GVC losses its architect and Hays hit by global job cut

“The markets continue to demonstrate a one step forward, one step back behavioural pattern. Today is a backwards day with the FTSE 100 down 0.5%, Germany’s DAX index falling 0.7%, Japan’s Nikkei 225 sliding 0.8% and the Hang Seng in Hong Kong trading 1.7% lower,” says Russ Mould, Investment Director at AJ Bell.

“Weighing on global markets was new data from China which showed its economy returned to growth in the second quarter of 2020, but domestic consumption and investment remained weak.

“On the UK market, technology, miners and consumer stocks were the main culprits for the index retreating. Energy, telecoms and utilities were the only sectors making any progress.

“Among the mid-caps, cinema operator Cineworld topped the FTSE 250 risers with only a fortnight to go before its sites reopen in the UK and US. In France, more than a million tickets were reportedly sold across the cinema sector in the first nine days after reopening from lockdown, indicating pent-up demand for the big screen.”

GVC

“The share price reaction to news of a CEO departing says a lot about how the market viewed someone. As such, it seems like investors don’t want Kenny Alexander to step down as boss of gambling group GVC as the company’s share price has fallen by more than 4%, effectively wiping £230 million off its market value.

“Mr Alexander is seen as the brains behind GVC’s rapid ascent, moving from a small betting business to a member of the FTSE 100 during his tenure.

“The company expanded through acquisitions, buying up the likes of Sportingbet and Ladbrokes, while also reducing its exposure to unregulated markets in order to make the business seem more credible to investors.

“Shareholders have been made very rich as a result of GVC’s ascent up the gambling industry ladder and so they might be nervous about his successor’s ability to keep striking the right notes.

“Chief operating officer Shay Segev has been with the business for some time, so his promotion to the top job at least means there isn’t a steep learning curve for the new boss.

“All eyes will be on Mr Segev and whether he can further crack the US market and make sure GVC is in the top tier of players as the sports betting market opens up.”

Hays

“Recruiters’ results are always worth tracking for the insight they offer into the economy. Companies like Hays do well when economies are buoyant and businesses are hiring lots of new staff, the reverse is true in a downturn.

“Like many of its competitors Hays has gone global to try ensure if the jobs market in one part of the world is struggling it can do well in another geography where the corporate world is in ruder health.

“That strategy has run into a problem thanks to a worldwide pandemic which has had a similarly widespread economic fall-out and this is evident in its latest quarterly update.

“Nearly all of Hays’ territories have seen net fee income drop in the order of 30% bar the US, which is a little better, and the UK and Ireland, which are markedly worse.

“This is not an encouraging portent for a brewing unemployment crisis in Britain – even if there were some modestly more encouraging signs in the latest jobs data.

“Another notable takeaway from the statement is that the market for permanent staff has been much harder hit than for temporary roles – suggesting companies are looking to retain some flexibility in an extremely uncertain environment.

“Hays can hardly complain given it cut its own headcount by nearly 10% in the quarter. The bad news is things could get worse before they get better as the unemployment rate tends to lag movements in the economy. At least the company has a strong balance sheet with which to weather the ongoing storm.”

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