All change at the top for Tesco, and Flutter bets on Stars merger

“Markets in the UK, Europe and Asia have taken a big step back as investors react to ugly manufacturing data from the US. Stocks on Wall Street last night took a beating with the Dow Jones falling by 1.3%,” says Russ Mould, Investment Director at AJ Bell.

“Investors were already worried about the outlook for the global economy and the new US data will only compound these fears.

“Sterling was weak ahead of Boris Johnson setting out details of his negotiating offer to the EU for Brexit. The currency fell 0.3% against the US dollar to $1.2270, dragging the UK-focused FTSE 250 index down 0.5% to 19,767. The FTSE 100 dropped 0.9% to 7,296."

Tesco

“Three cheers for Dave Lewis, the man who stopped Tesco from sinking into a deep hole. The departure of one of the most highly-respected bosses in UK business is not a surprise given his turnaround efforts now seem to be bearing fruit. He has made some very difficult decisions which, while painful, have put the supermarket back on track.

“When Lewis joined Tesco the business was on its knees, suffering from overexpansion and mismanagement. He’s had to slash thousands of jobs, streamline the business, address accounting issues, and find ways to cope with Aldi and Lidl snapping at Tesco’s heels. The takeover of wholesaler Booker was initially greeted with some scepticism but its merits are now being seen.

“He hasn’t been afraid of trying something new, as evident by the Booker acquisition and the launch of the Jack’s value brand. The jury is still out on Jack’s but it is clear that Lewis has been a man who has constantly rolled up his sleeves and explored every possible avenue to sharpen Tesco’s proposition.

“Very few chief executives are good at both fixing and growing a business as these tend to be different skillsets. Lewis’ successor Ken Murphy will have to focus on the growth part which is not going to be straightforward. He’s coming from Boots which has also been going through a big cost cutting programme amid pressure on earnings. Murphy will therefore need to change his mind-set from recovery to growth as soon as he joins Tesco next year.”

Flutter Entertainment

“After a period in which UK companies’ bombed-out valuations have left them vulnerable to foreign predators it is somewhat refreshing to see a constituent of the London market take the lead as Flutter Entertainment lines up a merger with Stars Group.

“Flutter, formerly known as Paddy Power Betfair, will combine with Stars to create what it is describing as the world’s largest online betting company. This will include the Sky Bet brand acquired by Stars last year.

“While the UK and Australia will remain core markets, assuming the merger goes through the biggest opportunity is sports betting in the US. The rationale being that increased scale will help create a stronger competitive position.

“Some of the legwork has already been done with Stars teaming up with Fox Sports to launch Fox Bet and Flutter having had a footprint in the US since 2009.

“Regulatory pressures are increasing in most markets and the opening up of sports betting in the US is seen as a major source of growth for the industry.

“There have been false dawns across the Atlantic before. The reopening of online betting in 2013, having been shut down seven year earlier, was seen as a big prize but UK companies failed to capitalise. Flutter will be hoping this deal can help it crack what appears to be a pretty tough nut this time round.”

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