- FTSE opens flat as the week’s optimism remains
- Vodafone sells Italian business to Swisscom for €8bn
- HelloFresh active customers fall 6.5%, recent profit warning weighs
- Oil price rises further
- Berkely Group shares unmoved as results show it’s sitting on solid ground
Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown:
“The FTSE has opened flat as the relatively upbeat mood this week remains intact. There has been rising optimism that the worst of economic pain is behind the UK, but bigger blockbuster moves have not been seen, in recognition of the significant ongoing uncertainty.
Telecoms giant Vodafone has sold its Italian business to Swisscom for €8bn. €4bn will be making its way back to shareholders through buybacks, in what will be seen as a welcome token for their patience in what has been a difficult period. The telecoms are unlikely to ever shoot the lights out when it comes to growth, but the reliable nature of their revenue and high barriers to entry make shareholder returns one of the core attractions of these stocks. Vodafone’s Italian business has been struggling, so shedding this weight should help the group refocus and the division’s been up for sale for a while. Attention will now turn to how effectively Vodafone uses its resources to fix wider challenges, including high debts, costs and some increasing competition.
German-listed Hello Fresh has seen some respite from the downwards pressure on its share price, even after it dished up a 6.5% reduction in active customers in the final quarter to 6.64m. The meal-kit trailblazers had seen their shares drop over 45% in recent days after a profit downgrade and weak outlook. A further reduction in profit is expected in the new financial year, as the group prepares to ramp up production. The effects of lower volumes will also be felt, as fewer orders rattling through expensive infrastructure will deflate margins. The group operates in a very tricky place, especially as consumers looks to tighten purse strings. Higher marketing expenses are also to blame for the poor outlook, but this is a classic case of spending to maintain, rather than grow, market share, which is not the best look. The positive market reaction will at least in part be down to a sense of relief that there were no further skeletons in the corporate closet.
Brent crude has risen to over $85, buoyed by a bullish outlook on global consumption for this year. US demand has been higher than expected, and OPEC+ supply cut extensions are also squeezing the price upwards.
Berkeley Group – Aarin Chiekrie, equity analyst, Hargreaves Lansdown:
Berkeley’s sitting on solid ground, despite some wobbles in the wider housing market. Many of its peers have posted large revenue and profit declines in recent months. But Berkeley’s London focus and higher-end product, with an average selling price of £624,000 at the last count, means it offers something different to other large builders. Sales rates between November to February have stayed in line with the prior six months of the year. That’s helping to keep profit guidance on track, which points to at least £1.5bn of pre-tax profits over the three financial years ending April 2026, spread fairly evenly over the period. Given that the UK housing supply shortage doesn’t look to be going away anytime soon, and demand in the key London area is likely to remain more robust than in other parts of the country, that target looks achievable.
While markets aren’t forecasting much of an uplift in the housing market in 2024, there are some early signs that pressures are beginning to ease for housebuilders. Mortgage rates have fallen from peak levels, real wages are growing and build-cost inflation has pulled back, giving some relief to industry margins. Berkeley’s also sitting on a hefty chunk of cash, so there’s plenty of scope for continued shareholder returns through a combination of dividends and share buybacks.”
