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News & Tips: Stagecoach, Tarsus, Old Mutual & more

Equities have bounced back, a little.
May 24, 2019

Theresa May's long anticipated departure has added to political intrigue but has failed to dent a recovery in London shares this morning. Click here for The Trader Nicole Elliott's latest thoughts on the markets. 

IC TIP UPDATES:

Stagecoach (SGC), alongside its West Coast Train partners Virgin Trains SNCF, has launched a second legal challenge to the Department for Transport over its decision to disqualify it from three franchise bidding competitions. The government department disqualified the partnership - in which Stagecoach has a 50 per cent share - over risks to its pension scheme. Sell.

European private equity firm Charterhouse has come knocking for Tarsus (TRS). Under the terms of the takeover offer, shareholders in Tarsus will receive 425p a share, a 36 per cent premium to the company’s share price on the day prior to the offer, valuing the firm at £561m. They will also be entitled to receive the final dividend of 7.7p a share for the period ending 31 Dec 2018. Await documents.

KEY STORIES:

There’s just one major update from London-listed financial services companies today, but it’s a big one: the board of Old Mutual (OMU) has suspended chief executive Peter Moyo “with immediate effect”, following a “material breakdown in trust and confidence” between the two. Shares in the pan-African investment, savings and insurance outfit are down three per cent in early trading, as chief operating officer Iain Williamson assumes the role of acting CEO.

Shares in flooring company Headlam (HEAD) are up three per cent this morning after the group announced strong like-for-like growth in the first four months of 2019. Like-for-likes were up 3.5 per cent in the period, albeit against a weak comparator from the start of last year. The UK’s residential and commercial markets were both strong in the period, commercial especially so. Construction of the group’s regional distribution centre is progressing in line with expectations.

OTHER COMPANY NEWS:

Ofgem has published an update today on the allowed returns in RIIO-2, the next price control period from 2021-2026. It proposes setting the allowed baseline return on equity at 4.3 per cent, almost 50 per cent lower than under RIIO-1. This is within a cost of equity range of 4.0 to 5.6 per cent which is slightly higher than December’s proposed range of 4.0 to 5.0 per cent. The 0.5 per cent outperformance wedge deducted from allowed returns has not been removed. Overall, RBC Capital Markets see this as “slightly positive” news for National Grid (NG.) and SSE (SSE). With draft business plan submissions due in July, final determinations will not be made until November 2020.