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“Many people may be surprised that the pound is holding firm and the UK-heavy FTSE 250 index is rising off the back of Theresa May’s Brexit vote defeat. “In essence the market believes we are going to get more time for negotiations, we’re less likely to have a hard, economically-damaging Brexit, or Brexit won’t happen at all. “The EU has already said it isn’t going to negotiate further and there remains great uncertainty over how events will play out, which suggests any stability in the markets could be short-lived. “It seems inevitable that both the pound and the stock market will be volatile for weeks or months to come until we have a definitive answer as to the exact direction of travel for Brexit,” says Russ Mould, Investment Director at AJ Bell.
Reckitt Benckiser
“News that Rakesh Kapoor is to stand down as chief executive of Reckitt Benckiser shouldn’t come as a surprise given how the business has floundered over the past year or two.
“So was he pushed out of the job? While the announcement merely says he is retiring, one can only speculate what was discussed behind closed doors. If he is leaving of his own free will then he’s not exactly departing when everything is going well.
“The $16.6bn acquisition of baby milk manufacturer Mead Johnson in June 2017 was considered by many investors to have been a bad deal with Reckitt paying too much and buying a company not in as good condition as first thought.
“Growth has been slowing on a group basis with Reckitt battling various issues ranging from cyber-attacks to factory problems.
“Kapoor’s early days as CEO were successful with shareholders rewarded with a decent uptick in the share price. But the shares have had a much harder time since summer 2017.
“His successor will need to be incredibly energetic, focused and highly skilled as Reckitt will not be an easy company to run.”
Pearson
“Academic publisher Pearson looks to be running to stand still based on the latest trading update. While 2018 profit is expected to be bang in the middle of previous guidance, this is backed by larger than expected cost cutting.
“Without these extra savings, the company would probably have been slightly short of expectations and would have been putting up a mild profit warning.
“Similarly, despite increasing its efficiency targets for 2019, its earnings per share forecasts for the year are pretty much in line with the existing consensus numbers.
“Investors will be disappointed that the key structural headwind for the company – the fact demand for expensive academic textbooks in the US has fallen away as students go online instead – remains an issue.
“Having contributed to a string of profit warnings, this part of the business remains a big drag on revenue and growth elsewhere is not yet sufficient to outweigh it.
“At least the company is backed by a strong balance sheet. This at least gives it some breathing room while investors wait to see evidence it is completing the transition necessary to put it back on a sustainable growth path.”
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