WINNERS & LOSERS SUMMARY: Kier Sinks After Suspending Dividend

(Alliance News) - The following stocks are the leading risers and fallers within the main London ...

Alliance News 17 June, 2019 | 10:15AM
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(Alliance News) - The following stocks are the leading risers and fallers within the main London indices on Monday.
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FTSE 100 - WINNERS
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Royal Bank of Scotland, up 2.2%. The state-backed lender said the completion of the merger between two Saudi Arabia based banks - Alawwal bank and Saudi British Bank - will lead to a "positive and material financial impact". RBS, through its Dutch-domiciled investment bank NatWest Markets, was part of a consortium including Stichting Administratiekantoor Beheer Financiele Instellingen and Spain's Banco Santander that held an aggregate 40% equity stake in Alawwal bank. The interest of RBS was equivalent to a 15.3% shareholding in Alawwal bank. RBS said as a result of the merger completion on Sunday, the NatWest Markets unit would recognise an income gain on the disposal of the Alawwal bank stake for shares in Saudi British Bank of GBP400 million and a reduction in risk weighted assets of GBP4.7 billion. RBS will also remove legacy liabilities of GBP300 million due to the merger. In total, RBS will record a GBP700 million profit attributable to shareholders as a result of the Saudi bank combination. It also anticipates the merger to increase its CET1 core capital ratio at March 31 by 60 basis points, being 20 points attributable profit and 40 points to reduction in risk weighted assets.
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FTSE 100 - LOSERS
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easyJet, down 4.5%, International Consolidated Airlines Group, down 3.6%. The airlines were lower following a profit warning from peer Deutsche Lufthansa. The German airline reduced its annual financial outlook, due to narrowed margins and losses by its budget carrier Eurowings. Lufthansa blamed "price deterioration in Europe caused by market-wide overcapacities and aggressively growing low cost competitors are putting pressure on yields in the European short-haul market". The German airline said it now expects adjusted earnings before interest and tax of EUR2.0 billion to EUR2.4 billion in 2019, on the basis of low-single-digit revenue growth. In 2018, Lufthansa reported adjusted Ebit of EUR2.8 billion, down from EUR3.0 billion in 2017. Lufthansa shares were down 12% in Frankfurt. In addition, eastern Europe-focused airline Wizz Air was down 3.2% and Irish carrier Ryanair Holdings was down 4.3%.
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DS Smith, down 3.1%. Exane BNP cut the paper and packaging company to Underperform from Neutral.
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British American Tobacco, down 1.7%. Morgan Stanley downgraded the Dunhill and Lucky Strike cigarette maker to Underweight from Equal Weight.
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FTSE 250 - WINNERS
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Babcock International, up 4.2%. The defence outsourcer confirmed it rejected in January an approach from outsourcer Serco Group. The proposal was unsolicited and "highly preliminary", Babcock said, and involved an all-share merger. No further proposal has been received since January. The Sunday Times had reported Serco made at least two attempts to merge with Babcock. Serco shares were down 0.2%.
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Hammerson, up 2.5%. Peel Hunt raised the shopping mall operator to Add from Hold.
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FTSE 250 - LOSERS
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Kier Group, down 10%. The troubled construction firm said it will cut 1,200 jobs, suspend dividend payments and earmark several non-core business disposals, as it looks to get its balance sheet under control. Kier put up for sale Kier Living, its housebuilding business, saying that despite being a strong business it would require significant funding to keep growing. So far there have been "a number" of expressions of interest. Kier Property also has been put up for sale, with the investment required likewise "incompatible" with Kier's capital requirements, and Kier also will be quitting the Management and Environmental Services businesses. Kier suspended dividend payments for its year ending June, and the following financial year. At the interim stage, Kier slashed its first half dividend 79% to 4.9 pence a share. "New CEO Andrew Davies is not stopping at just the dividend. He is taking drastic action in an attempt to avoid Kier suffering a similar fate to its doomed peer Carillion. Jobs are being slashed, the housebuilding unit is being sold and the company is prioritising cash flow. These all seem like sensible steps but delivering on this plan will not be easy," said AJ Bell's Russ Mould.
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OTHER MAIN MARKET AND AIM - WINNERS
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Union Jack Oil, up 26%, Reabold Resources, up 21%. The oil and gas firms announced potentially the biggest onshore find in the UK since 1973. The gas discovery has been made on the West Newton A-2 well in Humberside in the north-east of England, an area with "an abundance" of production infrastructure, Reabold said. Reabold owns 24% of the PEDL183 licence on which the well is situated, with Union Jack owning just shy of 17%. The licence is operated by Rathlin Energy UK. The well was drilled to a depth of 2,061 metres, finding a net 65-metre hydrocarbon interval within the Kirkham Abbey formation, which indicates a "substantial" accumulation, Reabold said. Overall, the field could include "at least" 189 billion cubic feet of gas, equivalent to around 31.3 million barrels of oil. Drilling is finished, and planning has already been received for testing of the well. This will start in the third quarter of the year, Reabold added.
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OTHER MAIN MARKET AND AIM - LOSERS
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Staffline Group, down 30%. The recruiter said it would scrap its dividend and announced plans for a GBP30 million share placing, in a bid to reduce debt. Staffline is planning a GBP30 million share placing in order to cut its ratio of net debt to underlying earnings before interest, depreciation, taxation, and amortisation to below two times. If an equity capital raise goes ahead, Staffline also expects to launch a GBP7 million open offer "to enable wider shareholder participation". Staffline said it will not be recommending a final dividend for 2018 but did reiterate its guidance for an underlying 2018 performance "in line with expectations". Moreover, the company expects its underlying earnings before interest and taxation in 2019 to be somewhere between GBP23 million and GBP28 million. Net debt at the end of 2019, before proceeds of any equity capital raise, is due "to be in line with current market expectations". In May, Staffline had warned that it was facing headwinds in its training and recruitment divisions. On Monday, Staffline said it may require a waiver of possible future breaches to the leverage covenant in its lending agreements.
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By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar Rating
Union Jack Oil PLC 0.31 GBX 0.00 -
Reabold Resources PLC 1.23 GBX 4.26 -
Staffline Group PLC 150.00 GBX 0.00 -
Smith (DS) PLC 313.80 GBX 1.92 -
Wizz Air Holdings PLC 3,419.00 GBX 0.89 -
Hammerson PLC 206.60 GBX 1.32 -
Kier Group PLC 111.20 GBX 8.07 -
Ryanair Holdings PLC 8.62 EUR -1.60 -
Babcock International Group PLC 464.50 GBX 0.52 -
British American Tobacco PLC 3,029.00 GBX -0.67
easyJet PLC 887.00 GBX -0.27 -
The Royal Bank of Scotland Group PLC 182.15 GBX 2.53
Serco Group PLC 141.90 GBX 0.78 -
International Consolidated Airlines Group SA 421.80 GBX 1.32 -
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