Market report

Microsoft buys Call of Duty | THG growth to slow | Henry Boot


5pm: Microsoft lifts US, oil and telecoms rise in UK

Microsoft is acquiring “Call of Duty” maker Activision Blizzard in a $68.7bn deal that lit up the US stock market and social sites.

One gaming site said the acquisition signals how mainstream gaming has now become, with three billion people now actively playing games, helped by global lockdowns and new technologies such as the metaverse, virtual reality, and cloud streaming.

Microsoft has had a foothold in gaming since 2001 but this deal propels it into the third largest gaming company behind Tencent and Sony in revenue terms.

“The price tag is setting social media on fire,” said finance analyst Danni Hewson. “It’s a gaming milestone, a whopper of deal that certainly pins Microsoft’s colours to the wall. 

“Nobody doubts that our lives and our future entertainment needs are firmly lodged in the “metaverse”.  Competition is going to get ever fiercer, and Microsoft is gearing up for the fight.”

In the UK, she noted that an uptick in the oil price has bolstered BP and Shell, and investors are taking another look at telecoms a sector “that’s been rather unloved but with massive potential”.

Oil majors were boosted after oil prices hit multi-year highs. Brent crude was quoted at $87.22 a barrel at the equities close, up sharply from $86.01 at the close Monday. The North Sea benchmark touched an intraday high of $88.13 in early trade – its highest level since 2014. BP closed up 0.5%.

Among telecoms stocks BT ended up 3.1% after Goldman Sachs promoted it to its Conviction Buy List. Vodafone closed 2.2% higher.

Ecommerce firm THG slumped 9.6% to take the Manchester-based firm’s 12 month decline to 78%. The latest fall followed a warning on margin growth (see below) which left investors unimpressed.

Stocks in London ended lower as investors bet on imminent moves by the US Federal Reserve to tighten monetary policy. The FTSE 100 closed 47.68 points lower at 7,563.55.

3.15pm: Power firm fails

Together Energy, based in Clydebank, has become the latest power retailer to collapse in the wake of soaring gas prices.

Full story here

2.30pm: Covid restrictions eased

Scotland’s social restrictions will be further eased from next Monday after the First Minister told MSPs “we have turned the corner on the Omicron wave”.

Full story here

Mid-day: THG ‘disbelief’

Some harsh words from AJ Bell’s Russ Mould after ecommerce group THG indicated that margins are likely to come in below expectations (see below).

“Under normal circumstances, a business delivering the level of growth seen in THG’s latest update would be applauded by the market. Sadly, THG has shot itself in the foot thanks to the way it has behaved as a listed company since joining the stock market,” he said.

“Failure to deliver the level of detail about the business desired by investors, questionable corporate governance standards, and comments by chief executive Matt Moulding that he wished he’d never floated THG all amount to bad practice as far as investors are concerned, and they’ve voted with their feet which has left the share price languishing well below its IPO price.

“The fact THG is guiding for revenue growth to slow in 2022 is even more reason for disgruntled investors to keep shaking their heads in disbelief.

“Online companies that pitch their story as rapid growth need to live up to the hype.”

Shares in THG tumbled 8.8% to take their year-to-date decline to 26%. The stock has fallen 77% over the past 12 months.

9am: FTSE 100 surrenders gains

After hitting a two year high, the FTSE 100 gave back all of yesterday’s gains, trading 64.3 points lower at 7,546.93.

“A rise in oil prices to a seven-year high and a continuing, though below inflation, rise in UK earnings has put the spotlight once again on inflationary pressures and a cost of living crisis,” said Russ Mould of AJ Bell.

“Traders are eyeing the $100 per barrel mark for crude oil for the first time since 2014, with the perceived diminishing threat posed by Omicron to the global economy and supply constraints and disruption driving the black stuff higher.

8.10am: AssetCo bid delayed

Martin Gilbert’s AssetCo has agreed to a further extension of the deadline to lodge a formal offer for River and Mercantile.

Full story here

7.30am: Vacancies rise

Job vacancies hit a record high of 1.24 million between October and December, according to the first data to exclude the impact of the government’s furlough scheme which ended on 30 September.

Full story here

7am: THG

Online retailer and tech group THG – formerly The Hut Group – said it had seen significant growth across all divisions during the peak Q4 trading period and expects to have delivered record annual sales of £2.2billion.

In a trading update CEO Matthew Moulding said: “Despite challenging conditions, we have scaled revenue and expanded our business model, particularly THG Ingenuity, well ahead of expectations given at our IPO 16 months ago.”

However, 2021 adjusted EBITDA margin is expected to be in the range of 7.4% to 7.7%, compared to market expectations of c.7.9%, after taking into account c.90bps of adverse foreign currency movements.

7am: Marshalls

Aggregates and landscaping firm Marshalls lifted full-year guidance after a strong final quarter which helped drive a 26% increase in annual revenue despite raw material and labour shortages.

It expects trading to be “slightly ahead of its previous view”, adding that its order intake was 13% higher than last year excluding the impact of price rises.

The outlook for the construction market remained positive, it said, particularly in its key target markets of new build housing, road, rail and water management.

Group revenue for the year to 31 December was £589m, up from £469m in 2020 and £542m in 2019 before the pandemic struck.

7am: Hotel Chocolat

Trading has been encouraging and the board now expects trading to be marginally ahead of management’s expectations for the current financial year.

Total Group revenue for H1 has been strong, increasing 40% compared to the prior year, and by 56% compared to the equivalent period in the financial year ended 28 June 2020.

7am: Henry Boot

The group expects profit before tax for the year ended 31 December 2021 to be materially ahead of market expectations.

Tim Roberts, chief executive, said: “We’ve had a good year ahead of expectations, operating in strong markets and also making very encouraging progress against our recently declared medium term strategic targets which will position the business well for successful growth.”

Global markets

The FTSE 100 was expected to pull back from its strong start to the week ahead of today’s unemployment data.

The index is at its highest level since 24 January 2020 domestic data will dictate today’s direction following a mixed session in Asia where markets were mostly in the red as global interest rates continued to climb on expectations of faster central bank tightening.

The Nikkei in Japan slipped 0.27% and South Korea’s Kospi fell 0.89%. China’s Shanghai Composite gained 0.73% while Hong Kong’s Hang Seng index fell 0.31%.

Leave a Reply

Your email address will not be published. Required fields are marked as *

This site uses Akismet to reduce spam. Learn how your comment data is processed.