FTSE lower despite resources strength as inflationary impact of war in Ukraine becomes clear, ITV shares slump as it reveals new streaming service, and Melrose holds back on capital return amid conflict

“Not even continuing strength in the oil and gas market and the resulting upswing in BP and Shell shares could save the FTSE 100 from a fall on Thursday,” says AJ Bell Investment Director Russ Mould.

“Investor nervousness is perfectly understandable as we won’t know the full impact of the conflict sparked by Russia’s invasion of Ukraine for some time.

“However, one thing is already clear, it has supercharged the inflationary pressures already facing the globe, while at the same time blunting central banks’ response, as they will be wary of being too aggressive on rates at a time of such uncertainty.

“Big share price falls for ITV, as investors baulk at the potential costs associated with its newly unveiled ITVX streaming platform, as well as Melrose Industries and Admiral on their latest results also helped put the index under pressure.

“This offset strength in the wider resources sector and a strong showing from London Stock Exchange Group following the release of its own numbers.

“The big fall for Melrose seemed at odds with results which were ahead of expectations, however the decision to delay the return of capital from the sale of several businesses in 2021 spoke volumes.

“Referencing Russia’s invasion of Ukraine in its rationale for the move, management are clearly very concerned about what might happen as a result of the war.

“London Stock Exchange was much more confident on its ability to ride out the crisis pointing to the fact that its operations in Russia and Ukraine account for less than 1% of total income.

“The profit and revenue growth announced this morning are genuinely impressive and help to vindicate the acquisition of data provider Refinitiv.”

ITV

“Just as the BBC has shaped iPlayer into a must-watch streaming service and often the first place that people now go to watch its content, ITV is to reshape its digital services in a bid to capture a greater share of the highly competitive streaming world.

“ITVX is not as revolutionary as the company might like you to believe. It is effectively offering viewers a chance to see some of its programmes before they are broadcast on linear TV as well as its back catalogue of shows.

“The first-watch opportunity and the option to pay for a premium service without adverts are the key differentiators, otherwise it is just a rebooted version of the existing ITV Hub.

“Traditional broadcasters are embracing the digital-first strategy as fewer people are sitting down to watch live TV. Viewers are increasingly switching on Netflix or Disney+ first and media groups like ITV need to find a way to make sure their brand also stays front of mind when someone is looking to put their feet up and choose something to watch.

“ITV is hedging its bets when it comes to revenue. YouTube and Spotify have both shown that consumers are happy to pay a subscription to avoid advertising so ITV appears confident that it will enjoy a decent amount of recurring revenue from monthly fees for those who take the premium version of ITVX.

“Equally it might be happy with people watching the free version if there are enough eyeballs to generate a decent advertising income.

“Ultimately the proposition will only be as successful as its content, and here’s where ITV might have to dig deep to compete against the ever-growing number of rival streaming platforms. Yes, it has some classics, but will the lure of endless Carry On films be enough to get people to keep watching ITVX?”

These articles are for information purposes only and are not a personal recommendation or advice.