Vodafone tries to regain investor support and Premier Foods pleases with profit guidance

“It’s been quite the tumultuous week, yet the FTSE 100 has managed to recover from all the weakness and is on track to end the five-day session marginally ahead,” says Russ Mould, Investment Director at AJ Bell.

“Investors who panicked when global markets took a dive on Monday may now be regretting their decisions to dump holdings.

“Commodity producers helped to drive up the FTSE 100 on Friday, supported by several unloved stocks starting to regain favour with investors including BT and Rolls-Royce.

“Next week sees the latest meeting from the Federal Open Markets Committee and the market will be eagerly watching for any signs of a change to US central bank policy. Investors are worried that economic growth could be losing momentum, but equally inflation is affecting us all. The Fed is unlikely to make any major changes to its current stance, but the market will look for every little sign of what the central bank could do next.”

Vodafone

“Full year numbers from Vodafone in May really created a stink. It fell short on profit and gave investors the unpalatable message that it would have to increase spending on its network, putting a dividend which had already suffered a heavy cut in 2019 potentially back in the firing line. Growth targets also left the market feeling distinctly uninspired.

“While the bad smell has hung around the stock since then, Vodafone’s first quarter trading statement has acted as a bit of an air freshener as it reports revenue growth across its consumer and business segments.

“The fact people have literally been a bit more mobile than they were 12 months ago means the income from roaming charges, with people paying more to use their mobiles abroad, has increased. However, it is still unsurprisingly at less than half pre-pandemic levels with many travel restrictions still in place.

“Vodafone continues to push a message of becoming a ‘next generation’ provider of digital services and connectivity in Europe and Africa – we may get more detail on what that actually means in English at an investor event in September.

“Chief executive Nick Read has now had nearly three years at the helm, and while the pandemic has disrupted nearly half that period, he needs to do more to win over shareholders or another candidate may be dialled up to lead the business.”

Premier Foods

“For a business which thrived during the pandemic, it was always going to be tough beating year-on-year comparative figures.

Premier Foods soared in 2020 thanks to the nation loading up on snacks and treats, and it would be wrong to criticise the business for failing to smash last year’s stellar growth levels. Importantly, if you look at the two-year comparative figures, Premier Foods has still made decent progress. Indeed, earnings are now expected to be at the top end of expectations.

“Strategically, Premier Foods has come a long way since its days as a zombie company where all the cash it made was gobbled up on debt repayments, leaving nothing to put back into the business. Now that situation has been resolved, it is reinvesting fast in product innovation and marketing, and you can see that it is working.

“Mr Kipling has long been a favourite with shoppers across the country, but pre-pandemic had faded slightly in terms of popularity. The brand has now bounced back with aplomb, helping act as a key sales driver for the group.

“Extending brands through product innovation such as Mr Kipling baking mixes and Oxo marinade is a clever move, giving Premier Foods more avenues by which to make money and also take up additional shelf space so its brands are front and centre when shoppers browse the aisles of a supermarket.

“And as the nation has been forced to rediscover home cooking as many pubs and restaurants were shut during lockdown, the Sharwood’s cooking sauce brand has also had a new lease of life.

“Premier Foods is a perfect example of a business that has regained focus and is now enjoying momentum as its growth plan is rolled out.”

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.