Vodafone drags on the FTSE100
Europe
European markets have opened modestly higher this morning, although early gains are being capped by caution ahead of today’s widely anticipated Federal Reserve rate decision.
The FTSE100 is being buoyed by some largely positive trading updates, with Vodafone acting as a bit of a drag.
Vodafone is another company whose share price has underperformed, and ultimately has seen the departure of CEO Nick Read at the end of last year, to be replaced by Margherita Della Valle. Since Read’s departure was announced in December the shares have managed to rise from their lowest levels since 1997, however the jury remains out as to whether the declines from the 2013 peaks has come to an end. Today’s Q3 numbers would appear to show that merely changing the CEO won’t resolve the underlying issues facing the business, with the shares sliding back from 3-month highs. When the company reported in H1 we got a downgrade to the full year outlook, despite reporting a 2% rise in revenues, although this was offset by an increase in its debt levels. Today’s Q3 numbers have painted a similar picture with weakness in Italy and Spain offset by a decent performance in the UK, raising the question why management thought it a good idea to reject last year’s €11bn offer by Iliad for its Italian business. New CEO Margherita Della Valle acknowledged the company needed to do better, however apart from the €1bn cost saving program announced a few months ago there is little sign that management have a plan that can stem the recent share price declines, amidst concern that the dividend could be at risk of a cut. On the plus side there was no change to the full year outlook, with adjusted EBITDA left unchanged at between €15bn and €15.2bn.
Entain shares have seen a decent boost after posting a positive Q4 trading update which was driven by the football World Cup, as it upgraded its full year outlook. A record performance in Q4 online net gaming revenue which saw a rise of 12% and a 14% rise in active customers. Full year EBITDA is expected to come in between £985m and £995m.
Halma is higher after announcing the acquisition of Thermocable for £22m, which is a leading developer of Linear Heat Detectors which trigger alerts in cabling when they detect a change in temperature.
GSK’s share price underperformance has been a bone of contention for shareholders for some time, CEO Emma Walmsley now expected to deliver now that the Haleon business has been spun out so that the focus can shift to specialty medicines and the vaccines side of the business. Last year the share price hit its lowest level since 2009 in the aftermath of the Haleon spin off and has struggled to rally since then, apart from a brief spike in December after a US judge threw out claims related to the Zantac drug.
Today’s full year results would appear to suggest that the business is heading in the right direction with Q4 profits beating expectations. Net profits for Q4 rose to £1.5bn, over double from the same period a year ago. Full year sales rose to £29.3bn with strong growth across all of its businesses, with record sales of its new Shingrix drug of £3bn, a 72% increase. Vaccines saw sales of £7.9bn a 17% increase. On the outlook turnover is expected to increase by 6% to 8% with adjusted operating profits expected to rise between 10% and 12%.