Stagecoach Group (SGC) has started its second legal action against the Department for Transport in less than a month after the bus, coach and train operator was shut out of the bidding process for key rail franchises in a row over staff pensions. In the latest stage of a battle that lays bare the crisis facing the rail franchising system, Stagecoach said today that, along with several consortium partners, it had begun legal action against the DfT after being prevented from bidding for the West Coast Partnership contract. It was joined in its action by the French railways group SNCF and Virgin, part of Sir Richard Branson’s trading empire. The action comes after the DfT blocked all three companies from bidding for the East Midlands, West Coast Partnership and Southeastern franchise competitions. Stagecoach argues that it was unfairly excluded from bidding for the franchises after it refused to take on open-ended pension liabilities for staff. Chris Grayling, the transport secretary, argued that the group had disqualified itself after its submission did not comply with the department’s requirements.
Mothercare (MTC) surged as the baby and maternity care retailer narrowed its annual losses and cut back its debts as the wider market took in Theresa May’s resignation. Shares in Mothercare surged 2¼p to 22¾p, after it reported a pre-tax loss of £67 million for last year: still in the red but better than the previous year’s loss of £94 million. The company said that it had slashed its net debts from £44.1 million to £6.9 million and completed its shop closure programme: it is now trading from 79 shops, down from 134 the previous year. Mothercare opened its first shop in Surrey in 1961 and used to be the favoured destination of parents-to-be and the mothers and fathers of babies and young children. It has increasingly found itself overtaken by rivals and has suffered the effects of the crisis gripping the high street.
M&S pays £30m fees for Ocado rights issue. Investors in Marks & Spencer Group (MKS) have raised concerns about the £30 million in fees and expenses the retailer is spending on its cash call to finance its food delivery venture with Ocado Group (OCDO). M&S is tapping shareholders for £601.3 million in a deeply discounted one-for-five rights issue. However, under the terms of the share sale, unveiled this week, the retailer disclosed that the proceeds would actually amount to £570.7 million once fees and expenses were paid. A top ten shareholder told The Times that they supported the M&S strategy and the “boldness” of the Ocado tie-up but added: “It is the structure of the deal which has incurred £30 million in fees that might be questioned.”
New River and Pimco team up to give retail parks some love. NewRiver REIT (NRR) has launched the partnership with Pimco’s Bravo Strategies III, a private equity-style fund, with the acquisition of four retail parks in Aberdeen, Dundee, Inverness and the Isle of Wight for £60.5 million. It plans to boost the portfolio to about £500 million of assets over the next few years. Allan Lockhart, chief executive of New River Reit, said: “Pimco is a global investor so they are looking at pricing globally and areas where there is some dislocation. UK retail is very dislocated and, from a pricing perspective, it is very attractive compared with [other sectors such as] industrial and logistics.”
Ringing endorsement for AJ Bell in platform’s first results since listing. One of Britain’s biggest investment platforms has posted a rise in profits and revenues in its maiden set of results as a listed company. The flotation of AJ Bell (AJB) has been one of the few success stories of the London stock market in recent months. Shares that were priced at 160p less than six months ago have more than doubled since the initial public offering. The company said pre-tax profits climbed 27% to £17.7 million in the six months to the end of March on revenues that increased by 17% to £50.1 million. Assets under administration were up 3% to £47.7 billion and the number of retail customers rose by 9% to 214,853.
The fashion for binge watching dramas on Netflix and streaming videos on YouTube has helped TalkTalk Telecom Group (TALK) return to “sustainable” growth. The no-frills broadband supplier said that subscribers were upgrading to faster services amid an explosion in online TV, film and video streaming. “There has been a big switch from copper lines to fibre,” Tristia Harrison, the chief executive, said. Data usage is growing by 40% annually, with video accounting for 60% of that, she said. “Gaming is enormous too,” she added. The surge in fibre subscriptions helped Talktalk to cut its pre-tax losses to £5 million in the 12 months to May 31, from £100 million previously. Turnover fell from £1.65 billion to £1.63 billion but rose slightly after stripping out sales from its closed mobile phone wing.
Serco to spend £170m on naval deal with Alion to capitalise on Trump warship plans. Serco Group (SRP) is to buy an American naval engineer for $225 million as it seeks to capitalise on President Trump’s plan to build dozens of new warships. The British outsourcer will pay £173 million for the naval systems unit of Alion, a privately held engineering company that provides artificial intelligence, science and technology services to the US military. Alion’s naval systems business employs about 1,000 people who assist in the design of ships and submarines and provide support after they enter service. Customers include the US navy, US army, US coastguard and Royal Canadian navy.
United Utilities Group (UU.) resists a pop at Labour. Britain’s largest listed water company has declined to criticise Labour’s plans to renationalise it, declaring itself powerless to influence voters. United Utilities reiterated in its full-year results that the threat of renationalisation was a “key area of uncertainty” and that the prospect of being acquired “below fair value” was one of the principal risks facing the company. Steve Mogford, the chief executive, issued a robust defence of its performance as a listed company but would not specify any potential downsides to Labour’s plans. “In the renationalisation environment we are in the political environment there and we are not necessarily going to be able to influence what voters do,” he told The Times. “I think the best thing we can do is focus on performing as a responsible company.”
GlaxoSmithKline (GSK) is to reintroduce incentive payments for sales representatives in some countries to retain talent after stopping them for years after scandals over illegal sales practices. Glaxo said in a statement that loosening the reins on bonuses would “uphold our ethical and values-led approach to healthcare professionals engagement, in full compliance with laws and policies, while supporting delivery of strong performance”. The company said the partial reversal reflected the shift in Glaxo’s portfolio towards speciality care products such as oncology. The new pay scheme will be focused on those therapeutic areas while remaining more conservative in primary care and vaccines.
Merlin’s magic has lost spell, says activist investor. An American activist investor is attempting to put Merlin Entertainments (MERL) in play after calling on the theme park operator behind the London Eye and Madame Tussauds to seek out a buyer to take the group private. The group confirmed to the stock market yesterday that it had received the demand from Valueact Capital, a US-based activist known for its turnaround campaign at Rolls-Royce. Valueact, which first declared a holding in Merlin in February last year, has built a 9.3% stake, second only to Kirkbi, the investment vehicle of the family that controls the Lego toy empire. Kirkbi has 29.6% of the Legoland operator.
Concern about B&M European Value Retail S.A. (DI) (BME) German business and a weak period for homeware sales took the shine off the bargain retailer’s improved profit and revenue growth. The aggressively expanding discount chain, which sells goods ranging from groceries, lights, DIY tools and gardening equipment to pet accessories, said that pre-tax profit rose by 8.7% to £249.4 million on revenue 17.1% higher at more than £3.4 billion in the year to March 30. The group said its results were tempered by the weak performance of its homeware lines in the second and third quarters, which prompted an overhaul of the category. In addition, it faced declining profitability at its Jawoll chain in Germany because of its efforts to shift slow-moving stock. “With most of this costly activity now concluded, the Jawoll team are able to offer its shoppers a more compelling product range, utilising B&M’s approach to limited assortment and directly sourced product being the key drivers of our disruptive pricing in the UK,” the group said.
Record order book for defence supplier QinetiQ Group (QQ.) Qinetiq has reported a record £3.1 billion order book and says it is on track for further growth next year. Shares in the group rose after it said revenues increased by 9% to £911.1 million in the past financial year, its third successive year of growth. Underlying operating profits edged up by 1% to £124 million and the company increased its dividend by 5% to 6.6p a share. Qinetiq is aiming to increase the share of its income it derives from overseas. Steve Wadey, chief executive, said it had increased its international revenue share from 21% to 30% over the past three years. He added: “We are pleased to report another year of organic revenue growth and record order backlog. Three years since launching our vision-based strategy we have reversed five years of revenue decline and delivered three years of growth.”
Royal Mail (RMG) slumped to a record low because of fears over its performance and a possible return to state ownership. Ministers were accused of selling the company on the cheap after it floated at 330p a share in October 2013. Within months, they were trading above £6. Since peaking at 631p a year ago, however, they have fallen as a profit warning bolstered concerns. This week, as the political way forward looked distinctly unclear, Royal Mail said that it would invest £1.8 billion in the postal service over five years under a turnround plan aimed at securing the future of the 500-year-old organisation as management warned investors to expect lower dividends. Rico Back, 65, the mid-cap company’s boss, insisted that the decision was not “taken lightly”. News of a lower payout arrived alongside results that one trader described as “pretty mediocre”. Liberum said that profits had been dented by weakness in its UK parcels, international and letters division.
Babcock International Group (BAB) slid to a new decade-low after telling investors that profit and revenue would fall over the coming year. JP Morgan downgraded the defence group from “overweight” to “neutral” and sliced its target price from 772p to 557p.
Travel and holiday companies led the blue-chip index lower, weighed down by nervousness over weak demand for overseas getaways. A Barclays survey intensified the angst, saying that more Britons are set to choose “staycations” this year. TUI AG Reg Shs (DI) (TUI) closed down by 40p at 740¼p. Wizz Air Holdings (WIZZ) slipped 23p to £30.79. International Consolidated Airlines Group SA (CDI) (IAG), and easyJet (EZJ) bounced back later, however, to finish 6p higher at 478¾p and just a quarter of a penny lower at 927p respectively.
Triton Partners has bid for the Nordic operations of the troubled travel group Thomas Cook Group (TCG). Shares in the struggling British company edged higher last night, gaining 2% to 12½p, after it confirmed that it had received a “highly preliminary and unsolicited indicative offer” for its northern European division, first reported by Sky News. The division includes its tour operator and airline in Norway, Sweden, Finland and Denmark. “The group is currently evaluating this offer,” Thomas Cook said. “The group has received multiple bids, including for the whole, and parts, of the airline business and the board of Thomas Cook will consider these approaches with the aim of maximising value for all shareholders.” It added that “there can be no certainty” over the prospect of a deal with Triton.
Tempus – EnQuest (ENQ): Hold. There is little upside in jettisoning the shares now. Operational and fiscal improvements are coming through steadily
Tempus – Acacia Mining (ACA): Resist offer. Lowball offer tramples minority interests
