FTSE 100 falls ahead of crunch week for central banks, Unilever appoints new chief executive and 888 boss exits amid money laundering concerns

“The FTSE 100 started Monday firmly on the back foot as investors started to display a bit of nervousness ahead of two big central bank announcements,” says AJ Bell Investment Director Russ Mould.

“For the most part 2023 has been smooth sailing for stocks but two icebergs lurk in the waters this week in the form of the Federal Reserve and Bank of England interest rate decisions.

“How far might they dial back rate hikes and the hints they might drop about the future trajectory of their policy decisions are the two things which will be keeping investors up at night.

“Musical chairs in Britain’s boardrooms dominated the news agenda with Unilever appointing a new boss, 888’s CEO leaving under a cloud and Legal & General’s longstanding chief Nigel Wilson waving goodbye after a decade in charge.

“The market reaction suggests Wilson will be missed. The shares have made progress under his tenure as he has quietly got on with the job of creating a more coherent business.

“Ryanair’s latest update maintained the positive tenor which has emerged from the industry so far this year with the company reporting record results for the final quarter of 2022 and pointing to strong demand as US and Asian travellers return to Europe this summer.”

Unilever

“There are some important clues in Hein Schumacher’s biography as to the type of boss he might be when joining Unilever in July. In the five years since running dairy cooperative Royal FrieslandCampina, he has readjusted the company and its portfolio and tightened its focus on growth and sustainable business.

“Unilever has become this sprawling empire that desperately needs a sharper focus on what it does best, and not constantly dip its toes into new areas. In recent years it has sold interests in tea and spreads and bought into male grooming with questionable success, while falling flat on its face trying to forge a position in over-the-counter medicines.

“Last year there was speculation that Unilever’s food arm could be sold to help fund the purchase of GlaxoSmithKline’s consumer healthcare operations, but that bid failed in what was an embarrassing moment for outgoing CEO Alan Jope. Investors thought it had offered too much money and the target business wasn’t the right fit.

“Unilever needs a clearer strategy, and it must achieve better organic growth. Its third quarter trading update was full of impressive sales growth figures, but these were all down to raising prices and favourable foreign exchange movements. Volumes fell by 1.6% which isn’t the sign of a business on top of its game.

“In recent years Unilever has come under fire from activist investor Nelson Peltz who took a stake in the business and secured a seat on the board. Fundsmith boss Terry Smith has also criticised the management for ignoring his request for engagement, despite his fund being a long-term shareholder.

“Schumacher would do well to install an open-door culture internally and externally. He needs to rebuild confidence with investors and make a firm plan for how the business will look over the next decade and beyond.

“A plan could take time to pull together and dealing with cultural changes internally certainly won’t happen overnight.”

888

“Gambling stocks are under enough regulatory scrutiny as it is without inviting reasons for further attention and yet that’s exactly what 888 has done.

“News it is suspending VIP accounts in the Middle East over best practices not being followed over money laundering is incredibly damaging.

“Combine that with the announcement of CEO Itai Pazner’s immediate departure and the market is likely to draw its own conclusions.

“A brief and to the point statement with the usual pleasantries doesn’t indicate the reason for his exit, leaving the obvious supposition that this debacle is to blame.

“Investors may have been more reassured by him staying in place to sort out the problems in the Middle East – an unenviable task which will now fall to the newly ‘executive’ chair Jon Mendelsohn.

“A background in politics may serve him well in the interim period before a new boss is found, given the tricky waters he now has to navigate. The imminent departure of the company’s finance chief Yariv Dafna and the company’s hefty debt pile only add to the list of complications.

“Longer term the betting industry faces scrutiny for the harm it does to wider society – with those harms only likely to be magnified against a more difficult economic backdrop.”

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