Shell to stay in the FTSE as it ends dual share class structure and James Bond comes to Cineworld’s rescue

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“The FTSE 100 made a tepid start to the week on Monday despite some positive economic news from China,” says AJ Bell Investment Director Russ Mould.

“A lot of the noises from the world’s second largest economy have been negative of late so the better-than-expected data on industrial output and retail sales understandably earned some applause from Asian markets.

“The next big economic release comes on Wednesday in the form of UK inflation figures which could reignite investors’ concerns about rising prices.

“The London market was bolstered by the news Royal Dutch Shell is casting off its dual-share structure but unlike BHP and Unilever is not threatening divorce and has instead committed itself to the UK and remaining in the FTSE 100 index.

“The better comparison is with Unilever – which like Shell has Dutch and British roots. The consumer goods giant ended up being brought back from the brink of a move to the Netherlands in the face of angry protests from shareholders.

“It turns out Shell didn’t need to have its feet held to the fire, and it will remain a key constituent of the FTSE as it tidies up its complex A + B share structure.

“Most of us will be mightily sick of the pandemic by now, but for Serco there has been a silver lining as it upgraded forecasts thanks to Covid-19 related work running for longer than expected.

“More telling for the company’s transformation away from the ugly duckling of a business of a few years ago is how much of this work is translating as free cash flow.”

Cineworld

“James Bond has come to the rescue of Cineworld, helping its UK and Irish cinemas in October to beat box office and concession revenue levels seen in the same month two years earlier, before the pandemic struck.

“No Time To Die has encouraged people to try the cinema again, although the master spy was unable to crack the code for similar success in the US and other Cineworld territories where October’s takings didn’t surpass the comparative period two years earlier.

“Nonetheless, the direction of travel for Cineworld’s revenue on a group basis is positive with the percentage of sales versus the same period in 2019 increasing month-on-month since July.

“The success of a cinema is highly dependent on the quality of the film slate and there have been some big-name productions helping to get punters through the doors, including Dune and Venom.

“The release schedule looks fairly promising for the months ahead, so barring a new flare-up of Covid cases and renewed lockdown measures cinemas look like they are in a better place.

“The one thing missing from Cineworld’s update is the profit figure. We know the company has been trying to strip out costs, but it also has inflationary pressures and oodles of debt that needs repaying.

“Now is not the time to push through big ticket price hikes. Not only are family finances under pressure from higher energy, fuel and food bills, but cinema operators also need to use cheaper prices as a way of attracting anyone still on the fence about wanting to spend two hours in a confined space with a load of strangers.”

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