Haleon splits from GSK, Deliveroo cuts revenue forecast & FTSE 100 climbs

“There was a decent start to markets on Monday, with the FTSE 100 jumping 1.1% higher to 7,238. Leading the UK market higher were oil stocks Shell and BP, banking group HSBC and the big miners,” says Danni Hewson, Financial Analyst at AJ Bell.

“Even cryptocurrencies managed to find some new friends after letting investors down in recent months. Bitcoin jumped 6.4% and Ethereum traded 8.3% higher. Commodities joined the parade, with Brent Crude oil advancing 2.5%.

“Investors seem to be taking the view that the US Federal Reserve will not be overly aggressive with the pace of interest rate hikes, in the belief that the central bank would not want to risk plunging the country into economic turmoil.

“In Asia, property stocks moved higher on reports that Chinese regulators were putting pressure on lenders to support real estate developers following mortgage payment protests last week from homeowners upset about unfinished developments.

“Deliveroo avoided a big sell-off despite cutting its revenue guidance amid worries about the state of the UK economy. One could argue this news had already been priced into its valuation, given the stock has been weak for months.”

Haleon/GSK

“GSK’s big demerger day has finally come, becoming a pureplay pharmaceutical group and spinning off Haleon as a standalone consumer goods business.”

“It’s an unusual listing in that Haleon has already been subject to a £50 billion takeover bid before the demerger happened, which came from Unilever.

“Normally you would expect to see any bid action happen after the listing. That’s because there is often a period of share price weakness in the demerged entity as investors offload stock which they’ve been given for free.

“Often with demergers many original investors aren’t really interested in all parts of the group, and as a result they dump the shares quickly. We saw something similar when Wickes separated from Travis Perkins last year.

“Haleon has so far got off to a mixed start. Trading started at 330p, but the shares had slipped to 326p in the first half hour of the UK market being open. Soon after they jumped to 337p. With a market value of approximately £31 billion, investors might be wondering why GSK didn’t accept the much higher bid from Unilever.

“While Haleon owns some well-known brands including Sensodyne and Advil, that may not be enough to entice a line of buyers for the stock. Shoppers are increasingly going for supermarket own-label products as the cost of living crisis hits, with plenty of cheaper options for toothpaste and headache tablets than those sold by Haleon. That raises the risk of Haleon struggling to deliver meaningful earnings growth in the near-term, which is hardly the best start to life as a standalone business.”

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