LONDON BRIEFING: UK government sets trading plan to cut NatWest stake

(Alliance News) - The UK government on Thursday said it plans to sell a large part of its stake ...

Alliance News 22 July, 2021 | 8:13AM
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(Alliance News) - The UK government on Thursday said it plans to sell a large part of its stake in lender NatWest, in a trading plan managed by Morgan Stanley.

The Treasury currently owns 6.34 billion shares in NatWest, via UK Government Investments, representing a 54.7% stake.

While the trading plan has been entered into on Thursday, the earliest that the sales will commence is August 12. The plan will run no later than August 11, 2022.

"HMT has instructed Morgan Stanley that (a) its intention is that up to, but no more than, 15% of the aggregate total trading volume in the company will be sold over the scheduled duration of the trading plan, and (b) shares may not be sold under the trading plan below a price per share that UKGI and HMT determine represents fair value and delivers value for money for the taxpayer," the government said.

NatWest has a GBP23 billion market cap, so a 15% stake would be worth about GBP3.5 billion. It would lower the government's holding to below 40%.

The Treasury said it will keep open other disposal options for its NatWest shares, including by way of share buybacks and accelerated bookbuilds, either or both of which could be launched during the term of the trading plan.

Goldman Sachs is the UK government's overall privatisation adviser to UKGI.

NatWest shares were down 0.3% early Thursday.

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

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MARKETS

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FTSE 100: up 0.1% at 7,002.08

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Hang Seng: up 1.6% at 27,667.61

Nikkei 225: Tokyo market closed for holiday.

DJIA: closed up 286.01 points, 0.8%, at 34,798.00

S&P 500: closed up 0.8% at 4,358.69

Nasdaq Composite: closed up 0.9% at 14,631.95

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EUR: flat at USD1.1797 (USD1.1800)

GBP: up at USD1.3736 (USD1.3684)

USD: down at JPY110.11 (JPY110.25)

GOLD: down at USD1,801.67 per ounce (USD1,805.13)

OIL (Brent): up at USD72.14 a barrel (USD71.86)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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Thursday's Key Economic Events still to come

Japan Marine Day holiday. Financial markets closed.

1345 CEST EU ECB interest rate decision

1430 CEST EU press conference with ECB President Christine Lagarde

1600 CEST EU consumer confidence indicator

1100 BST UK CBI industrial trends survey

1100 BST Ireland wholesale price index

0830 EDT US weekly jobless claims

1000 EDT US existing home sales

1000 EDT US leading indicators

1030 EDT US EIA weekly natural gas storage report

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The US Senate stumbled Wednesday in the first test for a long-sought bipartisan infrastructure package as Republicans blocked the trillion-dollar measure's advancement, but lawmakers suggested a compromise deal was on the horizon. With Republican senators in the 50-50 chamber uniting to oppose the package moving forward in a key procedural vote, Democrats were well short of the 60 votes needed to overcome a filibuster and formally begin debate on the plan. Republicans argue that more time is needed to thrash out the details with Democrats and the White House, primarily how to raise sufficient revenue to fund the once-in-a-generation spending. But Republicans and Democrats alike expressed optimism that a deal was days away. "We'll have a pretty full outline, probably by Monday, and we'll be in favour of it then," Republican Senator Mitt Romney told AFP. Romney and the other 21 negotiators issued a joint statement after the vote saying they have made "significant progress and are close to a final agreement."

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BROKER RATING CHANGES

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HSBC CUTS ROYAL DUTCH SHELL TO 'HOLD' (BUY) - PRICE TARGET 1,540 (1,800) PENCE

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DEUTSCHE BANK RAISES ANTOFAGASTA TO 'HOLD' (SELL) - PRICE TARGET 1,350 (1,300) PENCE

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RBC RAISES FLUTTER TO 'OUTPERFORM' (SECTOR PERFORM) - PRICE TARGET 16,000 PENCE

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BERENBERG RAISES ROYAL MAIL PRICE TARGET TO 550 (355) PENCE - 'HOLD'

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COMPANIES - FTSE 100

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Consumer goods firm Unilever reported interim sales growth, though noted input cost inflation. Revenue for the first half of 2021 rose 0.3% to EUR25.79 billion, while pretax profit dipped 3.6% to EUR4.37 billion. Underlying sales growth for the half-year was 5.4%, driven by volumes, though the company noted price growth stepped up in the second quarter. Unilever's underlying operating margin slipped 100 basis points to 18.8% due to investment into its brands and input cost inflation. "Competitive growth is our priority, and we are confident that we will deliver underlying sales growth in 2021 well within our multi-year framework of 3-5%, despite more challenging comparators in the second half," said Chief Executive Alan Jope. "We have seen further cost inflation emerge through the second quarter," Jope said. "Cost volatility and the timing of landing price actions create a higher than normal range of likely year end margin outcomes. We are managing this dynamically and expect to maintain underlying operating margin for 2021 around flat." Unilever added that the operational separation of the tea business is "substantially complete" and due to conclude in October. It is focused on the next phase for the business, which would include an initial public offering, sale or partnership. Unilever declared a quarterly dividend of EUR0.4268 per share, in line with what was declared for the first quarter.

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COMPANIES - FTSE 250

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Morgan Sindall said it expects full-year results significantly ahead of prior expectations following a strong first half performance. The construction and property regeneration group said all divisions have performance well and its results for the first half of 2021 are expected to show pretax profit around GBP53 million, reflecting growth of more than three-fold on a year ago and up 46% on 2019's pre-pandemic levels. The Construction & Infrastructure division's margin and profit growth was growth in the half, while Fit Out continued its "high level" of performance. "As a result, the group now anticipates that its full year results for 2021 will be significantly ahead of its previous expectations," said Morgan Sindall.

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Centrica said its first half performance was broadly as expected as it swung to profit. Revenue for the first half of 2021 rose 9.3% to GBP6.92 billion from GBP6.33 billion a year ago, and the British Gas parent turned to a pretax profit of GBP907 million from a loss of GBP462 million. "A pre-tax exceptional profit of GBP373 million was recognised in continuing operations in H1 2021, largely relating to write backs of exploration and production assets due to the increase in near term liquid commodity prices," the company noted. Adjusted operating profit was flat, meanwhile, at GBP262 million versus GBP264 million. Centrica proposed no interim dividend, in line with a year ago. "Although there is still a lot to achieve, our turnaround remains on track, our balance sheet has been significantly strengthened and the recent changes in colleague terms and conditions will enable us to better serve the needs of our customers," said Chief Executive Chris O'Shea.

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Insurer Hiscox said it will promote Chief Financial Officer Aki Hussain to chief executive from January next year, taking over from current boss Bronek Masojada. After 21 years as CEO, Masojada will retire at the end of the year. Hussain, who joined Hiscox in 2016, has been selected as his successor. "The business is on a very strong footing with market conditions the best we have experienced for many years and the time is right to hand over to new leadership," said Masojada.

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COMPANIES - MAIN MARKET AND AIM

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Bus and train operator Go-Ahead has hired Christian Schreyer as its new chief executive, replacing David Brown, who is retiring at the end of 2021. Schreyer is a German national who works for public transport operator Transdev as CEO North & Central Europe. Prior to this he worked for Deutsche Bahn. Outside the UK, Go-Ahead has three rail contracts in Germany and one in Norway.

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COMPANIES - GLOBAL

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ABB reported a sharp rise in income for the second quarter of 2021, helped by lower restructuring expenses, higher demand, and an easy comparison to the same period a year prior, which was crippled by the Covid-19 pandemic. The Zurich-headquartered robotics, power, heavy electrical equipment and automation technology company said that, for the three months ended June 30, net income was USD752 million, more than doubled from USD319 million a year before. This was on revenue for the quarter which grew 21% year-on-year to USD7.45 billion from USD6.15 billion, with increased customer activity and sales from the Electrification, Motion and Robotics businesses. Looking ahead, ABB expects revenue growth for the third quarter of 2021 to be 10% at most, with orders set to grow more than revenue.

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Publicis Groupe said it will recoup all of the revenue lost in 2020 due to the robust performance of its US and Asia operations, noting it has even improved on its performance in the first half of 2019. In the first six months of 2021, the Paris-based advertising and public relations firm recorded attributable net income of EUR414 million, sharply higher from EUR136 million a year earlier. Operating income surged to EUR598 million from EUR254 million. Revenue improved 4.1% year on year to EUR5.49 billion from EUR5.28 billion, with net revenue, the firm's preferred measure, up 3.3% to EUR4.93 billion from EUR4.77 billion.

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Thursday's Shareholder Meetings

Big Yellow Group PLC - AGM

Bytes Technology Group PLC - AGM

Edinburgh Investment Trust PLC - AGM

Gowin New Energy Group Ltd - AGM

Halma PLC - AGM

LSL Property Services PLC - GM re investment in Pivotal Growth

Malin Corp PLC - AGM

Pennon Group PLC - AGM

Petards Group PLC - AGM

SSE PLC - AGM

Vp PLC - AGM

Workspace Group 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
Antofagasta PLC 1,437.50 GBX -0.14 -
Go-Ahead Group (The) PLC 970.50 GBX 1.94 -
Royal Mail PLC 476.40 GBX -0.71 -
Royal Dutch Shell PLC B 1,528.40 GBX 0.53
NatWest Group PLC 217.60 GBX 0.14
Royal Dutch Shell PLC Class A 1,529.20 GBX 0.35
Flutter Entertainment PLC 15,365.00 GBX -1.54 -
Flutter Entertainment PLC 180.20 EUR -1.18 -

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