FTSE Friday: What’s Happened In The Large Cap Space This Week?

4th Nov '22 by Megan Boxall

3 comments 1301 reads

Amid the spectre of the Bank of England’s miserable recession forecasts, another substantial interest rate hike and the general aurora of negativity swirling around the UK markets right now, it has been nice to find optimism in announcements from some of the country’s biggest businesses.

There has been a lot to digest this week

Retailers defying the odds: Numbers from Next provide reassurance and Frasers is making some sensible acquisitions
Travel in Europe by rail or by air: Trainline and Wizz Air both reported numbers on Thursday
BP continues an excellent run for the big oil sector, despite big tax bills
Defensives in the healthcare space: GSK's first post-merger third quarter numbers
BT's costs continue to climb

In this article I’ll cover all of the above in varying detail. There have been some fascinating insights from the community on the large cap space this week so please keep your comments coming.

Retail: Resilience from Frasers and Next

On Monday, Frasers (FRAS) revealed it had hit the required acceptance level to complete its purchase of Australian-based flash sales retailer MySale. Frasers has been gradually adding to its stake in the business and was forced to make a cash offer in September when its stake first exceeded the 50% threshold.

Building a stake gradually before a full acquisition is a Mike Ashley special. Frasers’ founder - who announced his retirement from the board in September - bought many of the company’s impressive suite of brands in this way (another strategy was waiting for the target company to go bust and then purchasing it at a knocked-down price).

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Mike Ashley - a ‘bricks man, not a clicks man’ - has been succeeded as CEO of Frasers by his son-in-law Michael Murra

Ashley’s son in law, Michael Murray, who now runs the business, is applying the same tactic but is focusing on a different area of retail: digital. MySale runs marketplace technology which it uses to power its own global retail websites and the online sales of big brands. It’s an interesting strategic move for Frasers which will be able to use the technology in its own brands’ websites.

Murray is undoubtedly more of a ‘clicks man’ than his father in law (a self-proclaimed ‘bricks man’) who fought hard against the ‘Amazonification’ of the British retail scene and invested heavily in…

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RDHOWARTH

5th Nov '22

Interesting comments re BT... although I am struggling a little to see much evidence of this switching you reference in the numbers. If you could steer me to the data to look at that would be very helpful. I note the higher ARPU which is obviously part of the strategy to capture more higher value customers and its natural you drop some at the bottom. Personally I find the Enterprise and Global numbers more disappointing. Net net the market looks at one number FCF and votes accordingly depending if its up or down.

re the pension deficit. A quick look at the Gilt market on 30 September you will note this was the crux of Uk issues. So the pension at that date reflects the adverse Gilt performance on assets which was out of sync with discount rates. Now that Gilts have recovered I suspect this has had quite an impact on the deficit. Actually BT decision to hedge its own liabilities without too much gearing is a positive since the situation could have been much worse.

As the investment cycle ends BT will start to throw off cash...which can be used to add to the dividend through buybacks. This creates a buffer of protection around the dividend that should grow. Looking at profits since Covid Enterprise and Global have some catch up which should benefit from an upturn in the UK. This would make the current rating look ridiculous IMO. Its a shame investors can't look through the CF dip during investment since this puts companies off doing anything. Instead they just buyback stock because thats what investors reward.

jonny1969rotten

Need more articles like this, I think a number of contributors have dropped off in recent years & when you look over at Sharepad constantly firing off articles every week stocko needs to invest more instead of reliance of the stockranks etc which don't tend to work so well in bear markets anyway.

That said id keep up my subs for the content the excellent work Paul & Graham do every week day

Lucky dip

7th Nov '22

Very useful.

This article covers the large caps which is currently more popular with investors than the more speculative small caps and Disastrous Aims.

FTSE Friday: What’s happened in the large cap space this week?

Retail: Resilience from Frasers and Next

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About the Author

Megan Boxall

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