Flybe, Dignity and Metro Bank

“Better than expected second quarter GDP figures put investors in a good mood, sending the FTSE up 45 points to 6,769,” says AJ Bell Investment Director, Russ Mould.

“A dark cloud hangs over airline stocks with Flybe the latest to cause panic among investors. The regional carrier says consumer uncertainty and the economic impact from Brexit, as well as terrorist incidents, could materially impact its business. It is the latest in a string of negative news from the sector which has also seen EasyJet and International Consolidated Airlines downgrade earnings expectations in recent weeks. A likely move to slash airline prices across the industry to stimulate ticket sales won’t be good for profit margins.

“An 8.8% drop in underlying pre-tax profit in the first half of 2016 has spooked investors in funeral services provider Dignity. The market has taken fright at the earnings weakness, partially down to fewer UK deaths year on year. It seems odd measuring the success of a company by mortality rates but this is a key performance indicator for the business. You need to take a step back and consider the defensive nature of the business. Dignity is highly cash generative, pays a good dividend and provides a service that essentially falls under non-discretionary spend. Those are characteristics that many companies would die for.

“Metro Bank has become the second high street lender in 24 hours to report that the UK’s decision to leave the European Union has failed to dent consumer confidence. It follows comments by Virgin Money that business flows and customer behaviour haven’t changed. The real test will be in three months’ time when we can get a more accurate feel for how the economy has held up following the EU referendum and whether there has been a shift in consumer confident, which I suspect might be the case.”

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