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.
“It took multiple attempts to scale Everest and the FTSE 100 appears to have left base camp on another attempt to plant its flag above the 6,000 mark,” says AJ Bell Investment Director Russ Mould.
“And after two down days for the markets, the week is ending on a more positive note for equities worldwide as fears of a second wave in the current pandemic ease for now.
“US stocks traded higher overnight, with banks rising and hopes that the Federal Reserve is prepared to take further action to support the markets. Asian shares took their cue from mixed but ultimately improving economic data from China, the first country into and out of lockdown.
“However, with the Trump administration continuing to threaten new tariffs on China over its coronavirus response, there is still residual nervousness reflected in an increase in the gold price to multi-week highs above $1,740 per ounce."
Royal Mail
“The middle of a global crisis feels like an odd time to part ways with a CEO, particularly one who has been in post for as short a time as Royal Mail’s Rico Back.
“With his P45 delivered, Back is being given more time to enjoy the Swiss penthouse from which he has reportedly been running the company.
“The best hint at the reasons behind his departure is the company’s statement that interim executive chair Keith Williams will lead discussions on ‘an accelerated pace of change across the business’.
“German-native Back took over as CEO in June 2018 and while a plan to transform the business initially won some favour with investors, Royal Mail ran into trouble as targeted productivity improvements were not met amid wrangling with the unions.
“Back could not be criticised for not aligning his interests with shareholders, snapping up more than £3.5m worth of shares in the business across his tenure. His parting statements wishing the company well may be more than just platitudes.
“Interestingly one element of the group’s recovery plan – the targeted transition from letters to parcels – may have been accelerated by the coronavirus crisis. Parcel volumes in the UK business were up 31% in April as more of us went online to shop with high street outlets and shopping centres closed.
“The increased volume of parcels was not enough to prevent a big decline in revenue as the number of addressed letters fell by a third. The GLS parcel networks business has seen volatile trading to match the uneven spread of the virus across the continent.
“Royal Mail’s board will need to move fast to appoint a successor given the big challenges facing the business and the market will want to hear more as promised when full year results are posted on 25 June.
“The bonus to be paid to frontline staff and withdrawal of incentives for the executive team may go some way to mending fences with a disgruntled workforce.”
BooHoo / Keywords Studios
“While most companies are tapping investors for more cash simply to keep going during the crisis, there are a select few who can afford to think more strategically.
“Following in the footsteps of Auto Trader which recently made a similar move, BooHoo is the latest company to ask shareholders for cash so it can have a war chest to make acquisitions.
“Now is a perfect time for the strongest companies to buy weaker players, thereby extending their reach and market position.
“What’s really interesting is that BooHoo has convinced investors to buy more stock only days after its share price hit a new record high of 370.4p. While the placing price of 340p is a small discount, investors are still paying a high price to get a slice of BooHoo, suggesting that they really believe in its potential to keep growing very fast.
“It is no stranger to making deals, having previously bought assets from Karen Millen, Coast and Nasty Gal. Asking for such a large sum of cash would suggest that BooHoo is confident that opportunities will emerge as more retailers struggle to stay alive. A near-£200m fundraise will now enable BooHoo to act fast should there be a chance to buy something out of administration.
“There are always risks with buying other companies and there are longer term questions about whether there will be a consumer backlash against its fast fashion model. After all, the idea of constantly turning around new designs and customers wearing them once and chucking the clothes afterwards doesn’t resonate well with the ethical values increasingly being embraced by the younger generation.
“For now, investors seem to like the fact that BooHoo is trading well through the crisis and acquisitions could help it to broaden its appeal to older people and have a more international presence.
“Computer games services group Keywords Studios has also raised a slug of new cash to make deals. It has already made 44 acquisitions in its career and believes the Covid-19 crisis will increase the pool of potential deals as smaller companies struggle to keep going. An extra £100m will now put in a strong position to add a few more companies to the group.”
These articles are for information purposes only and are not a personal recommendation or advice.