FTSE 100 makes steady start to the week, JD Sports hit by downgrade, India’s Bharti to buy Drahi’s stake in BT, Marshalls profits slump

“After a volatile week last week investors will be relieved to see the FTSE 100 start off on Monday with steady gains,” says AJ Bell Investment Director, Russ Mould.

“A variety of companies were making progress, with only 15 names on the index in negative territory in early trading. The worst performer by a distance was JD Sports, which was victim to a downgrade from Deutsche Bank.

“The current calm may not last long with inflation readings due on both sides of the Atlantic as well as US retail sales data.

“Concern about the risks of a recession in the US could be either compounded or somewhat alleviated by the retail number given it is the primary marker of consumer spending which, in turn, accounts for the majority of overall economic activity.”

BT

“The news Indian telecoms firm Bharti is taking a major stake in BT is reflective of a big power shift between the two companies. Around the turn of the millennium, it was BT which had a substantial holding in Bharti, as well as two seats on its board.

“Bharti is buying its stake from French telecoms tycoon Patrick Drahi’s vehicle, Altice, and the news will likely be greeted with some relief by shareholders as it holds the promise of a bit more stability.

“Drahi has been selling assets to pay down debt so his stake in BT represented a significant overhang on the shares.

“This situation won’t be resolved overnight given Bharti is acquiring the stake in two tranches, with the second tranche dependent on regulatory clearance. Inevitably there will be speculation about what Bharti intends to do with its stake but, for now, it is ruling out any bid for BT.

“Investors are not able to extrapolate anything about valuation either given the price Bharti is paying has not been disclosed.

“Management will be glad to hear Bharti are supportive of the company’s current strategy, although clearly they will want to see evidence of progress that can revive a share price which has gone nowhere in the last five years.”

Marshalls

“It has been quite the fall from grace for building materials firm Marshalls, which benefited from strong demand during the pandemic as an older demographic with significant disposable income spent heavily on doing up their gardens.

“Combined with a decent stream of business from the new-build housing sector, this propelled both the share price and profits to new highs, but subsequently the company has had the kind of hard landing befitting a manufacturer of paving slabs.

“Pressures on household budgets, the property market and the prioritising of spending on other areas like holidays left Marshalls highly exposed. That’s reflected in these latest results with revenue and profit materially lower.

“It’s now the job of CEO Matt Pullen to sort all of this out. He’s had six months to get his feet under the table and has largely focused on stabilising performance, improving cash flow and paying down debt.

“When the company holds an investor day in November, the market will likely be looking for evidence of a plan by which he can return the group to meaningful growth.”

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