MARKET REPORT: First Group derailed by TransPennine setback

Train operator FirstGroup ran into trouble after it was stripped of the TransPennine Express franchise after months of delays and cancellations.

As a setback, the service, which connects cities such as Liverpool, Manchester, Leeds, Newcastle, Edinburgh and Glasgow, will be taken over by the government at the end of May.

It is the latest railway operation to be nationalized after Southeastern in 2021, Northern Rail in 2020 and London North Eastern Railway in 2018.

Shares in FirstGroup, which also controls Avanti West Coast, Great Western Railway, South Western Railway, Hull Trains and Lumo, fell 4.8 percent, or 5.9 pence, to 117.4 pence.

Chief executive Graham Sutherland said it had worked “extremely hard to improve services”.

But transportation secretary Mark Harper said months of inconvenience to commuters and businesses spurred his decision, adding: “This is not a panacea and will not immediately solve some of the challenges.”

It stopped FirstGroup shares in their tracks. The stock was up more than 20 percent this year before the move, though it was about 7 percent below pre-pandemic levels.

While the Bank of England raised interest rates from 4.25 per cent to 4.5 per cent, the FTSE 100 fell 0.1 per cent, or 10.75 points, to 7730.58, while the FTSE 250 fell 0.04 per cent, or 6.99 points, fell to 19,266.30.

Fast fashion company Asos, which was down 23 per cent on Wednesday after reporting half-year losses of £290.9m, fought back to rise 2.6 per cent or 12.6p to 500p.

Deutsche Bank cut its price target from 950p to 725p, while Barclays cut it from 625p to 500p. Takeover chatter echoed through the city again as deal talks continued.

Shares in troubled online broker Purplebricks crashed 29.3 percent, or 0.56 pence, to a new all-time low of 1.37 pence after it said discussions about a deal with Strike would leave investors with very little.

Strike is backed by investors including TalkTalk founder Sir Charles Dunstone and Channel 4 Ventures. Founded in 2012, Purplebricks had a lot of success in its early years and shares once traded for around 500p each.

Stock watch – John Lewis of Hungerford

Hungerford kitchen manufacturer John Lewis plans to delist from the AIM junior market.

The furniture designer said the costs associated with the trade were disproportionate to the benefits and that he would seek shareholder approval for the move.

Boss Kiran Noonan said the board wanted to ensure management time was focused on the company’s progress.

It also announced the sale and leaseback of its Oxfordshire headquarters. It fell 8.5 percent, or 0.12 pence, to 1.35 pence.

The ‘put up or shut up’ deadlines for suitors to make formal bids for two London-listed companies have been extended.

Dechra Pharmaceuticals (up 1.1 per cent, or 22 pence, to 3754 pence) said its takeover panel has agreed to set the date for Swedish private equity firm EQT to close its £4.6bn offer, with three weeks off to be set until June 2.

The bidding war for payments firm Network International looks set to last a few more weeks after a consortium of CVC and Francisco Partners was given until June 1 to make a formal offer.

Network (1.1 percent, or 4p, to 371p) said talks on a 387p per share proposal are “continuing.”

Meanwhile, Canadian giant Brookfield Asset Management has offered 400p per share, or £2.1 billion. Brookfield has until May 19 to “shut up or shut up.”

Also in the crosshairs is John Wood Group, which reported revenue of £1.25 billion in the first quarter – less than a week before the deadline for US private equity predator Apollo to make a formal offer.

Apollo has until May 17 to make a bid. After turning down four previous proposals, Wood agreed to Apollo last month after receiving a £1.7 billion bid. Shares fell 0.2 percent, or 0.4 pence, to 221 pence.

S4 Capital, the advertising agency founded by Sir Martin Sorrell, said AI helped the company become more efficient, but higher interest rates, inflation, weak economic growth and geopolitical uncertainty left many clients looking for short-term solutions to boost sales and had to reduce costs. Shares fell 2.2 percent, or 3 pence, to 136 pence.