The FTSE 100 ticked higher on Thursday, despite selling on Wall Street and in Asia, as its lack of technology exposure proved to be a boon.
Continuing concerns about whether the AI story is running out of legs had an impact on the big US tech names and their Asian suppliers, though continuing hopes for a breakthrough in the Middle East helped to keep a lid on oil prices for the time being as they remained below $80 per barrel.
WPP
When you are as beaten up as WPP is, it doesn’t take much more than some glimmers of hope to shift the market narrative. The first-half results provided enough of these to spark the share price into life.
Revenue is still under pressure and there is continuing churn in accounts but profit came in materially ahead of expectations as CEO Cindy Rose’s cost cutting measures take effect.
Like her predecessor Mark Read, Rose is looking to streamline a business which has more moving parts than Big Ben. It’s early days but investors are welcoming signs of some progress on this front as the company continues to economise and progress asset disposals.
Revenue falling less slowly wouldn’t ordinarily be a cue to get the party poppers out but it at least suggests management are starting to stabilise the business.
Rose will be aware more is required to win back investors who have abandoned WPP in droves in recent years – particularly as its problems cannot just be ascribed to a difficult market with rivals like Omnicom and Publicis still chalking up growth in spite of the uneven backdrop. She must also convince a sceptical audience that WPP can be a beneficiary of AI, rather than a victim of the disruption it can cause.
But today’s update has at least given shareholders something to cling on to as they wait for these bigger problems to be addressed.
Wizz Air
A swing to a wider than expected loss in the first quarter was always likely to lead to turbulence in Wizz Air shares and so it’s proved.
The company’s inability to point to a clear path through the current issues clouding the outlook for the airline sector also didn’t help. Budget airlines are more exposed to the increase in fuel costs given the need to keep a lid on fares to sustain their value credentials. Plus, their cohort of customers’ ability and willingness to spend is disproportionately affected by renewed inflationary pressures.
Wizz Air’s big expansion in recent years plus its decision to redirect planes on routes affected by the Middle East conflict to European destinations has resulted in overcapacity and means that despite flying more passengers it is doing so much less profitably.
The decision to continue expanding its fleet is a bold call, pursued in the hope that it can take market share if less robust rivals exit the market. For now, investors look to be unconvinced by this strategy.
Persimmon
Given the backdrop, Persimmon guiding for home completions at the top end of the expected range for 2026 is no mean feat.
This is underpinned by strong volume growth in the first half of the year. Persimmon also reported resilient margins which only edged slightly lower year-on-year. The company’s vertically integrated model, with materials and components manufactured in-house, helps provide a measure of protection against rising costs.
It does not however render Persimmon immune from the inflationary pressures facing the industry and this was reflected in the company quantifying a substantial headwind on this front in the coming 18 months.
The need to have a cash buffer to withstand these pressures explains the decision to keep the dividend on hold. It is striking that Persimmon hasn’t yet pivoted towards buybacks like several of its peer group.
Admiral
At a headline level Admiral’s results weren’t necessarily too much to write home about but this reflected a more challenging motor insurance market and the company still looks to be in the fast lane compared with its rivals.
Investors had fair warning of a market as soft as a flat tyre alongside the record full-year results in March and Admiral can point to progress in its diversification strategy and its plans to capture a dominant share of the electric vehicle component of the motor insurance space.
The decision to raise motor premiums ahead of competitors looks one aimed at defending long-term sustainable growth rather than chasing low-margin volumes and a better-than-expected share buyback offers a reward to shareholders for their patience.
Russ Mould: Investment Director
Russ Mould is AJ Bell's Investment Director. He has a Master's degree in Modern History from the University of Oxford and more than 30 years' experience of the capital markets.
He started out at Scottish...
