“The FTSE 100 dipped at the open to continue its rather lackadaisical progress over the last month, with investors awaiting a catalyst which might push them in either direction,” says AJ Bell Investment Director Russ Mould.
“The impact of banking giant HSBC trading without the rights to its latest dividend accounts for a good chunk of the UK market’s losses.
“Aviva, fresh from entering the Lloyd’s insurance market through an acquisition, unveiled better than expected results and raised dividend guidance.
“By applying AI in cybersecurity, Darktrace plays into two of the market’s favourite themes at the moment and, while life as a public company has been far from smooth sailing, its latest results got a favourable response. A restructuring and improved sales channels have helped support a shift in the trajectory of revenue and earnings which could help to rebuild the group’s credibility with investors.
“Entain’s latest update showed why some people are reluctant to invest in gambling companies as it warned of a continuing impact from a tighter regulatory regime. Governments seem very aware at this point of the social harms involved with gambling and this means the threat of ever more stringent rules being introduced is a growing risk for the sector.”
Virgin Money
“The mortgage industry has changed colour more times than a chameleon and Virgin Money has been one the key names involved in the consolidation process. Having acquired Northern Rock at the start of 2012, Virgin Money was then gobbled up by CYBG in 2018 and merged into Clydesdale Bank in 2019. It’s now set to become part of Nationwide.
“It’s an interesting time for big deals in the mortgage sector. We’ve seen tentative signs that the property market is regaining strength after a difficult few years hampered by a high interest rate environment which made mortgages less affordable. While mortgage rates have crept back up in recent weeks, the general consensus is that the Bank of England will start cutting base rates later this year and that should hopefully benefit those looking to move home or get on the housing ladder.
“Nationwide is effectively pouncing on Virgin Money at a time when prospects are improving for its industry, albeit we’re still in a volatile period until the base rate starts to come down. This is slightly unusual as companies often buy rivals at precisely the wrong time – namely acquiring at the top of the market when everything looks good and then overpaying for deals, rather than taking bold steps and acquiring when everything looks bad and valuations are weak.
“Buying Virgin Money is not just about mortgages – the company will also boost Nationwide’s position in the deposit, credit card and business banking sectors. The brand will still be used for six years and we’re unlikely to see big branch closures for a few years. This all depends on Nationwide being able to get the deal over the line. It’s slightly out of kilter with its traditional roots but would not change its status as a building society.
“A 38% bid premium is not overly generous and sits well below the 51% average seen last year with UK-listed takeovers. We might get interest from other parties now that Nationwide has thrown its hat into the ring or shareholders might push for a better price.”
Marks & Spencer
“Marks & Spencer’s co-chief executive Katie Bickerstaffe is to leave the company. The co-CEO structure is always a difficult one to maintain as it presents the risk of a power struggle.
“It looked as if Stuart Machin had the upper hand from the first day their co-leadership was announced in 2022. He was always referred to as ‘chief executive’ without any ‘co’ in his title, unlike Bickerstaffe. She was often attributed as ‘supporting’ Machin, which implied being a deputy.
“The pair were previously joint chief operating officers, effectively divvying up oversight for various parts of the business. Bickerstaffe was not mentioned at all in the half-year results statement last November which gave a clue that something might be afoot.
“Marks & Spencer has a history of revolving doors with its senior management team, but the difference now is that the business seems to have found its groove and the turnaround story is gaining traction. It doesn’t appear to be a case of someone senior leaving because the strategy isn’t working.
“Machin is the architect behind the retailer’s recent success and the fact he remains in the top job will be of comfort to shareholders and the market.”
ITV
“ITV’s recent decision to exit its BritBox International joint venture with the BBC looks an increasingly smart call given how well its ITVX streaming service is performing. There’s no point in the company diluting its resources and focus when it needs to put all of its efforts into making ITVX a success.
“Plus, the BritBox sale has enabled the company to return a nice dollop of cash to long-suffering shareholders through a share buyback.
“While ITVX drew a healthy amount of market scepticism when it was announced two years ago, in its first full year the platform has made a good contribution to the business. This helped to make up for an alarming 15% decline in linear advertising.
“While some of this is cyclical and relates to the uncertain economic backdrop, it seems the structural pressures in this market are also accelerating at speed. There remains a large audience for linear TV but advertisers are unable to tailor ads to specific consumers in the same way they can online.
“As well as improving its digital offering, a key plank of ITV’s strategy has been increasing its production-based revenue. This tends to be more predictable than volatile ad spending. Today’s results show the progress which has been made with its ITV Studios business as revenue hit a new record level.”
These articles are for information purposes only and are not a personal recommendation or advice.