Proactive Investors -
- FTSE 100 extends gains after US markets rally
- Government drawing up plans for collapse of Thames Water - reports
- Boohoo and Revolution Beauty in war of words after AGM drama
11.39am: Thames Water says financing talks continue
Thames Water has spoken after the press speculation about its future.
It said talks continue with regard to the further equity funding expected to be required to support Thames Water's turnaround and investment plans.
"Ofwat is being kept fully informed on progress of the company's turnaround and engagement with shareholders," it added in a statement.
The firm said it continues to maintain a strong liquidity position, including £4.4bn of cash and committed funding, as at 31 March 2023.
11.10am: Water privatisation has "totally failed"
The potential collapse of Thames Water has sparked debate about whether water companies should be nationalised.
Cat Hobbs, Director of public ownership campaign group We Own It, said: "Water privatisation has totally failed and Thames Water being on the point of collapse makes this painfully clear."
"England has chosen to hand over its essential water infrastructure wholesale to privatised monopolies, owned by a handful of shareholders around the world."
"They’ve extracted £72bn in dividends while letting pipes leak and pouring sewage into our rivers and seas. And they’ve collectively built up a debt mountain of £53bn, although they started out in 1989 with zero debt."
10.30am: MP says banks has questions to answer over speed of passing on rate rises
The Work and Pensions Secretary has said there is a “question to be asked” about how quickly banks are passing interest rate rises to savers.
Lenders have faced criticism for raising mortgage rates as the Bank of England increases interest rates to fight inflation but not raising savings rates at the same speed.
Speaking to LBC, Mel Stride said: "There’s certainly a question to be asked about the speed at which banks pass on the benefits of these interest rates. That’s a way of saying it’s definitely something to be looking at."
"The Chancellor has had the banks in for some very serious conversations about this. The Financial Conduct Authority... also oversees that sector and is looking at exactly those kinds of issues."
"So it is something that’s right up there on the Treasury’s agenda at the moment."
"I think the general feeling is that there is a question mark hanging over whether they are passing on these benefits to savers quickly enough."
"And what I’m reassuring your listeners of is that we are absolutely looking at that."
10.07am: Utilities steady despite Thames Water reports
The reports that the government has begun drawing up contingency plans for the collapse of Thames Water have not hit listed water companies, so far at least.
Neil Wilson at Markets.com said investors appeared to have "shrugged off" the drama.
"While it is not a listed business, such news would normally cause investors to speculate what might happen to other companies in the sector."
“Shares in United Utilities, Severn Trent (LON:SVT) and Pennon (LON:PNN) barely moved, suggesting that investors see Thames Water as a company-specific problem (drowning in debt) rather than the start of broader trouble,” he commented.
Shares in all three were little changed while the FTSE 100 is 30 points to the good at 7,492.
9.51am: Sage boosted by JP Morgan upgrade
Sage, the online accountancy software provider, sits top of the FTSE 100 risers as JP Morgan took a more positive view of the stock.
The US investment bank has upgraded Sage to overweight from neutral and increased its price target to 1,110p from 860p.
The broker has also placed Sage on its 'analyst focus list'. The news helped push the shares 4.1% higher to 909.20p.
But JP Morgan was less bullish on online insurers, Direct Line and Admiral.
It has placed both stocks on 'negative catalyst watch.'
Shares in Admiral fell 3.6% - the biggest faller in the FTSE 100 - and Direct Line by 1.4%.
9.36am: Defra in emergency talks with Ofwat over Thames Water - FT
A bit more on the situation at Thames Water. The Financial Times reports officials have confirmed that Defra, the environment ministry, is holding emergency talks with industry regulator Ofwat to consider contingency plans in case the company is unable to raise private finance in the coming weeks.
As previously reported one leading option is placing Thames - the UK’s biggest water company - into a special administration regime that would effectively mean public ownership.
9.25am: Revolution Beauty and boohoo need to work together and put spat behind them
The spat between boohoo and Revolution Beauty continues to attract attention although Russ Mould at AJ Bell thinks both sides "could do with putting the war of words behind them and working together ," for the sake of other shareholders.
"A fashion for retail businesses to take stakes in their peers was always a recipe for friction and Boohoo has certainly been throwing its weight around after taking a hefty stake in the cosmetics business," he pointed out.
He described the scenes at yesterday's AGM as "unedifying" and "somewhat farcical" where Boohoo was successful in ousting the senior management only for the sole remaining director to bring in two non-executive directors who then reappointed the executives which had been forced out.
“Revolution Beauty’s contention that Boohoo is aiming to take the company over by stealth through a boardroom coup without making an offer for the business may find some sympathy with minority shareholders," Mould explained.
“The return from suspension today is welcome news for investors and the shares have surged higher, although, at 29p, it is a long road back to the issue price of 160p from its 2021 IPO," he added.
Shares in Revolution Beauty were trading 57% higher compared to their suspension price.
Meanwhile, the FTSE 100 is up 38 points at 7,500.
8.47am: FTSE 100 holds gains despite more signs of housing market stress
The FTSE 100 remains firmly in the green despite further signs of easing house prices in the UK and an escaltion in the chip war between the US and China.
At 8.50am, London's lead index was up 30 points at 7,492.
Susannah Streeter at Hargreaves Lansdown (LON:HRGV) noted the "upbeat sentiment about signs of resilience for the mighty American economy is over-riding worries about China’s flagging recovery and fresh signals that another twist in the chip wars is set to emerge."
"Reports that President Biden is considering slapping further export bans on AI chips headed for China dented the share price of Nvidia and AMD in after-hours trading," she pointed out.
"The chip makers which have been enjoying a boom amid expectations of soaring demand for artificial intelligence largely erased gains made over the session," she added.
In the UK, more than four in 10 UK house sellers are having to shave more than 5% off the original asking price to achieve a sale, according to Zoopla, in signs that rising mortgage rates are dampening the market.
The property website said this proportion, seen in June, is the highest it has recorded since 2018. Around one in six, 15% of, sellers are having to shave more than 10% off the initial asking price to get a sale over the line, Zoopla said.
"Our view remains that 5% mortgage rates represent a tipping point, beyond which house prices will post annual price falls with lower sales volumes," Zoopla said
8.15am: FTSE on the front foot after strong US data
London’s blue-chips have made a bright start to trading after a batch of surprisingly robust US data raised hopes the world’s largest economy may avoid a recession.
Deutsche Bank’s Jim Reid noted: “Risk appetite has returned to markets over the last 24 hours, aided by a strong set of US data releases that dampened fears about an imminent recession after weaker data over the last week.”
At 8.15am, the FTSE 100 was 19.89 points at 7,481.35 while the FTSE 250 jumped 60.64 points to 18,115.48.
Mulberry jumped 4% despite a drop in annual profit and a reduced dividend.
The luxury goods maker said revenue for the first 12 weeks of the new financial year is 6% ahead of last year with retail revenue up 15%, with the newly acquired Sweden and Australia stores continuing to perform well.
“We are confident in our strategy and continue to invest, including in further store openings across the network planned later this year,” said Chief Executive Thierry Andretta.
Revolution Beauty shares resumed trading after its lengthy suspension as the war of words with major shareholder boohoo.com continued.
The two sides have been swapping barbs after a dramatic AGM yesterday which saw three senior board members removed, after a shareholder vote, only to be reappointed soon after.
Boohoo said it had “serious concerns” over the conduct at the AGM while Revolution Beauty described boohoo’s approach as “nothing short of value-destructive, opportunistic and self-serving.”
Away from corporate news and the other focus today will the ECB’s Sintra conference, that will feature all of Fed Chair Powell, ECB President Lagarde, BoJ Governor Ueda and BoE Governor Bailey later today.
7.56am: Mulberry slashes dividend as profit falls
Mulberry slashed the final dividend after reported a sharp drop in annual profit after a “challenging” first half of the year, although revenue edged higher.
The luxury goods company, famous for its handbags, said revenue in the 52 weeks to April 1 rose
4% to £159.1mln from £152.4mln the year prior, “despite macro-economic uncertainty.”
But reported pre-tax profit for the period fell to £13.2mln from £21.3mln while the final dividend was lowered to 1p per share from 3p.
UK retail sales eased slightly to £87.7mln from £88.5mln reflecting an improved performance in the second half of the year.
The international business was the star performer with sales up 12% to £46.5mln while Asia Pacific sales edged up 3% to £28.9mln despite a number of Covid-19 lockdowns in the region, particularly in China and South Korea.
Mulberry said revenue for the first 12 weeks of the new financial year is 6% ahead of last year with retail revenue up 15%, with the newly acquired Sweden and Australia stores continuing to perform well.
“We are confident in our strategy and continue to invest, including in further store openings across the network planned later this year,” said Chief Executive Thierry Andretta.
7.35am: Revolution Beauty and boohoo war of words continues
The war of words between Revolution Beauty and boohoo.com continued after a dramatic AGM yesterday which saw three senior Board members removed, and subsequently, reappointed.
Boohoo, which holds a 26.6% stake in Revolution Beauty opposed the relection of Chief Executive Bob Holt, Chief Financial Officer Elizabeth Lake and Chair Derek Zissman, and all three were initially ousted from the board.
It meant Non-Executive Director Jeremy Schwartz, was briefly the beauty products seller's sole board member.
With three board members required to meet the group’s Articles of Association, Schwartz appointed two non-executive directors, and those three then re-appointed the ‘ousted three’.
Revolution Beauty described the approach taken by boohoo as “nothing short of value-destructive, opportunistic and self-serving.”
“Boohoo is seeking to stage a board and management control coup without making a general offer, or paying a single penny,” it continued.
For its part, boohoo, said it had “serious concerns” regarding the conduct of the board of Revolution Beauty at, and immediately following, the AGM, which it said were “self-serving and not in the best interests of shareholders.”
It said Schwartz’s actions “contravened corporate governance best practice and disregarded the expressed opinion of the company's shareholders.”
“This will likely result in significant remuneration and share awards for members of a self-elected board,” boohoo added.
Boohoo called on the company to convene a general meeting to remove Holt, Lake and Zissman and appoint Alistair McGeorge and Neil Catto as directors.
McGeorge, a boohoo non-executive director, is the current non-executive chair of tonic waters and mixers producer East Imperial PLC (LSE:LON:EISB).
Catto is currently a non-executive director at tinyBuild, and was previously chief financial officer of boohoo between 2011 and 2022.
Amongst all the drama, shares in Revolution Beauty are set to resume trading today after a long suspension.
7.07am: Government monitoring Thames Water as debt concerns mount
The government has begun drawing up contingency plans for the collapse of Thames Water amid growing doubts in Whitehall about the ability of Britain’s biggest water company to service its £14bn debt-pile, according to Sky News.
Sky has learnt that ministers and Ofwat, the industry regulator, have started to hold discussions about the possibility of placing Thames Water into a special administration regime that would effectively take the company into temporary public ownership.
Such a process was used when the energy supplier Bulb collapsed in 2021.
On Tuesday, Sarah Bentley, its chief executive for the last three years, resigned with immediate effect, saying: "The foundations of the turnaround that we have laid position the company for future success to improve service for customers and environmental performance."
The Daily Telegraph reported on Tuesday night that Thames Water was still trying to raise £1bn from shareholders and that AlixPartners had been drafted in to advise on the company's operational turnaround plans.
Thames Water is owned by a consortium of pension funds and sovereign wealth funds, many of which are understood to be sceptical about delivering additional funding.
Its largest shareholder is Ontario Municipal Employees Retirement System which holds a stake of nearly 32%, according to Thames Water's website.
Others include China Investment Corporation, the Universities Superannuation Scheme and Infinity Investments.
Thames Water serves 15mln customers across London and the south-east of England, and has come under intense pressure in recent years because of its poor record on leaks, sewage contamination, executive pay and shareholder dividends.
7.00am: FTSE 100 expected to push higher on brighter global economic picture
The FTSE 100 is expected to open higher on Wednesday after gains in the US after a batch of surprisingly robust economic data.
Spread betting companies are calling London’s lead index up 25 points from Tuesday’s close of 7,461.46.
Consumer confidence, housing sales and durable goods orders all surprised on the upside boosting hopes that the world’s largest economy may yet swerve a recession.
There was also better news on global inflation with weaker than expected figures in Australia and Canada.
The Australian Bureau of Statistics said that inflation eased to 5.6% from 6.8%, with petrol prices dropping by 8%.
In the US, the Dow Jones Industrial Average rose 212.03 points, or 0.6%, at 33,926.74. The S&P 500 gained 49.59 points, or 1.2%, at 4,378.41, and the Nasdaq Composite jumped 219.89 points, or 1.7%, at 13,555.67.
In Asia, the Nikkei in Tokyo rose strongly while the Shanghai Composite in Beijing and Hang Seng in Hong Kong edged lower.
Back in London, and utilities will be in focus on reports the government has started drawing up contingency plans for the collapse of Thames Water amid growing doubts in Whitehall about the ability of Britain’s biggest water company to service its £14bn debt-pile.
Sky reported the news which comes after Thames Water CEO, Sarah Bentley, resigned.
The Telegraph reported on Tuesday night that the firm was still trying to raise £1bn from shareholders and that AlixPartners had been drafted in to advise on the company's operational turnaround plans.