Unilever, Intu Properties and Banks

“The FTSE 100 followed the direction of US markets last night by pushing ahead in early trading on Thursday. A 0.5% rise to 7,041 was also driven a mixture of banking shares rising off the back of the Bank of England’s stress tests and strength in miners and tobacco stocks. “Cautious remarks by the US Federal Reserve triggered a rally in US stocks on Wednesday as investors interpreted the comments as a signal the central bank may slow down the pace of interest rate hikes,” says Russ Mould, Investment Director at AJ Bell.

Unilever

“The departure of Paul Polman as chief executive of Unilever shouldn’t come as a surprise. What is unexpected, however, is the appointment of Alan Jope as his replacement, currently president of Unilever’s beauty and personal care division.

“Tesco’s boss Dave Lewis has long been seen as a potential successor to Polman. Indeed, he used to have Jope’s job at Unilever up until 2014. “Aside from Lewis, market speculation had also thrown Unilever’s chief financial officer Graeme Pitkethly and food and refreshments chief Nitin Paranjpe into the ring as potential candidates for the top job once Polman was ready to step down.

“Polman is the latest in a long line of FTSE 100 chief executives to announce their departure in 2018, with other examples including Aviva’s Mark Wilson and Ashtead’s Geoff Drabble. One could argue this elite group is getting out at the top, just as large parts of the global economy are starting to look fragile.

“Polman’s legacy has been slightly tarnished by the failed plan to move the company’s headquarters to Rotterdam. While shareholders got their way and Polman’s final act was to walk away with his tail between his legs, one hopes that he is instead remembered for the large amount of value created for shareholders during his tenure. It must also be noted that he helped to fight off a takeover bid from Kraft Heinz in 2017.

“Unilever has delivered a 290% total return since Polman became CEO in January 2009, which is the rise in the share price plus all dividends reinvested. While by no means the best performance from a FTSE 100 company, it is still a decent result and one that would have significantly outperformed the money you would have got on cash in the bank.”

Intu Properties

“It has been a bruising 2018 for shopping centre landlord Intu Properties as it is jilted at the altar for a second time. A consortium led by major shareholder Peel has walked away from a potential £2.85bn bid.

“The fact both these prospective buyers and Hammerson, which abandoned its own merger plans earlier this year, took a good look at Intu and turned their noses up should ring big alarm bells with shareholders.

“The company is now left in a difficult position with too much debt, retail assets which would be difficult to sell, and the prospect of losing tenants. On top is the looming departure of chief executive David Fischel.

“A cut to the dividend will help provide some short-term breathing room for the company but more radical action will be required to ensure the long-term viability of the business.

“And it is no surprise to see shares in direct peer Hammerson as well as British Land and Land Securities, which also have significant retail exposure, under pressure given what today’s news says about how UK retail assets are perceived.”

Banks

“The Bank of England’s dire warnings about the impact of a no-deal Brexit rather overshadowed a clean bill of health for UK banks under the severe economic scenarios considered under new stress tests.

“Their successful navigation of this hurdle is not a big surprise. UK banks have been merrily paying out dividends and discussing plans to return surplus capital to shareholders, something regulators would likely have stamped on if the banks were short of a capital safety net.

“Somewhat surprisingly Royal Bank of Scotland appeared to be top of the class in terms of how it stood up to the tests, with HSBC appearing to be the worst.

“This likely reflects a need on the part of Royal Bank of Scotland to be particularly prudent given the big stake of the business still in public hands and a chequered past.”

These articles are for information purposes only and are not a personal recommendation or advice.