FTSE 100 Analysis: NatWest buys £1.3 billion of own shares from government

FTSE 100 futures

FTSE 100 futures are trading broadly flat, up just 1.5 points this morning at 7,771.4.

We can see that the UK 100 has traded in a narrow channel over the past two weeks. During this time, it has tried and failed to break above 7,777.7 five times, making this the immediate upside target that needs to be claimed. That would bring 7,870 back onto the radar before it can look at the 2023-highs.

On the downside, there is evidence of support being found at 7,723, although we could see the index slip 7,702 if it comes under renewed pressure.

Top UK stock news

NatWest (NWG) has agreed to buy 469.2 million of its own shares from HM Treasury for just under £1.26 billion. The shares, collectively accounting for 4.95% of its issued share capital, are being purchased for 268.4p each, representing the closing share price last week. NatWest will cancel 336.2 million of the shares and retain 133 million. The transaction will leave HM Treasury with 38.69% stake in terms of voting rights. The UK government became the majority shareholder in the bank back in 2008 but has been steadily selling-down its stake since then.

Rolls Royce (RR) CEO Tufan Erginbilgic said the company’s power-systems division that makes engines for ships and trains had been ‘grossly mismanaged’ in recent years, having seen margins decline despite seeing a rise in revenue in 2022, during an interview with the Financial Times. He said the unit needs a ‘clear strategy’ but has ‘lots of potential’. An overhaul of management is already underway.

UK housebuilders such as Persimmon (PSN) Barratt (BDEV), Bellway (BWY), Taylor Wimpey (TW) and Redrow (RDW) are worth watching today after online property portal Rightmove (RMV) said over the weekend that average asking prices rose 1.8% in May to hit £372,894.

Also keep an eye on airlines and leisure stocks such as TUI (TUI), easyJet (EZJ), IAG (IAG) and InterContinental Hotels (IHG) after Irish carrier Ryanair said it is forecasting a strong summer of bookings that should drive a 10% increase in passenger numbers.

AstraZeneca (AZN) said Anna Manz, the current chief financial officer of the London Stock Exchange Group (LSEG), will join the board as a non-executive director at the start of September. Notably, Manz is also currently a non-exec at broadcaster ITV (ITV), but will step down from this role at the end of August.

Dechra Pharmaceuticals (DPH) said it will fail to deliver its guidance for the current financial year after seeing a more volatile trading environment since the start of 2023. The company said full year underlying operating profit will be below its target of £186 million in the year to the end of June 2023. It blamed de-stocking by wholesalers in the US and, more recently, the UK. It said it is continuing discussions about a possible takeover offer worth 4,070p per share that was announced earlier this month.

Wise (WISE) chief financial officer Matthew Briers has informed the company he plans to resign by March 2024 in order to focus on making a full recovery from an accident he had last year. A search for his replacement is underway.

Software firm Kainos Group (KNOS) said revenue rose 24% in the year to the end of March to £374.8 million and a 15% rise in adjusted pretax profit to £67.6 million. It said profits benefited from increased investment in Workday Products. Bookings climbed 22% to £427.8 million. The dividend was raised 8% to 23.9p per share.

Johnson Matthey (JMAT) has signed a three-year strategic supply deal with Norwegian firm Hystar with the aim of ramping-up renewable hydrogen production. The UK firm will supply membrane electrode assemblies to help Hystar increase hydrogen production as it aims to get a multi-GW production project up and running by 2025.

HICL Infrastructure (HICL) has conducted a private placement of £150 million worth of loan notes, with proceeds being used to reduce the amount being borrowed under its revolving credit facility. This will extend maturity dates and fix the all-in interest at a lower rate than what the facility was charging. The weighted average interest of the notes is 5.75% after hedging. One tranche of £100 million notes will mature in May 2033 and the other £50 million is repayable by May 2035.

BT Group (BT.A) has been added to Citigroup’s European Focus List and replaced German firm Deutsche Telekom, with the broker stating there is ‘deep value’ in the UK telecoms giant. BT announced a radical shake-up last week and Citi said it has made the right decision to double-down on building-out is fibre network even if this weighs on free cashflow temporarily.

Grainger (GRI) has been upgraded to Add from Hold by Peel Hunt. The broker said the private rental property firm is ‘resilience personified’ and is outperforming its commercial peers.

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