Three things you need to know in the financial markets this morning from investment writer, Tony Cross.
FirstGroup [LON:FGP] has this morning released the findings of a strategic review, which has highlighted the need to reassess what happens with the company’s North American operations. In a bid to maximise shareholder value, the board has appointed advisers to explore all options – including disposal – for the First Student and First Transit contract groups. Whilst this won’t necessarily result in a disposal, that remains one option. The move appears to show further signs that First is favouring growing its rail business.
Upbeat half year results are out from Sports Direct [LON:SPD] this morning, showing a 14% increase in group revenues and a 230 basis point increase in gross margins. Pre-tax profits are up 160% and net debt has almost halved and whilst the headline figures will have been bolstered by a series of acquisitions – including Game Digital and House of Fraser – the fact that the margins are rising whilst debt falls away too appears impressive. The potential for better economic visibility in the coming months following last week’s decisive election could stand to further bolster the fortunes of the company.
Water regulator Ofwat has this morning made its final determinations for the 2020-2025 period. Pennon [LON:PNN], the owners of South West Water, have been quick to reassure investors with a statement, noting that key metrics within the edict are consistent with their previous assumptions regarding price changes. The regulated monopoly aspects of this industry can often mean asset valuations behave more like bonds than equities, so confirmation of pricing for the next five years should have the potential to offer some certainty for investors.