LONDON BRIEFING: National Express eyes cost cuts in Stagecoach merger

(Alliance News) - Transport operator National Express confirmed on Tuesday it is in discussions ...

Alliance News 21 September, 2021 | 8:10AM
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(Alliance News) - Transport operator National Express confirmed on Tuesday it is in discussions with peer Stagecoach over a possible all-share combination.

The statement confirmed a report by Bloomberg News that National Express was looking to make a takeover bid for Stagecoach.

Under the deal terms, it is expected that Stagecoach shareholders would receive 0.36 of a new National Express share for each Stagecoach share, resulting in them owning around 25% of the combined group. The formula represents an 18% premium on Stagecoach shares.

National Express had a market capitalisation of GBP1.36 billion at Monday's London close, while Stagecoach had a value of GBP374.87 million.

National Express shares were up 8.4% early Tuesday, while Stagecoach shares were up 15%.

The boards of National Express and Stagecoach said the potential merger would be a "strategically compelling proposition" with significant growth and cost synergies, as well as delivering strong value creation for both sets of shareholders.

National Express said it has identified at least GBP35 million per year in pretax cost synergies from a combination with Stagecoach, with all of these achieved within three years. It cited as an example National Express Coach using Stagecoach's bus depot network.

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

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MARKETS

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FTSE 100: down 0.1% at 6,953.76

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Hang Seng: marginally lower, down 5.79 points at 24,093.35

Nikkei 225: closed down 2.2% at 29,839.71

DJIA: closed down 614.41 points, 1.8%, at 33,970.47

S&P 500: closed down 1.7% at 4,357.73

Nasdaq Composite: closed down 2.2% at 14,713.90

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EUR: unchanged at USD1.1733 (USD1.1734)

GBP: unchanged at USD1.3678

USD: up at JPY109.57 (JPY109.46)

Gold: down at USD1,761.55 per ounce (USD1,764.07)

Oil (Brent): up at USD74.79 a barrel (USD74.58)

(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

China Mid-Autumn Festival. Financial markets closed.

Bank of Japan monetary policy meeting.

US Federal Open Market Committee meeting starts.

1100 BST UK CBI industrial trends survey

0830 EDT US housing starts

0855 EDT US Johnson Redbook retail sales index

1630 EDT US API weekly statistical bulletin

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The UK government borrowed more than expected in August, figures from the Office for National Statistics showed. UK public sector net borrowing, excluding public sector banks, was estimated to have been GBP20.5 billion in August, higher than economist forecasts of GBP14.2 billion. The ONS said the latest figure was the second-highest August borrowing since monthly records began in 1993, but GBP5.5 billion less than in August 2020. During the course of the virus pandemic, UK government borrowing has been hitting record levels, with vast amounts being spent on measures such as furlough payments.

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UK energy companies and the government agreed the energy price cap must "remain in place" during crunch talks to find a solution to record gas costs. UK Business Secretary Kwasi Kwarteng held a crisis meeting with the industry before announcing to the Commons that ministers would not be bailing out energy firms and that the energy price cap would be "staying". In a joint statement issued late on Monday evening, Kwarteng and Ofgem Chief Executive Jonathan Brearley confirmed they had taken a unified position over the price ceiling continuing. "Central to any next steps is our clear and agreed position that the energy price cap will remain in place," they said. It comes as the Daily Telegraph reported that some companies present at the meeting – attended by the likes of Scottish Power, Octopus, E.ON SE and EDF – called for the cap to be scrapped amid fears more firms could collapse, with four having already gone bust.

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Canadians returned Liberal Prime Minister Justin Trudeau to power in hotly contested elections against a rookie conservative leader, but he failed to gain an absolute majority, according to projections by television networks. Trudeau called the snap election last month, hoping to parlay a smooth Covid-19 vaccine rollout – among the best in the world – into a new mandate to steer the nation's pandemic exit and pass his agenda without opposition support. But after a bumpy five weeks of campaigning, his voice was raspy and he appeared set for a repeat of the close 2019 general election that resulted in the one-time golden boy of Canadian politics clinging to power yet weakened after losing his majority in parliament. Pollster Tim Powers predicted a Liberal minority win again.

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BROKER RATING CHANGES

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GOLDMAN SACHS RAISES SEGRO TO 'CONVICTION BUY LIST' ('BUY') - TARGET 1,550 (1,310) PENCE

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CREDIT SUISSE RAISES JD SPORTS FASHION PRICE TARGET TO 1,220 (1,000) PENCE - 'OUTPERFORM'

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UBS RAISES COMPUTACENTER TO 'BUY' ('NEUTRAL') - TARGET 3,290 (2,520) PENCE

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COMPANIES - FTSE 100

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Kingfisher said it delivered a strong financial performance in the first half of its financial and saw an improved position in key markets. For the six months to July 31, revenue was GBP7.10 billion, up 20% from GBP5.92 billion last year, and pretax profit was GBP677 million, up 71% from GBP398 million. Kingfisher posted like-for-like sales growth of 23% from a year before, with strong performances in the UK & Ireland, France, Iberia and Romania. Kingfisher declared an interim dividend of 3.80 pence, up from the 2.75p paid last year. In addition, the board announced the return of GBP300 million of surplus capital via a share buyback programme. The programme will commence soon, it said. Kingfisher said it has seen a good start to the second half of the year with resilient demand across all markets. Like-for-like sales to this past Saturday were down 0.6% on a year before but up 16% from 2019. Looking ahead, Kingfisher expects financial 2022 adjusted pretax profit in the range of GBP910 million to GBP950 million. It posted adjusted pretax profit of GBP786 million in financial 2021, so results will be up at least 16%.

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Compass Group, ahead of the end of its financial year on September 30, said revenue in the fourth quarter is expected to improve to 86% of 2019 revenue, which is slightly ahead of previous guidance of 80% to 85%. For the full year 2021, the catering firm said revenue is expected to be 76% of 2019 levels. Compass said the outperformance was led by its Sports & Leisure unit with improved attendance - particularly outdoor sports - and strong per capital spend. Further, it noted that, since the start of September, the return to Education venues has been strong, with high on campus spending, while trading in its Business & Industry division was in line with "cautious" expectations. Compass said its underlying operating margin in the fourth quarter is expected to be around the mid-point of the guidance range of 5.5% to 6.0%, as it continues to manage mobilisation costs and inflation. For the full year 2021, underlying operating margin is expected to be 4.4%. Looking ahead to the start of the new financial year, Compass said most of its sectors are expected to continue performing well. However, it remains cautious about Business & Industry, given continued uncertainty over the pace of office reopening in major markets.

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COMPANIES - GLOBAL

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A new digital bank brand offering cashback and money management features has been launched in the UK by JP Morgan Chase. The Chase brand already provides a range of financial services to more than 60 million households in the US. Among its UK offerings will be a "numberless" debit card made from recycled plastic. The card details are stored behind a secure login on the Chase app, so customers do not put their account details at risk if they lose their physical card. Chase will offer a fee-free current account combining money management features with cashback rewards on everyday debit card spending. Features include small change round-ups on which people can earn 5% interest for 12 months. Customers' spending on debit cards will be rounded up to the nearest GBP1 and the small change will be deposited into a separate account where it will earn interest at 5% for 12 months.

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Tuesday's Shareholder Meetings

Appreciate Group PLC - AGM

Augmentum Fintech PLC - AGM

Kin & Carta PLC - GM re change to articles of association

Knights Group Holdings PLC - AGM

Manolete Partners PLC - AGM

Meggitt PLC - GM re recommended cash acquisition by Parker-Hannifin

Oxford Instruments PLC - AGM

Regional REIT Ltd - 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
JD Sports Fashion PLC 1,064.50 GBX 0.52 -
Computacenter PLC 2,740.00 GBX 0.66 -
Segro PLC 1,288.00 GBX -0.04 -
National Express Group PLC 229.00 GBX 2.05 -
Stagecoach Group PLC 77.35 GBX 0.98 -

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