LONDON BRIEFING: UK cuts NatWest stake; THG and IAG raise funds

(Alliance News) - Three large stock and bond sales attracted attention early Tuesday, suggesting ...

Alliance News 11 May, 2021 | 8:18AM
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(Alliance News) - Three large stock and bond sales attracted attention early Tuesday, suggesting continued strength in capital markets despite concern in the US about rising inflation that sent New York and London both lower.

The UK government raised GBP1.10 billion by selling down its stake in lender NatWest to under 55%.

THG, better known as The Hut Group, raised USD1.05 billion from a share placing, plus a subscription by tech investor SoftBank.

Airline group IAG raised EUR800.0 million from a bond issue to tide it over until travel picks up.

NatWest was down 3.6% at 189.90 pence per share early Tuesday. THG was up 15% at 682.13p. IAG was down 4.8% at 199.82p.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: down 1.8% at 6,995.48

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Hang Seng: down 1.8% at 28,078.60

Nikkei 225: closed down 3.1% at 28,608.59

DJIA: closed down 34.94 points or 0.1%, at 34,742.82

S&P 500: closed down 44.17 points, or 1.0%, at 4,188.43

Nasdaq Composite: closed down 350.38 points, or 2.6%, at 13,401.86

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EUR: down at USD1.2139 (USD1.2156)

GBP: down at USD1.4115 (USD1.4130)

USD: up at JPY108.91 (JPY108.75)

Gold: down at USD1,834.59 per ounce (USD1,837.81)

Oil (Brent): up at USD67.83 a barrel (USD67.71)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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Tuesday's Key Economic Events still to come

1100 CEST Germany ZEW indicator of economic sentiment

1630 EDT US API weekly statistical bulletin

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People in England will be able to hug loved ones, dine in restaurants and go on holiday abroad from next week in a "considerable step on the road back to normality", UK Prime Minister Boris Johnson confirmed on Monday. The move to the next stage of the road map out of lockdown on May 17 came as the Covid-19 alert level in the UK was downgraded after a "consistent" fall in cases, hospital admissions and deaths. Scottish First Minister Nicola Sturgeon will give an update on restrictions on Tuesday, having indicated Scotland could be granted renewed freedoms along similar lines from Monday. Confirmation that England would move to step three on the road map came from Johnson at a Downing Street press conference after a Cabinet meeting to sign off the change. The road map remained on track for the next stage on June 21 and Mr Johnson promised that later this month the government would set out "what role there could be – if any – for certification and social distancing". The government has been reviewing whether Covid status certification, recording whether people have had a vaccine or negative test result, could be used to help open up businesses and Johnson's comments could be a hint they are no longer a priority. Johnson said current data indicated it might be possible to scrap the "one-metre plus" rule, which would greatly increase flexibility for businesses to increase capacity.

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Scandal-hit financier Lex Greensill will be questioned by UK members of Parliament over the collapse of his firm and the lobbying controversy centred on former prime minister David Cameron. MPs on the cross-party Treasury Committee will quiz the boss on Tuesday afternoon on the demise of Greensill Capital, which jeopardised 5,000 steelmaking jobs in the UK. The committee's inquiry is also investigating how Cameron lobbied UK Chancellor Rishi Sunak over access to government-backed coronavirus loans for Greensill. Ahead of his appearance, the MPs are expected to publish correspondence received from the subjects of the inquiry after they were issued with a series of questions. Cameron, who was employed as an adviser to Greensill after leaving government, will appear before the Commons committee on Thursday.

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BROKER RATING CHANGES

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GOLDMAN SACHS RAISES VODAFONE TO 'CONVICTION BUY LIST' (BUY) - PRICE TARGET 195 (165) PENCE

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ODDO BHF CUTS WIZZ AIR TO 'NEUTRAL' (OUTPERFORM) - PRICE TARGET 5,100 (5,550) PENCE

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GOLDMAN STARTS DELIVEROO WITH 'BUY' - PRICE TARGET 420 PENCE

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JEFFERIES STARTS DELIVEROO WITH 'BUY' - PRICE TARGET 390 PENCE

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JPMORGAN STARTS DELIVEROO WITH 'NEUTRAL' - PRICE TARGET 285 PENCE

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COMPANIES - FTSE 100

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The UK government has raised GBP1.10 billion from the sale of 580.0 million shares in lender NatWest. The placing price was 190 pence, a 3.6% discount to Monday's closing price of 197.05p. NatWest shares have risen 18% since 2021 began, and are up 73% over the past 52 weeks. The sale means the UK government now holds a 54.8% stake in NatWest, down from 59.8% previously. UK Government Investments - which was set up by former chancellor George Osborne to offload UK government-owned companies - first announced its intention to cut its NatWest stake below 55% after the market close on Monday. In mid-March, the UK government sold 590.7 million shares at a price of GBP1.12 billion, reducing its stake to 59.8% from 61.7%. The UK government first began building its majority stake in the bank from October 2008 during the financial crisis as it looked to inject funds into the banking system. As a result, the government ended up holding an 81% stake in the lender - called Royal Bank of Scotland Group at the time - after a hefty GBP45.5 billion taxpayer bailout.

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International Consolidated Airlines launched a bond offering amid ongoing uncertainty over air travel. The British Airways parent is launching an offer worth EUR800.0 million of senior unsecured bonds convertible into shares. "Given the continuing uncertainty in respect of air travel, the net proceeds from the offering will be used by IAG to (i) strengthen the group's balance sheet and increase the group's overall liquidity position and (ii) provide the group with increased operational and strategic flexibility to take advantage of a recovery in demand," the company said. The offering comes after disappointment over the UK government's plans to reopen the travel industry. On Friday evening, Westminster revealed that Portugal, Gibraltar and Israel are among just 12 destinations on England's new 'green list' for travel.

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UK grocer Wm Morrison reported a strong start to its financial year amid a supermarket "renaissance". Against volatile trading a year ago during the onset of the Covid-19 pandemic, Morrisons said it sustained a "roust" sales performance throughout the first quarter of its 2022 financial year. Total sales rose 5.3% including fuel, while like-for-likes were up 4.7%, with fuel volumes "almost back" to pre-pandemic levels by the end of the period. Excluding fuel, like-for-like sales were up 2.7% year-on-year and two-year sales - being a comparison against a pre-pandemic period - were up 8.7%. The grocer incurred a further GBP27 million of Covid-19 costs in the quarter, in line with its expectations. Given the strong start, Morrisons retained its full-year profit guidance. However, it is "now confident of a year of meaningful profit growth" for the 2023 financial year.

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COMPANIES - MAIN MARKET AND AIM

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THG said it has raised USD1.05 billion via an upsized share placing, together with a share subscription by a SoftBank subsidiary. Due to strong demand in the bookbuild, THG said its placing was bumped up to USD320 million from USD270 million. Further, SBM, a subsidiary of Tokyo-based tech investor SoftBank, has subscribed for USD730 million. THG late Monday said it has inked a financial and trading partnership with SBM under which they will explore potential commercial arrangements with each other. The collaboration comprises the USD730 million subscription by SBM in THG shares, plus an option to subscribe for a 20% interest in THG Ingenuity. In addition, THG has agreed to acquire New Jersey-based skincare and haircare products Bentley Technologies from its founder and the Riverside Co for USD255 million on a cash and debt-free basis.

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COMPANIES - GLOBAL

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Softbank also released annual results on Tuesday. Net income fell 7.5% to JPY506.67 billion, about USD4.7 billion, from JPY547.72 billion, as revenue declined by 2.6% to JPY2.697 trillion from JPY2.770 trillion. Additionally, SoftBank said it is forming a "capital and business alliance" with Kuala Lumpur-based data and AI company Axiata Digital Advertising. As part of the deal, SoftBank is taking a 23.1% stake in ADA for USD60 million. On top of that, Daichi Nozaki, SoftBank vice president & head of the Enterprise Business Unit's global business division, will join the ADA board in mid-May.

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Tuesday's Shareholder Meetings

AstraZeneca PLC - AGM

AstraZeneca PLC - GM re acquisition of Alexion Pharmaceuticals Inc

Cairn Energy PLC - AGM

Caledonia Mining Corp PLC - AGM

Capita PLC - AGM

Capital & Counties Properties PLC - AGM

Centamin PLC - AGM

Fidelity European Trust PLC - AGM

GLI Finance Ltd - AGM

Gym Group PLC - AGM

HgCapital Trust PLC - AGM

Irish Residential Properties REIT PLC - AGM

IWG PLC - AGM

Just Group PLC - AGM

Macfarlane Group PLC - AGM

Vector Capital PLC - AGM

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By Tom Waite; thomaslwaite@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Wizz Air Holdings PLC 5,084.00 GBX 2.11
THG PLC Ordinary Share 609.50 GBX -2.01 -
Deliveroo PLC 253.48 GBX -1.06 -
Vodafone Group PLC 129.96 GBX 0.39
International Consolidated Airlines Group SA 201.80 GBX 2.02
NatWest Group PLC 204.80 GBX 1.19

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