Markets remain fragile and GVC is back on a winning streak

Wednesday, October 9, 2019 - 09:14

“It is little wonder global equities are fragile at the moment as an apparent breakdown in trading relationships between some of the world’s largest economies is hardly an encouraging sign for global growth,” says AJ Bell Investment Director Russ Mould.

“A Brexit deal before 31 October looks increasingly unlikely, meaning investors are having to face up to two potentially unpalatable scenarios, no deal or further delay.

“In Washington, the blacklisting of some Chinese companies and sanction on officials involved in the detention of the Uighur ethnic group is hardly the most auspicious of preludes to talks between the US and Beijing later this week.

“Investors may look to tonight’s publication of minutes from the US Federal Reserve’s latest interest rate meeting for signs the central bank is prepared to do what it takes to keep the world’s largest economy on track, and this hope may have helped the FTSE 100 eke out some modest gains on Wednesday morning."

GVC

GVC has had a very difficult year ever since being caught up in considerable shareholder backlash against directors dumping about £20m worth of shares and chief executive Kenny Alexander receiving very large stock awards. The company also lost its place in the FTSE 100 index and under pressure from investors, Alexander took a six-figure pay cut.

“The company’s fortunes seemed to have turned around since reporting half year results in August when it said the full year should be better than expected. True to its word, its latest trading update confirms that business is going swimmingly and that earnings guidance has been raised again.

“Online business is doing really well and its UK high street shops aren’t doing as badly as feared. Plans to close up to 900 stores over the next two years should help to streamline the business and potentially leave it with a more profitable estate, albeit on a much smaller scale.

“One of the biggest risks for any gambling company’s profit margins is tighter regulation and GVC is no stranger to having to monitor policy changes. Higher taxes as more territories regulate activities would hit margins but operating legally in a regulated territory is something that most investors want.

“For now there is no update on regulatory developments in Germany but it is a country being monitored closely by GVC, so too Brazil which is set to have a regulated sports betting market next year or the year after.”

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


The daily market update is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.


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