Unilever brightens FTSE with leap at activist Peltz’s arrival

FTSE 100 ekes out a small gain as EU leaders agree to step-back from Russian oil, Unilever soars 7% as activist investor Nelson Peltz joins the board, and China trusts rally as Shanghai ends two-month lockdown.

The FTSE 100 made a sluggish start after oil pushed higher as the EU cut off Russian supplies, though Unilever (ULVR) shares jumped 7% as activist investor Nelson Peltz joined the board.

The blue-chip index edged 0.2%, or 13 points, higher to 7,613 as EU leaders agreed on a plan to block more than two-thirds of Russian oil imports. Russia currently supplies around 27% of the EU’s oil and 40% of its gas. The news pushed the price of Brent crude up over $123 per barrel – the highest figure since early March for the global benchmark.

‘The UK is in a better position than some European countries when it comes to reliance on Russia for energy supply, but this doesn’t mean supply concerns will be completely glossed over,’ said Sophie Lund-Yates, analyst at Hargreaves Lansdown.

‘The move is likely to create a permanent hike in EU oil prices, and the cost of sourcing is going to rise.’

The oil majors rose, with Shell (SHEL) up 1.4%, or 34p, at £24.08 and BP (BP) rising 1.3%, or 5p, to 439p.

Peltz raises Unilever hopes

Unilever was the biggest riser this morning, up 7%, or 244p, at £37.40 after Trian Fund Management revealed it had bought a 1.5% stake last month in the £89bn global consumer goods giant. Its founder, billionaire activist investor Peltz (above), will also join the board as a non-executive director in July.

Peltz, whose track record of investments include turnarounds and changes at Heinz, Cadbury Schweppes and Pepsico, said: ‘We look forward to working collaboratively with management and the board to help drive Unilever’s strategy, operations, sustainability, and shareholder values.’

Unilever chairman Nils Andersen welcomed Peltz. ‘We have held extensive and constructive discussions with him and the Trian team and believe that Nelson’s experience in the global consumer goods industry will be of value to Unilever as we continue to drive the performance of our business.’

Peltz’s arrival should please leading Unilever investors such as fund managers Nick Train and Terry Smith, whose funds hold nearly 2% of the company, although both reduced their stakes in April, according to Refinitiv data. While both have in the past praised the group’s strength in growing markets, the 28% drop in the shares since their September 2019 peak has caused concern.

Smith has been particularly critical, attacking the company for a lack of direction after it attempted to launch a £50bn bid for GlaxoSmithKline’s consumer drugs business in January. 

Trian Investors 1 (TI1 ), the £295m Guernsey investment company through which some of the stake is held, firmed 0.4% to 118p. Launched in 2018 to invest in a high quality but underperforming UK business, the closed-end fund initially invested £250m in Ferguson. It successfully pressed the plumbers’ merchant to relist in the US where the bulk of its business is based, a move the company agreed to in January.

Although returns from Ferguson have been good, the fund’s own shares have disappointed, trading on a wide 32% discount to net asset value, according to Numis Securities. A year ago, the company announced it would broaden the range of its investments and the £37.7m ($50m) investment in Unilever, accounting for 8.7% of its assets, is its first step.

B&M feels the pinch

B&M (BME) was biggest faller, tumbling 8.7%, or 39p, to 418p after the discount retailer posted a dip in sales over the past year as finance chief Alex Russo was announced as the new chief executive. Sales were down 4.1% and revenues at the group declined by 2.7% to £4.67bn in the year to 26 March while profits were roughly flat.

AJ Bell analyst Russ Mould said when households are feeling the pinch one course of action is to trade down to cheaper options which ‘should play into the hands of variety discount store B&M’.

‘However, the company is simultaneously losing the tailwind it had during the pandemic when it was in a select grouping of shops which were able to remain open. And its value-based proposition means margins are pretty skinny and therefore vulnerable to inflation,’ he said.

Airline stocks also suffered as half-term chaos at UK airports continued, with widespread flight cancellations. British Airways owner International Consolidated Airlines (IAG) lost 3.9% to trade at 129p, mid-cap budget airline Wizz Air (WIZZ) lost 4.2% to trade at £29.62 and Easyjet (EZJ) was down 2.6% at 521p.

The FTSE 250 slipped 0.6%, or 129 points, to 20,417, with Baltic Classifieds (BCG) the biggest faller, losing 5.3% to trade at 142p.

Shanghai eases lockdown 

In other investment company news, China trusts rallied as authorities in Shanghai prepared to lift a painful two-month lockdown at midnight. The economic impact of restrictions in China’s commercial hub and largest port have hit their shares by 21%-26% this year.

JPMorgan China Growth & Income (JCGI ) jumped 5.7% to 377.79 and Baillie Gifford China Growth (BGCG ) advanced 3.4% to 279p.

Fidelity China Special Situations (FCSS ) was more muted, adding 1.2% to 250p, as the smaller companies focused portfolio published annual results showing a 34.9% drop in net asset value for the year to 31 March. Fund manager Dale Nicholls said weak sentiment and low valuations had created opportunities with gearing, or borrowing, increased to 24% to take advantage.

 

 

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