Daily market update: Reckitt, ITV, Pepco, Melrose Industries

“The FTSE 100 slumped on Thursday despite mining stocks enjoying strong gains on hopes of a reprieve on tariffs and expectations China will launch a big stimulus package,” says AJ Bell Investment Director Russ Mould.

“The UK’s flagship index was dragged lower as several big names traded without the right to their next dividend and some corporate results disappointed.

“News that Donald Trump is temporarily sparing carmakers from US tariffs on Canada and Mexico helped reinforce hopes there may be some flexibility in the new administration’s trade policy.

“Later today the European Central Bank is expected to cut rates having been given a freer hand as inflationary pressures have eased.”

Reckitt

“You’d need a bottle of Vanish to clean up the messy set of results from Reckitt. There is certainly plenty for investors to unpick in the statement as the company continues along the restructuring path.

“On the plus side, proposals to reshape the business have been firmed up, with a plan to exit the portfolio of non-core brands – somewhat ironically dubbed Essential Home – on track to complete this year.

“Reckitt also delivered strong margin performance and hiked the dividend. Of more concern to the market in the short term will be the soggy fourth quarter sales performance which seems to be leaking into the outlook for 2025 as a whole.

“A weak cold and flu season in the US was the main culprit but there may still be some concern about the strength of the core brands Reckitt is retaining and whether shoppers are trading down to unbranded alternatives.

“There may also be disappointment that Reckitt didn’t have anything more definitive to say about an exit from its Mead Johnson infant formula arm. The $18 billion capture of this business in 2017 has been a disaster of a deal and remains a source of litigation risk for the group.”

ITV

“ITV continues to prove its critics wrong, delivering a solid set of results and being miles ahead with the pace of recouping investment in its streaming platform.

“The Studios arm has been a shining light over the past year, with record profits and big hits with the public. It has two aims – make the type of shows that will get people watching ITV’s own channels and make productions that will be hits for third party platforms/broadcasters. It succeeded on both accounts in 2024.

“The knockout performance means any bidder will have to dig deep to convince ITV’s board and shareholders to accept an offer for the Studios arm. Speculation is rife that All3Media owner RedBird IMI wants to buy the production business and ITV’s latest results have effectively pushed up the price that’s needed to get a deal over the line.

“ITV is under pressure to do something to get its share price out of the doldrums. It might seem odd to sell the crown jewels, but the board runs the business in the best interests of shareholders and if the price is right, RedBird IMI might be told to come on down with its chequebook.”

Poundland / Pepco

“Poundland was once the envy of the retailers across the UK, attracting significant footfall and customers filling their baskets on every journey. Now, Poundland has come to symbolise the forgotten wasteland of UK high streets, full of copycat outlets and sandwiched between charity shops and vape stores.

“Lower income households have struggled during the cost-of-living crisis as the cocktail of high interest rates and stubbornly high inflation crimped their ability to spend. Poundland has suffered badly and it’s no wonder that parent company Pepco is thinking about offloading the brand.

“Finding a buyer won’t be an easy task and any deal will likely lead to store closures and job cuts. Poundland needs to be slimmed down and refocused so it has a chance of getting back on top.

“Further interest rate cuts in the UK would be helpful to Poundland, yet there are cost headwinds on the horizon from Rachel Reeves’ Budget decisions. UK retailers from April must stomach significant extra employment-related costs and these will inevitably be passed on to the customer or we’ll see more shrinkflation. Shoppers won’t like either situation, suggesting 2025 is going to be one big headache for the consumer sector. It’s precisely the worst time for Pepco to be trying to sell Poundland.”

Melrose Industries

“It is often better to travel than arrive, and so it proved for aerospace engineer Melrose Industries as investors took profit despite a strong set of numbers which beat analysts’ expectations.

“The company has been pulled higher in Rolls-Royce’s tailwind amid recovering demand in the civil aviation space. The market reaction may reflect some disappointment about the company’s five-year targets, even if they do suggest a reasonable level of ambition on the part of management.”

Entain

“It may have been left reeling by the shock exit of Gavin Isaacs after just five months in the top job, but Ladbrokes-owner Entain seems to be getting its house in order.

“A return to organic growth is a significant milestone, although investors will want to see evidence it can deliver on a medium-term ambition to generate meaningful cash flow.

“Isaacs barely gets a mention, bar a cursory reference from his interim replacement Stella David, and there’s no detail on why he left after such a short spell in charge. Until the company has a permanent replacement in place this is likely to leave investors with some nagging doubts.”

Admiral

“The market was in the mood to salute insurance outfit Admiral, whose shares moved to a three-year high as it unveiled a bumper set of results which included a big increase in the dividend.

“The company’s motor division looks to be returning to the fast lane after a period of being held up by higher claims and costs. Admiral’s ability to cut prices has attracted drivers in their droves and the changes in the Ogden rate – which dictates the level of compensation in personal injury cases – have helped support a big increase in profit.

“UK motor insurance was the main engine of growth but most other areas of the business contributed decent growth too, bar the Italian arm where the company has a job to improve performance.

“Finishing the integration of pet insurance specialist More Than also means Admiral has another string to its bow which should now be firing on all cylinders.”

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