Proactive Investors -
- FTSE 100 10 points lower
- UK economy flatlines
- Rightmove rejects bid
Trustpilot soars
Review aggregator Trustpilot plc has outpaced the entire FTSE 350 set with a 14% share price rally.
It follows the announcement of a S$23 million (£20 million) share buyback following stronger-than-expected profitability over the first half.
Shares are currently swapping for a seven-week high of 219p.
Another mid cap, WH Smith PLC (LON:SMWH), is the second-strongest performer among the FTSE 350 set with a 13% rally following its own share buyback announcement.
Among the blue chips, insurer Prudential (LON:PRU) plc and Ladbrokes owner Entain PLC (LON:ENT) are among the top risers.
The FTSE 100 is currently 10 points lower at 8,195.
Zara owner Inditex gains in Madrid
Inditex (BME:ITX), the Spanish owner of Zara, reported a 7.2% rise in sales to €18.10 billion in the six months to the end of July 2024.
Zara, Inditex's largest brand, saw sales increase by 5.4% to €13 billion.
Inditex operates 5,667 stores globally, including brands like Pull & Bear, Massimo Dutti, and Bershka. The company plans to expand its store footprint by 5% between 2024 and 2026.
Inditex is also executing a €900 million logistics upgrade over two years and reported net cash of €10.90 billion at the end of the half-year period.
Shares in Inditex, which is Spain’s most valuable company, added 4.5% on the Madrid bourse.
Frasers-backed model train maker increases profits
Hornby PLC (LON:HRN), the model train maker that counts Mike Ashley’s Frasers Group PLC (LON:FRAS) as a major backer, saw its profits increase by 10% year on year in the five months to 31 August.
Frasers owns 8.9% of Hornby’s outstanding shares, having upped its stake by 11.1 million shares in February.
Hornby’s products are stocked in Frasers-owned GAME stores, with Ashley personally acting as a strategic consultant to the group.
In a Wednesday trading statement, Hornby said: “As is usually the case in our industry; the outcome for the full year is subject to the sales rate in the run up to the key Christmas trading period.
“Our outstanding order book is strong with new products still to be released.
In addition, D2C (direct to customer) invoiced sales are up 11% on prior year and 56% up on the same period in 2022.”
The morning so far
The markets kicked off on Wednesday with news that the UK economy flatlined for the second month in a row in July.
The latest figures fell short of economists' expectations for a 0.2% increase in GDP.
While services output increased by 0.1% during the month, it was insufficient to offset a 0.8% decrease in production output and a 0.4% drop in construction output.
Attention has now turned to what it could mean for interest rates with Charles Stanle’s Rob Morgan suggesting it is “still probably a little early” to expect a cut this month, but another 0.25% reduction “looks firmly on the table” for November.
The was a swathe of company news to digest, including Rightmove PLC (LON:RMV)’s rejection of a “wholly opportunistic” takeover approach from Murdoch-owned REA Group that “fundamentally undervalued Rightmove and its future prospects”.
Rightmove shares added 0.75% on the announcement.
Other big-cap movers included miners Fresnillo PLC (LON:FRES) and Antofagasta (LON:ANTO), as well as insurer Prudential plc, all of which added more than 2%.
The same cannot be said for pest control big cap Rentokil Initial (LON:RTO), which bombed over 19% after warning that sales in North America in the past two months were lower than expected.
Profits are likely to be hit by higher costs and currency headwinds, said the group.
In the mid-cap space, Trustpilot plc added 9% after declaring a new US$23 million (£20 million) share buyback after stronger-than-expected profitability over the first half.
Adjusted pre-tax earnings of US$10.6 million outstripped expectations, Trustpilot reported, having climbed 86% from US$5.7 million previously.
WH Smith PLC also announced a buyback plan after the FTSE 250-listed retailer posted a strong full-year performance, sending shares up more than 10%.
At the time of writing, the FTSE 100 was flat at 8,205.
Brent crude prices at lower levels since december 2021
Brent crude oil prices shot below US$70 a barrel for the first time since December 2021 this morning.
The dip follows a lower demand forecast from OPEC.
In its September report published on Tuesday, the cartel revised its forecast for global oil demand growth in 2024 downward to around two million barrels per day (mb/d), representing an adjustment of 80,000 barrels per day (tb/d).
Looking ahead to 2025, global oil demand growth has also been revised down by 40 tb/d, now standing at 1.7 mb/d.
Concerns over Chinese demand continue to weigh on demand forecasts.
China’s latest economic data shows a widening trade surplus due to a decline in domestic demand for foreign-made goods and services
Rentokil slammed 17% lower
Shares in pest controller Rentokil Initial PLC bombed over 17% this morning after warning that sales in North America in the past two months were lower than expected.
Profits are likely to be hit by higher costs and currency headwinds.
Organic revenue growth from the US and Canadian operations is now expected to be around 1% in the second half of the year, down from 2.8% in the first half.
“We continue to believe in the fundamental strength of the North America business,” said management.
“The substantial structural growth opportunities, enhanced by the benefits of the Terminix transaction, means the value creation opportunity remains intact, albeit taking longer to realise than anticipated.”
FTSE 100 inches higher
Despite pre-market trades anticipating a fall, the FTSE 100 shot into the green in opening exchanges.
London’s premier index is currently nine points higher at 8,215, with miners Antofagasta plc and Fresnillo PLC (LSE:FRES), plus insurer Prudential plc, adding more than 2% each.
Rentokill, on the other hand, has collapsed more than 17% following a profit warning.
What does GDP result mean for interest rates?
With the UK economy unexpectedly flatlining for the second month in a row in July, the discussion has turned to what it means for further interest rate cuts going forward.
The Bank of England’s Monetary Policy Committee knocked 0.25% off the base rate in August and with GDP beginning to still, the prospect of another later this month has raised slightly.
“The stagnant growth picture certainly won’t prompt any significant inflationary concerns among the MPC decision makers at the Bank of England,” said Rob Morgan, chief investment analyst at broker Charles Stanley (LSE:CHAS).
“It’s also not so obviously weak to infer that rates are too restrictive, but it does tilt the odds in favour of a further cut in September a little.”
Morgan suggested it “still probably a little early” to expect a cut this month, but another 0.25% reduction “looks firmly on the table” for November.
“A few more months of data and, perhaps crucially, a Budget from the Chancellor of the Exchequer that lays out tougher fiscal policy, will be important fodder for the decision-making process,” he added.
Rightmove rebuff’s REA’s ‘wholly opportunistic’ bid approach
Rightmove PLC has rejected a takeover offer from Australian property website REA Group that valued the FTSE 100-listed property portal at 698p per share.
Although the offer represented a 26% premium on Rightmove, the board deemed it a “wholly opportunistic” that “fundamentally undervalued Rightmove and its future prospects”.
The offer was unanimously rejected by the board.
Under official takeover rules, Murdoch-owned REA has until 30 September to come back with a more enticing offer.
Rightmove shares opened slightly lower at 670p today.
Boohoo brings US fulfilment operations to the UK
Boohoo Group PLC (LON:BOOH) has announced that it will start fulfilling US orders from its “state-of-the-art automated distribution centre” in Sheffield, UK.
The British online fashion group made the decision in order to increase its product offering to US customers, who are currently only privy to 60% of styles available in the UK.
Boohoo anticipates a write down on investments and costs associated with establishing its US distribution capabilities, but expects “a significant reduction in ongoing costs over the medium term”.
Its US distribution centre only launched in 2023 as a way of increasing next day and express delivery options for US customers.
The decision could spark some ESG concerns due to the impact on Boohoo’s carbon footprint.
Though the company already produces many of its garments in the UK before shipping them off to the US, it also buys garments manufactured in South Asia.
Boohoo was rapped on the knuckles earlier this year for inaccurately labelling garments as made in the UK.
Boohoo intends to cease operations at its Elizabethtown, Pennsylvania distribution centre in November.