Markets pick up, Netflix strikes major deal, PZ Cussons finds life harder going, and Saga travel bookings beat pre-Covid levels

“A lot can change in a week on the markets,” says Russ Mould, Investment Director at AJ Bell.

“Having seen some very bad days for equities in recent sessions, Europe and parts of Asia were more upbeat on Wednesday. The FTSE 100 was up 0.9% to 7,042 and China’s SSE index jumped back to life after markets were closed for a few days’ holiday. The SSE advanced 0.4%. Pre-market indicative prices also suggest a decent day for US stocks.

“So, what’s changed to make investors more confident? One key event is China’s troubled property developer Evergrande striking a deal over a bond repayment, thereby bringing a sense of relief to markets we might not see the business collapse – something that could cause ripples in multiple markets. Evergrande still has plenty of problems to fix including more bond payments later this week, but today’s deal would suggest catastrophe is not immediately around the corner.

“We also have the Federal Reserve issuing a policy statement later today and speculation is growing that we won’t get the dreaded tapering announcement at this event. That would be a massive relief to investors and could give further support to markets.”

Netflix

“The purchase of the company which manages the rights to Roald Dahl’s stories is a breakthrough moment for Netflix. It has now got its hands on a rich library of weird and wonderful characters, meaning it can create spin-off shows, remake films of the most popular books and sweat the assets even further.

“Disney’s purchase of the Star Wars empire raised eyebrows at the time, but it has perfectly demonstrated how strong intellectual property can be used to create a multitude of content. The Roald Dahl acquisition is Netflix’s chance to do the same.

“While Dahl’s books may not have the incredible reach of Star Wars, titles like Charlie and the Chocolate Factory are still loved around the world and Netflix can use this to its advantage. This includes creating products beyond a TV screen, such as games, merchandise and theatre.

“So many parents subscribe to Disney+ because it has content that their children will watch over and over again. Netflix now its own must-watch content and importantly it is evergreen material. People young and old love these stories and that should strengthen loyalty to the Netflix platform.”

PZ Cussons

“So much for the assumption that everyone’s hygiene habits would permanently change because of the pandemic.

“A year ago, the consensus view was that Covid was so devastating to the world that it taught people the importance of washing their hands more often to reduce the spread of germs. Soap and hand gel sellers looked as if they would be sitting pretty for years ahead.

“Reality has now hit home with a sharp fall in year-on-year sales for one of the UK’s best known hand gel products, Carex. To be fair, its owner PZ Cussons had a high hurdle to beat, given how the year-on-year comparative period saw an unprecedented surge in sales.

“Furthermore, last year it barely had to do any cut-price promotions to shift products as demand went through the roof, implying that profit per bottle could be less this year if it reverts to historical discounting trends.

“Fast forward to the start of its new financial year and there are pressures across the board, principally tough comparative figures to beat, significant cost inflation and ongoing disruptions to supply chains.

“The company says it should still hit earnings forecasts if life doesn’t get worse, but the sharp decline in its share price in response to the trading update would suggest that investors don’t believe it will hit those estimates.”

Saga

“The argument for Saga having a diversified lifestyle offering for over-50s has been reinforced during the pandemic as the resilience of the insurance arm has helped make up for a big hit on the travel side as cruises, in particular, were among the first areas to be heavily affected.

“The company’s focus on an older target market, once seen as a big long-term advantage given the UK’s aging population, became a problem given this cohort were the ones most at risk from infection.

“Now a recovery in travel looks to be gathering some momentum as Saga achieves a key milestone with bookings for next year ahead of pre-Covid levels. The amount Saga gets from each passenger on its cruises is also ahead of budget which is encouraging for future levels of profitability.

“Historically the travel and tour operator parts of the business were the ones Saga really wanted to push and the company is not being shy about chasing up the pent-up demand for holidays from its target demographic, with marketing spend bumped up accordingly and a plan to relaunch the brand.

“It is not likely to be all plain sailing from here and there is still a risk that Covid smudges a promising looking picture for 2022.

“However, the company has worked hard to get its balance sheet into a robust position and, with the founder’s son and former longstanding boss of Saga Sir Roger de Haan at the helm as chairman, there is a chance that the company’s pledge to emerge the other side of the pandemic stronger is more than just a platitude.”

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