What to watch: BT considers Openreach sale, Royal Mail boss departs, stocks rise

Edmund Heaphy
·Finance and news reporter
·5-min read
A British Telecom Openreach van, parked in an east London road.
A British Telecom Openreach van. (PA)

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

BT shares climb on Openreach sale talks

Shares in BT Group (BT-A.L) climbed by almost 10% on Friday after a report suggested that the company was planning to sell a multibillion-pound stake in its lucrative Openreach division.

The Financial Times reported that BT was discussing the sale with potential buyers, including Australian bank Macquarie and an unnamed sovereign wealth fund.

The Openreach division maintains the infrastructure that connects nearly all homes and businesses in the UK to the national broadband and telephone network, and is the company’s most profitable division.

Unnamed sources briefed on the discussions told the Financial Times that the potential sale could value the unit at around £20bn ($25bn).

The sale could thus fund BT’s planned £12bn upgrade of its broadband network, which has become a focus of chief executive Philip Jansen’s turnaround strategy.

Shares in the telecoms firm have plunged by 80% over the past number of years, and it last week chose to cancel its annual dividend for the first time since it was privatised in 1984, citing the impact of the coronavirus crisis.

“If BT is able to pull this deal off, and in some respects, it really needs to if the UK is able to get the broadband infrastructure it needs, then we could well see a considerable uplift in the share price, given that Openreach’s assets have been valued somewhere in the region of between £15bn and £20bn,” said Michael Hewson, the chief market analyst at CMC Markets UK.

Royal Mail boss resigns after testy two years battling postal unions

Shares in the Royal Mail (RMG.L) fell by almost 1.5% on Friday after the company unexpectedly announced that chief executive Rico Back had stepped down “with immediate effect” after less than two years in the job.

Back battled with unions over pay at the 500-year-old group, faced shareholder revolts over his compensation, and saw the company relegated from the blue-chip FTSE 100 index (^FTSE).

The company said on Friday that he would be replaced in an interim capacity by Keith Williams as executive chairman and Stuart Simpson as chief executive.

“It has been a privilege to lead a company that is so much a part of UK life at this crucial time in its history,” Back said.

His departure comes as the firm faces a huge surge in costs and falling revenue due to the coronavirus crisis.

Costs in its UK parcels, international, and letters (UKPIL) business climbed by £40m (£49m) in April, due to overtime and agency fees related to “high levels” of employee absence, social distancing measures, and the cost of acquiring personal protective equipment for workers (PPE).

William Hill revenue down 57% as it loses £15m a month

The gambling firm William Hill (WMH.L) has seen its total revenues plummet by 57% during the coronavirus pandemic.

The betting company has seen its income hit hard by the closure of its branches and mass cancellation of sports events. Revenue dropped 85% in its shops between 11 March, before the lockdown began, and 28 April. Online revenue was down 33% in the UK.

But the company’s shares leapt more than 10% on the announcement, with some of the news still cheering investors.

It said the decline in online sports betting had been “less than anticipated.” Customers had flocked to alternatives when their favourite sports events had been scrapped, such as table tennis, emerging market football and gaming, the trading update on Friday said.

Coronavirus drives German GDP down by 2.2% in the first quarter

Germany’s GDP contracted by 2.2% in the first quarter of 2020 from the previous quarter, as the coronavirus pandemic dented Europe’s largest economy. On the year, the economy contracted by 2.3%.

This was the largest quarterly decline since the first quarter of 2009, during the height of the global financial and economic crisis, and the second largest drop since German reunification in 1990, according to the Federal Statistics Bureau on Friday.

“Things will get worse before they get better, said ING chief economist Carsten Brzeski in a note. “If today’s data are the result of two weeks of lockdown, three more weeks of lockdown and a very gradual lifting of some measures do not bode well for the second quarter.”

The Munich-based Ifo economic institute forecasted a drop of 12.2% in the second quarter, revised down from their previous estimate of a 9.8% drop.

European stocks climb as factories rebound in China

European stocks looked set to close out the week in the green on Friday after new data from China showed that the country’s factories recovered faster than expected in April.

Chinese industrial production rose 3.9% compared with the same month in 2019, ahead of analyst forecasts of just 1.5%.

The pan-European STOXX 600 index (^STOXX) was almost 1.2% in the green. London’s FTSE 100 (^FTSE) rose by around 1.3%.

Germany’s DAX (^GDAXI) climbed by around 1.7%, while France’s CAC 40 (^FCHI) rose by 1%.

Stocks in Asia broadly climbed on Friday, even as stocks in China were weighed down by the prospect of a spike in unemployment in the country and a fragile recovery in the services sector.

China’s SSE Composite Index (^SSEC) fell by less than 0.1% on Friday and the Hang Seng (^HSI) was up marginally in Hong Kong at market close.

Japan’s Nikkei (^N225) closed 0.6% in the green, while the KOSPI Composite Index (^KOSPI) in South Korea rose by more than 0.1%. Australia’s ASX 200 (^AXJO) was up by more than 1.4%.

What to expect in the US

Futures were pointing to a higher open for US stocks on Friday.

S&P 500 futures (ES=F) rose by more than 0.3%, while Dow Jones Industrial Average futures (YM=F) climbed by more than 0.4%. Nasdaq futures (NQ=F) were up by more than 0.5%.