Investors have eagerly awaited a ceasefire in the Middle East this week but once again there are mixed messages from the US and Iran, leaving markets confused. Momentum has been lost across the main European stock indices and oil has edged higher, meaning it’s still a waiting game.
The FTSE 100 dipped 0.7% to 10,036, dragged down by several big-name stocks trading without the right to their next dividend including British American Tobacco, Segro and Aviva.
Next’s results were well-received and gave a boost to other consumer-facing names including Marks & Spencer and Sainsbury’s. That was despite a warning from Next over the potential impact of the Middle East events on costs, prices and demand.
Next
If there are any companies better at navigating the ins and outs of being a public company than Next, they’re certainly few and far between.
The outlook for the UK retail sector may look decidedly gloomy but Next is a beacon of light within that beleaguered industry.
Impressively, Next says it can absorb the additional costs it has already identified thanks to the conflict in the Middle East without needing to downgrade its guidance for the current financial year.
For Next, dealing with the current situation isn’t just a matter of the knock-on effect on energy and freight costs, as the company has broadened its horizons internationally.
Reassuringly, Next feels confident enough to sanction further generous returns to shareholders – outlined with the usual transparency it displays on capital allocation.
The skills it has built up in retail logistics allows sales of third-party brands to make an increasing contribution and, acting from a position of strength, Next has acquired several complementary brands which further bolster its offering.
The coming period may be tricky but Next has shown time and again that it can navigate choppy waters and come out the other side stronger.
Currys
The resignation of Alex Baldock is a £141 million loss to Currys, judging by the amount wiped off its market value on the news.
The CEO leaves on a high. He not only fought off an activist investor trying to take over the business on the cheap but also steered the ship out of a rocky patch and took it to new heights.
Finding someone of Baldock’s calibre as a replacement will not be easy. He has achieved the rare task of keeping a high street retailer relevant in the digital age.
Currys’ strengths lie in not only matching prices from online rivals like Amazon, but also in serving people who need help with choosing the right technology and as a place to get kit fixed. Good customer service should never be underestimated, particularly when you can ask a question in person.
Baldock was right to have rejected Elliott’s takeover bid as the company was merely going through a tough period. The share price then doubled over the next two years, vindicating the board’s decision to turn down the offer.
Baldock’s leadership success at Currys has elevated his bankability in the business world and it was only a matter of time before someone offered him a bigger job.
Ceres Power/Centrica
Developing fuel cell technology is not an activity for the faint-hearted and Ceres Power has had several false dawns during its time as a public company. However, the sense it is gaining some traction is solidified by a partnership with Centrica.
The urgency around upgrading the UK’s energy infrastructure has been dialled up a notch by the current crisis. Ceres’ technology could help get businesses on-site power rapidly when the grid system is struggling to keep up with demand.
For Ceres, Centrica’s scale and capabilities and broad energy expertise should prove helpful. While for Centrica, the arrangement comes with relatively little risk and could add another string to its bow.
Ceres shareholders will hope this can help take a proposition closer to full commercial reality. That feels overdue for a business which is yet to turn an annual profit in its more than 20 years on the stock market.
OECD
Conflict in the Middle East could have damaging consequences for the UK economy and other parts of the world if the crisis is long-lasting. That’s the implication of a new report from the The Organization for Economic Co-operation and Development (OECD).
The sharp jump in oil prices and disruption to shipping routes threatens to feed into higher costs for consumers and businesses. The longer the Middle East crisis lasts, the bigger the potential economic hit.
The UK’s GDP is already moving at a lacklustre pace as the government works through a plan of public finance strengthening first and economic growth second. The last thing chancellor Rachel Reeves wants is for her growth plan to be derailed, but it’s clear that she needs to consider such a scenario.
Dan Coatsworth: Head of Markets
Dan Coatsworth is AJ Bell's Head of Markets. Dan has been with the company since December 2012 and has more than 18 years' experience in the industry, following the markets and all things investing. He...
