Must read: slow start for stocks, BT, Thames Water

Our head of investment rounds up the morning's big news.

GLOBAL MARKETS

The FTSE 100 has opened flat with miners like Rio Tinto Registered Shares (LSE:RIO), Antofagasta (LSE:ANTO) and Anglo American (LSE:AAL) among the underperformers as well as the typically volatile Ocado Group (LSE:OCDO). It comes after the UK blue-chip index reached near four-month lows on Friday.

Overnight China’s consumer inflation reached the slowest pace since 2021, while its factory gate prices fell the most since 2015. 

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A weaker-than-expected US jobs report failed to provide support for US markets on Friday, despite the potential read across for the Federal Reserve. Focus shifts to US earnings season which begins with the banks on Friday.

BT 

Confirming media reports, BT Group (LSE:BT.A)’s CEO Philip Jansen (pictured above) has announced he will step down in the next 12 months as the telecoms giant begins its search for his successor. Jansen has been chief executive since February 2019, steering the business through the challenges of the pandemic and he has been instrumental in BT’s national fibre network rollout. In May, BT announced plans to cut up to 55,000 jobs by 2023, or 40% of its workforce as it looks to embrace new technologies like artificial intelligence. 

Shares have fallen significantly under Jansen’s tenure. The stock was trading above 200p when he began and is now trading over 45% lower, highlighting the pressure he is likely to have been under from shareholders. 

A fresh CEO could be another element of its overhaul, alongside job cuts, technological changes, and its fibre roll out. However, shares are failing to react today amid the uncertainty around his successor.

THAMES WATER 

Thames Water investors have agreed to inject an extra £750 million of investment into the embattled utility giant. Further ahead, there are also plans to invest £2.5 billion in the company between 2025 and 2030. The funding is subject to ‘certain conditions, including the preparation of a business plan that underpins a more focused turnaround that delivers targeted performance improvements for customers, the environment and other stakeholders.’

Interim joint CEO Cathryn Ross said we have enough to pay what we need to pay this year and into the future. Thames Water’s bonds are trading higher in response. Meanwhile, Sir Adrian Montague succeeds Ian Marchant as chair of Thames Water today. 

Thames Water sought to reassure investors by underscoring its ‘strong liquidity position’ of £4.4 billion as at 31 March and said full-year gearing fell to a 10-year low, while revenue increased by 4% to £2.3 billion thanks to tariff growth. However, its bottom line is still struggling with EBITDA dropping by 3% to £1.1 billion because of increased operating costs. 

There have been existential fears about the future of Thames Water since it was reported that the government and the water regulator, Ofwat had been drawing up contingency plans for its collapse. Britain’s largest water company has been struggling with a heavy £14 billion debt pile which has been growing since privatisation in 1989. There have also been criticisms about the high amount of loans and dividends it took out.

Like many businesses, Thames Water has also been dealing with the backdrop of cost inflation, particularly from energy and chemicals. And more recently its CEO Sarah Bentley quit while Thames Water suffered its worst leakage rate in five years in 2022. There is also the backdrop of climate change and Britain’s water crisis with sewage spills making the headlines. 

Today’s investment injection comes as a welcome development for Thames Water and reduces the likelihood of collapse. However, there is clearly still a lot of work to be done to reduce leaks and sewage spills, reduce its debts and improve profitability.