Weak pound lifts FTSE but renewed restrictions sink travel and hospitality stocks, Moonpig delivers nice gift for investors, and On The Beach faces tough backdrop

“The FTSE 100 continues to tick higher but its momentum has been checked slightly by the reintroduction of restrictions in the UK which suggest the market’s more relaxed attitude to the Omicron variant might be somewhat premature,” says AJ Bell Investment Director Russ Mould.

“The modest gains for the index on Thursday morning could largely be attributed to the weakness in the pound – trading at 12 month lows against the dollar amid concerns around the fate of the UK economy. A drop in sterling flatters the overseas earnings which dominate the FTSE 100.

“News that a booster shot of the Pfizer/BioNTech vaccine gives decent protection against the new Covid strain helped lift US markets overnight, however this sets up a race to get jabs into arms before even more onerous restrictions are seen as being required to protect healthcare systems.

“News of tighter UK restrictions understandably overshadowed the latest trading update from aircraft engine maker Rolls-Royce given its reliance on the aviation sector with British Airways owner International Consolidated Airlines also under pressure. Hospitality stocks suffered early on too.

“If we’re spending more time indoors and ordering stuff online then that has benefits for packaging firm DS Smith which was the top FTSE 100 riser as first half results suggested it is also doing a good job of managing rising input costs.”

Moonpig

“Moonpig has confounded its critics who said last year’s revenue boost was a one-off due to Covid and that it would struggle going forward. It essentially says there has been a structural shift in how people buy greetings cards with more people now purchasing online, and more frequently.

“Yes, overall revenue is down on the same period last year, which truly was an exception time for the business, but on a two-year basis it has made big gains. Strategically everything is falling into the right place which explains why investors have given the thumbs up to its latest results.

“The structural shift in more people buying cards online in good news for its growth outlook, so too is the fact that customers are also using its platform to buy gifts which makes this a more diversified business.

“Rather than simply ordering a card and getting Moonpig to stick it in the post, customers are also taking advantage of the ability to buy flowers, chocolates, teddy bears and more, which makes their overall gift more generous and meaningful.

“Moonpig is doing some simple things which are incredibly powerful sales drivers, such as crunching data to remind people to send cards on certain dates and letting them personalise gifts as well as cards.

“It says 89% of first-half revenue was derived from existing customers which shows good loyalty. It’s done some clever moves such as encouraging customers to download its app, as having that on a phone makes it more likely for repeat custom.

“Moonpig is also making it as easy as possible for customers to shop, such as having personalised landing pages for customers that click on reminder notifications, and more relevant gift recommendations.

“What it’s doing is not rocket science, but these little touches make all the difference.”

On The Beach

“We have got used to certain patterns during the pandemic and where working from home guidance and increased mask wearing lead, yet tighter travel restrictions often follow.

“This is the unhelpful backdrop to an iffy set of full year results from online beach holiday specialist On The Beach.

“The company made what seemed like a prudent decision at the time to suspend new bookings for holidays departing before 1 September back in May.

“On The Beach continues to do the right things to protect its standing with holidaymakers, offering all refunds in cash, unlike some of its rivals, investing in TV ads, offering free Covid tests and working on all the background stuff around its technology routes, back-office and payments when bookings were depressed.

“The company also benefits from its asset-light nature, meaning during fallow periods it does not face onerous ownership costs on high street outlets, planes or hotels.

“In theory this should put On The Beach in a strong position in a more normalised environment, the problem for the business is it has no control over when that truly normalised environment returns.”

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