UK investors begin the week with takeover talk to digest after defence contractor Babcock (BAB) admits it turned down approaches of a tie-up from outsourcing peer Serco (SRP).

There is also a strategy overhaul reported by troubled construction firm Kier (KIE) and a profit warning from German airline Lufthansa to mull, the latter hurting UK listed airlines that have been struggling with rising costs this year.

British Airways-owner International Consolidated Airlines (IAG) and discount carrier EasyJet (EZJ) head the FTSE 100 loser board on Monday, down more than 3% a piece at 446.4p and 895p respectively.

Financials provide the key UK index with support with several large banks on the rise while life insurer Standard Life Aberdeen (SLA) tops the risers, up 1.5% at 275.9p.

BABCOCK MERGER DISMISSED

Back to Babcock, the group has today confirmed that it received an offer from Serco in January to buy the company, but that bid was rejected.

In today’s announcement the company says it ‘carefully considered the proposal’ alongside its advisors and ‘unanimously rejected it’ having concluded that a combination of the two companies had no strategic merit and was not in the best interests of Babcock's shareholders, customers or wider stakeholders.

Yet investors appear to sense that this is not over, pushing Babcock shares more than 3% higher in early trade to 478.6p.

Serco shares are also up, albeit modestly, nudging 136.1p levels.

There is also major strategic rethink news from troubled construction firm Kier, plans that will see around 1,200 jobs go in a bid to save £55m a year from 2021.

The axe will strike at the workforce of non-core activities Kier Living, Property, Facilities Management and Environmental Services.

‘These actions are focused on resetting the operational structure of Kier, simplifying the portfolio, and emphasising cash generation in order to structurally reduce debt,’ said chief executive Andrew Davies.

Two weeks ago Kier saw its share price crash by more than 22% after it issued a profit warning.

POSITIVE DRUG DATA

Drug development major AstraZeneca (AZN) has confirmed that interim analysis of the Phase III Ascent trial showed that its chronic lymphocytic leukaemia drug had significantly prolonged the time patients live without the disease.

The company data says an encouraging 88% of patients on AstraZeneca's Calquence remained free of disease progression after 12 months, compared with just 68% of patients on rituximab combined with idelalisib or bendamustine, the company said, but investors take the news in their stride.

AstraZeneca stock drifts 0.5% lower to £61.81.

More positive is news from banking group Royal Bank of Scotland (RBS) which reckons it could see a ‘release of capital that will also have a positive and material financial impact for RBS.’

This stems from the planned merger of Alawwal bank, in which the UK group owns an equivalent 15.3% stake, with Saudi British Bank. The freeing up of extra funds will help fuel RBS’s focus on its core UK market.

RBS shares rise 2% to 216.5p, although the stock has fallen sharply from highs of 270p levels since March.

STAFFLINE SCRAPS DIVIDEND

Recruitment and training company Staffline (STAF:AIM) will scrap its dividend and attempt to raise £37m of emergency funding as it seeks to ease spiralling debts.

This follows news that the company has had to raise its estimate of costs associated with an historical breach of UK wage rules. Staffline has been assessing its historical compliance with national minimum wage regulations, relating to a six year period from 2013 to 2018.

The company said it expected to release its results for the year through December on 27 June following a lengthy delay, but the stock is taking a hammering on Monday, crashing 25% to 180p, having slumped from 330p levels as recently as May.

More positive news comes from building supplies company Fox Marble (FOX:AIM) which has secured its largest single order for Illirico Selene marble from an existing customer in Kosovo.

Fox Marble received the order for 1,850 tons of Illirico Selene from the Maleshevë quarry in Kosovo, an existing customer, and said that loading of the material had begun. Revenue from the order would only be recognised as the material is despatched from the quarry over the next few weeks, the company added.

Shares in the business rally close on 5% to 7.6p.

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Issue Date: 17 Jun 2019