FTSE 100 down with China stimulus in view, Vistry warns on profit as further cost issues revealed, International Consolidated Airlines flies high and Rightmove soldiers on following bid drama

“The FTSE 100 was dragged lower by resources stocks on Friday morning,” says AJ Bell Investment Director Russ Mould.

“After a hectic week investors had more to digest in the form of further Chinese stimulus but what has been announced so far doesn’t seem to be moving the needle and the risks to China from a second Trump presidency are now overshadowing efforts to get the economy moving. The question on investors’ lips will be whether this encourages Beijing to unveil a bolder package of measures.

“Asian stocks sputtered overnight and the UK-listed miners who are reliant on China for much of their demand were also on the back foot.

“As expected the Federal Reserve followed up the Bank of England’s quarter percentage point rate cut with its own cut of the same quantum overnight. However, news which ordinarily would have drawn a lot of the market’s focus has been pushed down the agenda as attention is turned to the implications of Donald Trump’s return to the White House.

“New figures revealed slowing UK pay growth as Serco announced an eye-catching £20 million hit from the changes to employers’ National Insurance contributions in the Budget.”

Vistry

“Vistry’s latest update offered further evidence that build cost inflation is back with a vengeance for the construction sector.

“Where the situation is rather worse for the company though is its South Division, which has been systematically underestimating costs across multiple sites over an extended period, and the problems first identified in October have been revealed to be worse than previously thought when subject to a review. This has led to another profit warning and the shares are now trading at around half their 52-week highs.

“It seems Vistry’s big pivot into affordable housing and regeneration over recent years caused some ruptures and the management in place for this problem child of the business, exclusively drawn from the traditional housebuilding operations, have dropped the ball in a big way. There is a modicum of reassurance to be taken from the fact the review didn’t find similar problems elsewhere.

“However, while some of the individuals involved have stepped away from the business, there are still questions to answer for those at the top of the wider group over how they allowed this situation to develop. Vistry will have to work hard to rebuild market confidence and unfortunately it seems to be doing so at time when the foundations underpinning the industry as a whole look a bit more shaky.”

International Consolidated Airlines (IAG)

“Shares in International Consolidated Airlines have taken off following better than expected third quarter results and a new €350 million share buyback.

“Revenue growth mixed with stronger margins gave a nice boost to profit, which in turn has driven cash flow and continues IAG’s journey in strengthening its balance sheet. That puts it in a stronger position to crank up shareholder returns or potentially start thinking about making more acquisitions.

“It’s a radically different situation to three years ago when IAG was struggling under the weight of the global pandemic.

“The key to success in the airline industry is ensuring that planes are as full as possible, there are more planes in the sky than the previous year, costs are kept under control, and customers are spending more money across a range of items covering air fares, charges and consumables.

“IAG has been ticking all the right boxes, including more bums on seats per flight across all of its routes apart from the Africa, Middle East and South Asia region, and even then, it was only a small decline year-on-year.”

Rightmove

“Rightmove’s first trading update since fighting off Rupert Murdoch-backed REA doesn’t blow out the lights, but it does contain enough pockets of good news for investors to be glad it isn’t being gobbled up.

“The big news is better than expected growth in average revenue per advertiser. Unlike a traditional real estate company which relies on commission from home sales, Rightmove’s model is about estate agents spending big to promote their property listings. Beating forecasts for the amount of money it is getting per advertiser is confirmation that its business model is ticking along nicely.

“The government’s Budget last week has somewhat scuppered the outlook for the property market, which isn’t necessarily a bad thing for Rightmove, although it is still unhelpful.

“Interest rate expectations have changed and it seems unlikely that we’ll see mortgage affordability dramatically improve over the coming months. That’s bad news for people looking to buy or sell homes and bad news for estate agents hoping for an increase in property transactions. However, for Rightmove it creates a backdrop where estate agents might have to work harder to promote their listings – which means spending more money with the property portal.

“Rightmove faces heightened competition as US rival CoStar uses its acquisition of OnTheMarket to spread its wings across the UK. Competition can be a good thing as it stops businesses becoming complacent and forces them to think on their feet and be more innovative. Rightmove is the dominant player in the UK and will no doubt work hard to retain that status.”

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