FTSE stabilises, EasyJet gives more clarity to travellers, Euromoney takeover approach, and Primark trials click and collect

Markets / Easyjet / Euromoney

“Following last week’s brutal session for stocks globally, a 0.2% rise in the FTSE 100 is a good enough reason to be more optimistic about the equities market. Stability often comes before recovery and markets being more composed would suggest investors are no longer panicking,” says Russ Mould, Investment Director at AJ Bell.

“Fears over a slowdown in consumer spending have hurt shares in retailers and leisure operators in recent weeks, so it was interesting to see many of these stocks among the top risers on Monday.

International Consolidated Airlines, B&M, Next and Whitbread were among the FTSE 100 stocks nudging ahead, while some of this year’s stock market winners fell back including diversified miners, perhaps as investors took some profits.

“After weeks of chaos across UK airports, EasyJet is taking proactive action to reduce the number of flights over the summer to help ease the pressure on transport hubs struggling to deal with the recovery in demand for flying.

“While this will give clarity to travellers wondering if they would get to the airport and see their flight cancelled, it does pour some cold water over EasyJet’s earnings guidance as the costs are jumping higher.

“While there will be some disappointment among travellers affected by the forward cancellations, it could help to avoid a reputational disaster for EasyJet should it have continued to leave people stressed on the day of travel.

“A private equity consortium clearly wants its hands on Euromoney given how five potential offers have been made for the business, starting at £11.75 per share and now sitting at £14.61.

“Euromoney has a lot of attractions to private equity – services which are in demand, a strong balance sheet and the opportunity to make big improvements to profit margins.

“The company has been sharpening its focus thanks to a mixture of self-help measures and strategic deals. It has been reaping the benefits of bolt-on acquisitions which have helped to strengthen its data intelligence capabilities, and its events business has also been recovering from Covid disruption.

“A takeover would be a short-term win for shareholders given how the latest proposal is at a significant premium to last Friday’s closing price of £10.94 but it would also see yet another quality business leave the UK stock market, which is negative for investors looking at the London Stock Exchange for long-term opportunities.”

Associated British Foods

“The big takeaway from Associated British Foods’ latest update is the news that its retail chain Primark is trialling a click and collect service.

“Primark has long been a bit of an outlier on the high street for having no online transactional services.

“Its argument has always been that the economics of online deliveries and returns wouldn’t stack up at its price point and for its product range.

“Given the big costs facing web-only retail at present, this argument carries more weight than ever. Primark has also relied on lots of impulse purchases in store which might be difficult to replicate online. But click and collect, which is being trialled on children’s wares in the North-West, could be a useful halfway house for the business.

“It means people can shop at their convenience at home but will still come through the doors of a Primark to collect their purchase and potentially make some incremental buys along the way.

“Like all value-based consumer facing propositions, Primark faces the challenge of dealing with mounting costs while not losing its credentials on affordability with customers. Its scale is helping in terms of tackling this challenge and assuming it can sustain this, the brand could enjoy market share gains as shoppers trade down.

“Another thing which makes Associated British Foods stand out is its conglomerate structure. However, a diversified business has served it well during the pandemic and through reopening as the importance of its food, ingredients and grocery business has come to the fore.

“This is particularly the case at present thanks to the disruption to global food supplies caused by the war in Ukraine.”

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.