As we head towards the start of the Scottish holiday season this weekend, EasyJet will be busy loading passengers as its shareholders contemplate a key takeover deadline.
Shares in the budget airline soared by around 12% after American investment fund Castlelake confirmed at the beginning of June that it is considering a possible offer.
The stock continues to trade at a 26% premium compared with the period before Castlelake’s interest was made public. However, the rise reflects investor bets on a bidding war that is now rapidly losing its strategic momentum following comments from a rival airline that a takeover would be difficult to pull off.
Luis Gallego, the chief executive of IAG, British Airways’ parent group, has said that the European Union’s rigid competition framework renders any imminent bid practically non-viable.
Castlelake is required to announce its intentions by 5pm on 26 June unless an extension is granted by the takeover panel.
There will be keen interest in whether Babcock makes any mention of military spending this week following the abrupt departure of John Healey as Defence Secretary.
It should, however, update on the readjustment to costs and timings of its frigate building which was interrupted by design changes.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said there is good momentum behind the company ahead of full-year results on Monday.
“A short trading update last month revealed that full-year revenue is expected to rise around 10% to £5.3bn, ignoring exchange rates, driven by strong performances in its Nuclear and Aviation divisions,” he noted.
“Underlying operating profits are expected to grow at a faster pace of around 19% to £433m, as margins continue to improve. However, this excludes £140m in one-off costs related to late-stage design changes on its Type-31 shipbuilding programme.
“Looking ahead, Babcock expects to grow revenues at a mid-single-digit rate next year, with around 70% of its workload already under contract.
“Underlying operating margins also look set to continue improving towards its mid-term target of 9%, underpinned by a strong demand outlook for its higher-margin nuclear business.”
Shares in online greetings card company Moonpig are still trading below its IPO price. Like a lot of pandemic winners, Moonpig has struggled in a post-Covid world, even if its operational and financial performance has stacked up better than its share price showing, say analysts at AJ Bell.
While its core cards business has performed robustly, and benefited from increasing subscriptions for its ‘plus’ service which offers perks and discounts, selling experiences has not been so successful.
Moonpig, which reports full-year figures on Thursday, has had more luck shifting ancillary items like flowers and chocolates – using AI to pitch personalised options to customers. The business is also very cash generative and benefits from having materially lower costs than its bricks and mortar peers.
New CEO Catherine Faiers will be expected to outline her vision for the business and how she hopes to achieve future growth – with obvious levers being an improvement in the experiences business and international growth, particularly in the US.
Selling an increasing volume of gifts on top of cards is likely to remain an important component of the strategy. Investors will be wary of any signs the ‘attach rate’ – or in other words how many people are including a gift item when buying a card – is slipping to match depressed levels of consumer sentiment.
DIARY
Monday 22 June
- Full-year results from Babcock
Tuesday 23 June
- Full-year results from Gear4Music, Severfield and Telecom Plus
Wednesday 24 June
- Full-year results from Berkeley and ProCook
Thursday 25 June
- Full-year results from Halfords, Moonpig, Volex and Wise
- Pre-close trading statement from Serco
Friday 26 June
- Deadline for Castlelake to declare intentions towards EasyJet
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