earnings and cash flow over several years.
He suggested the more muted share price response may reflect “some disappointment at a lack of further upgrades” after the company’s boost to guidance at the half year stage in August.
Former PM Cameron returns to politics as Braverman exits
Away from the markets and news of a big political comeback.
Former Prime Minister David Cameron has been appointed Foreign Secretary as the current incumbent of No 10 Downing Street Rishi Sunak reshuffles his cabinet ahead of a forthcoming General Election.
The King confers a peerage on David Cameron so the former Prime Minister (who resigned as MP for Witney) can return to government as Foreign Secretary (but he’ll be answerable to, and speak from, the House of Lords, not the Commons) pic.twitter.com/TZ8Au3Bo2w— Chris Ship (@chrisshipitv) November 13, 2023
Cameron takes over from James Cleverly, who is the new Home Secretary, succeeding Suella Braverman who has been sacked.
Cameron, who resigned as Prime Minister, after failing to win the Brexit referendum, will join the House of Lords as he is no longer an MP.
Braverman's exit ends a controversial tenure at the Home Office, in which she recently prompted widespread anger with her comments on rough sleeping being a “lifestyle choice” and criticism of the Met Police’s handling of pro-Palestinian protests in recent days.
Tullow Oil facility removes key drag on share price
Peel Hunt (LON:PEEL) thinks Tullow Oil's new new facility represents important third-party validation of its business model, particularly given it is from a single counterparty who is a major player in the commodities space.
Tullow (LON:TLW) has now entered into oil marketing and offtake agreements with Glencore (LON:GLEN) for its Ghana and Gabon production, it pointed out.
"In our view, the new US$400m facility significantly de-risks Tullow’s ability to refinance its 2026 notes," the broker said.
"This uncertainty has been a key drag on the share price," it explained.
The broker reiterated its 75p target price and buy rating.
Shares remain in demand, up 7.9%