Archived article
Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
“Although the stock market is a bit juddery at the moment, the underlying trend is still pointing upwards despite some moments of weakness. While the FTSE 100 was flat on Friday morning at 7,539, it is on track to finish the week 0.6% ahead.
“A continuation of this trend would imply the FTSE 100 has a good chance of moving back into positive territory very soon.
“At present the FTSE 100 is down nearly 2% year-to-date. That is better than Hong Kong’s Hang Seng index (down 7.3%) and Germany’s Dax Extra index (down 4.5%), but considerably lagging Japan’s Nikkei 225 (up 6%) and the S&P 500 in the US (up 9%),” says Russ Mould, Investment Director at AJ Bell.
Serco
“Today’s update from Serco suggests a turnaround of the group, previously derailed by financial issues, various contract problems and customers losing faith in the business, is once again heading in the right direction.
“The unscheduled release reveals the outcome for 2018 will be stronger than expected across all major metrics and tellingly it’s not just about cost cutting. The company also points to ‘strong operating performance’.
“The next focus may be on whether the company can return to a positive cash generation and even resume dividend payments, which have been absent of late.
“A series of profit warnings took Serco to the edge of collapse five years ago and the liquidation of its peer Carillion earlier this year was a reminder of the stakes for chief executive Rupert Soames and the rest of the management team.
“They seem to be doing the right things in terms of factors which they can control, but the outside political pressure on outsourcing does not look like it will go away any time soon.”
Funding Circle
“Funding Circle is the latest peer-to-peer (P2P) platform failing to live up to the hype. The company priced its IPO (initial public offering) at 440p, almost the bottom end of its 420p to 530p range.
“This will be an embarrassment to management, particularly as Funding Circle was hoping to use its stock market listing to raise its profile.
“It is perhaps easy to see why investors have been reluctant to pay up for shares in Funding Circle, whose platform helps small to medium sized businesses to borrow money directly from individuals.
“It made £94.5m revenue in 2017 and a pre-tax loss of £36.3m. It spent £38.7m on marketing – so roughly 40% of revenue. The company says it expects to significantly increase marketing activity, albeit maintaining this ratio of spend-to-revenue for the medium term.
“That level of heavy spending is likely to have alienated some investors completely from the stock, or made others nervous about whether it can drive loan growth without costly marketing support in the long-term.
“You also have to consider the P2P sector has developed a patchy reputation in recent years with concerns about loan default levels and lower returns than some platforms initially indicated.”
These articles are for information purposes only and are not a personal recommendation or advice.