Daily market update: Anglo American, Berkeley, Everyman Media, FirstGroup

Markets were in a holding pattern ahead of the Fed’s interest rate decision later today.

A quarter point rate cut is widely expected, but more interesting to the market will be commentary on the direction of rates in 2026. There have been conflicting signals from the Fed about monetary policy and markets are keen to see if there is more joined up thinking from the central bank.

The FTSE 100 was flat at 9,641 as strength in basic materials was offset by weakness in healthcare and utilities. WPP extended yesterday’s rally, suggesting that investors are fired up by takeover speculation or they’re taking the view that so much bad news around trading has now been priced into the stock, that the slightest bit of good news could spark a rally.

Anglo American

Shareholders have approved the merger of Anglo American and Teck, marking a new chapter in the top tier of the mining industry.

Now comes the hard part – living up to the hype at the heart of the merger rationale. Big deals are notoriously value-destructive, either because management over-estimated cost synergies, culture clashes rear their ugly head, or financial returns fall short.

The combined Anglo/Teck group will be a big player in the copper market, where the outlook for the metal price is red hot. It just needs to be able to capitalise on the market opportunity and not be derailed by production issues, such as labour strikes, lower than expected ore grades or processing problems.

Berkeley

It’s no secret that the run-up to the Budget had a chilling effect on property transactions and that’s evident in Berkeley’s first-half results. However, the company’s relatively bright tone on the longer-term outlook and a reiteration of full-year guidance has received a positive reception from investors.

Interestingly, there is no mention of the so-called ‘mansion tax’ which arguably could impact Berkeley more than other housebuilders thanks to its focus on premium properties in the south of England.  

Increased tax on rental income is also seen as having a disproportionate effect on Berkeley given its burgeoning build-to-rent business, which could now face diminished demand.

At least the company’s communication remains refreshingly clear. It is fully committed to its 10-year strategy out to 2035 which provides a roadmap to see it through any turbulence in the wider market. It also continues to be effusive about the strong dynamics behind the London property market.

Berkeley has managed to keep a tight lid on costs, despite some inflationary pressures in labour and materials and this, coupled with the strength of its balance sheet, could help it to handle the ups and downs of the housing market.

Everyman Media

Cinema operators’ fortunes are only as good as the film slate. If the schedule looks weak, people aren’t going to leave the house to see something on the big screen. That’s exactly what’s happened in the final quarter of the year, with Everyman bemoaning a poor UK box office performance.

There is only so much a cinema operator can do in this situation. Some might slash prices to put bums on seats; others might accelerate refurbishment plans to make their sites more appealing. It’s telling that Vue recently launched a new loyalty scheme to drive more business, and it is installing posher seats in certain sites.

Netflix trying to buy Warner Bros arguably clouds the outlook for the cinema industry even further. Should Netflix manage to fight off Paramount in the bid for Warner Bros then it’s inevitable that more big titles go straight to streaming.

The cinema industry is not going to disappear completely, but its trials and tribulations are getting worse. This is evident in Everyman’s deteriorating share price which tells the story of a business losing fans left, right and centre. It is down 82% since May 2021.

FirstGroup

Transport operator FirstGroup continues its post-pandemic recovery with a contract to run the London Overground network.

The loss of several key rail franchises over the last decade or so had left FirstGroup more reliant on its bus operations so it’s no surprise to see the market welcome a return to greater diversification in the business.

The revenue risk is borne by TfL, making this an attractive commercial opportunity. FirstGroup already has an established presence in the capital and an existing relationship with TfL for which it already runs a significant chunk of the bus network as well as trams and the London Cable Car.

The new contract widens the gap between FirstGroup and its main UK-listed peer Mobico. FirstGroup’s shares have advanced more than 180% over the last five years while Mobico has reversed more than 90%.