Daily market update: FTSE 100 lower, Intertek, IAG, Rightmove

The FTSE 100 started Friday on the back foot as local election results trickled in and tensions simmered in the Middle East.

While officially the ceasefire between the US and Iran remains in place, an exchange of fire in the Strait of Hormuz has helped to extinguish some of the hope that a deal between the parties might be close.

For now, the move higher in Brent crude oil prices is relatively modest and still substantially below last week’s highs, suggesting commodity traders still see a chance for de-escalation in the region.

As broadly expected, early indications suggest Labour has endured a poor set of local election results as Reform sees a surge of support in England – with Scotland and Wales still to begin counting. Gilt yields held firm at elevated levels with pressure on embattled prime minister Keir Starmer likely to build.

There was modest selling in some of the names which had bounced back this week. The top faller was quality assurance play Intertek as it once again rebuffed the attentions of Swedish private equity firm EQT.

While there may be short-term disappointment from some shareholders that the cash on the table has been dismissed, Intertek can point to previous examples of businesses rejecting offers and going on to better things. Electronics retailer Currys being an obvious recent example.

Intertek’s management now need to demonstrate they can deliver long-term growth and justify the decision to remain independent. Assuming this is the end of EQT’s pursuit, this could also be chalked up as a win for a UK market which can ill-afford a further thinning of the breadth and depth of its roster of listed companies.

International Consolidated Airlines (IAG)

British Airways’ owner IAG has warned that higher fuel prices will hit profits this year, but there are words of encouragement for anyone worried if their summer holiday will go ahead. IAG reports no issues with fuel availability in its main markets.

Dependability is important in the airline industry. IAG avoiding widespread cancellations in a period clouded by fears of fuel shortages could help it to stand out from the crowd. Other airlines won’t be so lucky.

Keeping customers on side is much more important during a crisis than making big money, as it can help build long-lasting trust.

There are no guarantees that IAG will be able to stick to its scheduled flights post-summer. It flags the potential for jet fuel to be restricted on a global basis if the conflict lingers on.

Months of further disruption to the flow of crude oil and jet fuel from the Middle East could severely damage the airline industry. Like the pandemic, operators’ hands would be tied, and they might not be able to fly as freely as they would like.

Airlines are taking it one week at a time, and as it stands today, IAG is keeping its chin up in the face of uncertainty.

Rightmove

Renewed uncertainty around the housing market and legal action over its alleged excessive fees have weighed on shares in Rightmove. In this context, the company’s latest trading update was reassuring as it stuck with guidance for meaningful annual revenue growth.

Subdued levels of housebuilding are the main negative and a second-half weighting for the company’s results in 2026 does create some risk that it fails to catch up.

Being the market leader creates a virtuous circle for Rightmove. Its site has the most listings and is therefore the one which prospective property buyers will go to when looking for their next home. This reinforces its position as a must-have product for estate agencies and housebuilders, which provides it with significant pricing power when it comes to securing subscriptions from its customer base.

However, it’s been clear for some time that some estate agents feel they have been squeezed until the pips squeak and that has manifested itself in the lawsuit filed by former regulator Jeremy Newman on behalf of thousands of estate agents and new home developers with the Competition Appeal Tribunal.

Rightmove has remained tight lipped about the litigation, although the new ‘glow’ TV ad campaign aimed at boosting the volume and quality of enquiries with estate agents on its portal feels like an attempt at showing its clients a bit of love.

Another source of concern for investors is the potential for Rightmove, like other data and software businesses, to be disrupted by AI. It is notable just how much the business is talking up its use of AI and the ways it can benefit from this technology rather than be disintermediated by it.

Saba / Workspace / Syncona

Dan Coatsworth, Head of Markets at AJ Bell, comments:

A mere 24 hours after declaring victory in its campaign against Herald Investment Trust, Saba has sharpened the knives for its next attack.

It has demanded that five non-executive directors be removed from the board of Workspace. While a serviced office provider might seem like a radically different target than the investment trusts Saba has pursued to date, Workspace does qualify as one given its status as a real estate investment trust.

Saba has built up an 18.2% stake in the business and earlier this year called for Workspace to sell its assets to pay off debt and return the proceeds to shareholders. Saba believed this was the best solution to the company trading at a persistent discount to the underlying value of its assets.

Saba said too many small shareholders controlled a large portion of the shares, deterring institutional investors from building positions, and making it hard for the company to raise meaningful amounts of money at a decent valuation to fund growth.

Workspace says it has held talks with Saba but doesn’t believe its proposals are the right ones. That has clearly irked the activist investor and prompted it to take the nuclear option of pushing for a major overhaul of the board.

It creates a difficult situation for new CEO Charlie Green, whose appointment was announced 11 days after Saba’s ‘managed wind down’ letter in January. Green would have known about Saba’s demands before taking the top job, yet he might not have expected activist disruption to escalate, dominate his agenda, and cause a major distraction before he’s had time to execute the business strategy.

Meanwhile, Saba continues to build stakes in other targets ripe for disruption. The latest is life sciences investment trust Syncona, where the activist has just doubled its position to 10%.

Last October, Syncona said it would return £250 million to shareholders by selling certain private portfolio investments to help maximise value for investors. It clearly isn’t going far enough if Saba is buying more shares. The stake building implies the activist might want to leverage its position as a major shareholder to make demands on the company.