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(Alliance News) - The UK government on Wednesday gave formal approval for the HS2 project to begin the construction phase, but work cannot start until the Covid-19 lockdown has been lifted.
The government has issued a notice to proceed to the companies that will build phase one of the high-speed railway, PA reported.
Prime Minister Boris Johnson gave the green light for HS2 in February despite it running tens of billions of pounds over budget and several years behind schedule.
The government-commissioned Oakervee Review warned that the final bill could reach GBP106 billion at 2019 prices.
HS2 Minister Andrew Stephenson said: "While the government's top priority is rightly to combat the spread of coronavirus, protect the NHS and save lives, we cannot delay work on our long-term plan to level up the country.
"HS2 will be the spine of the country's transport network, boosting capacity and connectivity while also re-balancing opportunity fairly across our towns and cities.
Notice to proceed has been given to the four joint ventures previously awarded main works civil contracts. That means the firms can transition from carrying out scheme design and preparatory work to detailed design and construction.
Among UK-listed companies, Costain Group said its Skanska Costain Strabag joint venture received a notice to proceed on the design and construction of phase 1 of HS2 in the southern area. Its work will include designing and building tunnels for the approach of the railway line into London Euston station.
Costain said the contract is worth GBP3.30 billion to the joint venture as a whole, but it won't make a significant contribution to Costain's profit until financial year 2021 onwards. This is because construction is paused during the Covid-19 lockdown.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.4% at 5,766.97
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Hang Seng: down 0.8% at 19,550.09
Nikkei 225: closed down 0.5% at 19,550.09
DJIA: closed up 558.99 points, 2.4%, at 23,949.76
S&P 500: closed up 3.1% at 2,846.06
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GBP: soft at USD1.2576 (USD1.2597)
EUR: unchanged at USD1.0962
Gold: down at USD1,715.30 per ounce (USD1,734.53)
Oil (Brent): down at USD29.18 a barrel (USD30.08)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's Key Economic Events still to come
1100 BST Ireland goods exports and imports
1000 CEST IEA oil market report
0700 EDT US MBA weekly mortgage applications survey
0830 EDT US Empire State manufacturing survey
0830 EDT US advance monthly sales for retail & food services
0915 EDT US industrial production & capacity utilization
1000 EDT US NAHB housing market index
1000 EDT US manufacturing & trade: inventories & sales
1030 EDT US EIA weekly petroleum status report
1400 EDT US Beige Book
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Britain's economy may shrink by 35% between April and June this year, the fiscal watchdog has said as the chancellor of the exchequer warned Tuesday there would be more tough times ahead in the coronavirus pandemic. The Office for Budget Responsibility said unemployment could hit 3.4 million, leaving around one in 10 of the working population without a job, while the UK economy could fall off a cliff edge. Rishi Sunak said not every business or household could be protected, but that a "bounceback in growth" was expected when the crisis eases. The Department of Health said 12,107 patients have died in hospital after testing positive for the virus in the UK as of 5pm on Monday, up 778 from the previous day's total, while confirmed cases reached 93,873.
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US President Donald Trump ordered a freeze on funding for the World Health Organization for "mismanaging" the coronavirus crisis, as world leaders weighed easing lockdowns that threaten to tip the global economy into a second Great Depression. The death toll from the pandemic has topped 125,000, with nearly two million people infected by the disease that has upended society and changed lives for billions around the globe confined to their homes. Across the planet, leaders are agonising over when to lift lockdown measures to jump-start devastated economies but still avoid a second wave of infections. And with the world battling to get on top of the pandemic, Trump fired his broadside at the WHO and halted payments that amounted to USD400 million last year. Trump's attack came as the US counted a fresh record of 2,228 victims over the past 24 hours, according to Johns Hopkins University. Nevertheless, Trump vowed to reboot large sections of the world's top economy "very soon," saying the US would reopen "in beautiful little pieces", with the hardest-hit areas like New York taking slightly longer.
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BROKER RATING CHANGES
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CREDIT SUISSE RAISES RECKITT BENCKISER TO 'NEUTRAL' (UNDERPERFORM) - PRICE TARGET 5900(5550) PENCE
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RBC CUTS RIGHTMOVE TO 'UNDERPERFORM' ('SECTOR PERFORM') - TARGET 440 (550) PENCE
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BARCLAYS RAISES LAND SECURITIES TO 'OVERWEIGHT' ('UNDERWEIGHT') - TARGET 745 (870) PENCE
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COMPANIES - FTSE 100
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Ferguson said it thinks the US is its "natural long-term listing location" after a demerger of its UK operations. After consultation with institutional shareholders, Ferguson said it does not think the required 75% majority would be in favour of a primary US listing. Thus - once "general uncertainty" from Covid-19 dies down - Ferguson will convene a general meeting to consider an additional listing in the US which, if approved, would take effect in the first half of 2021. Within a year of the additional US listing, the board intends to put forward a further resolution to relocate the company's primary listing to the US. Separately, Ferguson said trading to March 31 was not "materially impacted" by coronavirus, though revenue growth softened towards the end of the period. Revenue from ongoing operations rose 4.3% in the first half of financial 2020, and was up 7.3% in the two months ended March. Within this, US revenue grew 5.0% in the half, and 8.2% in the two-month period, while Canadian sales fell. Given Covid-19 uncertainty, Ferguson has suspended its USD500 million share buyback.
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Packaging firm Smurfit Kappa said its performance in the first quarter was strong, though sales and earnings were down on a year ago. Revenue was EUR2.19 billion in the three months to March, down from EUR2.32 billion a year ago. Ebitda fell to EUR380 million from EUR424 million. Volumes in Europe increased by 3%, or around 2% on an organic basis, while demand in the Americas grew by 3.5% year-on-year. Smurfit said that due to Covid-19 uncertainty, it is prudent to no longer recommended 2019's proposed final dividend at its upcoming annual general meeting.
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COMPANIES - FTSE 250
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Insurer Hastings Group said the first quarter of 2020 was "unprecedented" with Covid-19 heaping operational challenges on top of recent industry headwinds. Gross written premiums were stable at GBP234.3 million for the three months to March 31, but net revenue was "down slightly" at GBP179.2 million, as policy growth was more than offset by lower earned premiums and reduced investment income. "Trading trends in light of Covid-19 continue to be monitored closely, including any impact in trading income due, in particular, to reduced mid-term policy adjustment income and the impact of the actions the group has taken, and may continue to take, to support policyholders," the group said. Motor insurance accident frequencies reduced during March, Hastings added, with this trend expected to continue for the duration of Covid-19 travel restrictions. The insurer still intends to seek shareholder approval for its 2019 final dividend of 5.5p at May's AGM. Most of Hastings's insurance peers have pulled their planned payouts. RSA and Aviva have already withdrawn their 2019 final dividend, as have Direct Line Insurance Group and Hiscox.
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Spirent Communications also confirmed it will pay its 2019 final dividend. The Crawley-based telecommunications testing and security firm said it delivered "strong results" in the quarter to March 31, with revenue up 12% and "robust" profit growth. After taking into account strong cashflow in the period, which resulted in a cash balance of USD208 million at the end of March, Spirent said it intends to pay its previously announced 2.70p final dividend. This will be paid at the start of May. "We have started the year well and our pipeline remains solid. We recognise that the current volatile environment may affect deal timing and as a result, we continue to be extremely vigilant and are taking prudent actions to mitigate risk and delay discretionary expenses. We are keeping a careful eye on customer demand as we monitor the continuing effects of the virus," said Chief Executive Eric Updyke.
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Wednesday's Shareholder Meetings
Hunting
Diversified Gas & Oil
Bunzl
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By Tom Waite; thomaslwaite@alliancenews.com
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