These are the first days for Haleon, GlaxoSmithKline’s consumer goods spin-off, but the first day’s valuation of £ 28.5 billion for the Panadol-to-Sensodyne business represented a less-than-assaulting debut for the European list. older for more than a decade.
The nominal score was estimated to be about £ 30 billion. The burning territory would have been around £ 35 billion. And given the £ 10.5 billion in debt assumed by Haleon, £ 39.5 billion would have been required to match the £ 50 billion offered by Unilever in January.
For investors who intend to stay there for decades (i.e. not GSK or co-rider Pfizer, who want to “monetize” their group holdings gradually), the initial valuation matters little. But it’s also true that a six-month roadshow hasn’t exactly evoked images of Haleon as an unpolished gem, hidden in the back of GSK’s first aid kit, waiting to glow in a released form.
Rather, investors have taken the boardroom promise of annual sales growth of between 4% and 6% over the medium distance with a little salt. They can understand how the 4% goes, as the unit has risen above that rate over the past two years, albeit with a push since the launch of a free-selling form of Voltaren, an analgesic. But they will believe in 6% that destroys the market when they see it. Not many global healthcare companies have been operating at this rate for a long time.
Meanwhile, Unilever shareholders may feel they had a right to organize a mini-disturbance to prevent their company from adding a few billion more to the £ 50bn (rejected) bid price. Haleon looks like a solid, cash-generating business, and a worthy addition to the ranks of the top 20 FTSE 100 stocks. But he has yet to prove he deserves to be qualified as anything other than a defensive player.
What did Deliveroo shareholders ask for?
Great news for Deliveroo shareholders, eh? Well, a little. Growth in app orders has slowed (to just 2% in the second quarter of this year, compared to 12% in the first), but the loss-making food delivery business should have lower-than-expected losses this year. Shares rose 7% in this mixed news.
The logic of the stock market was not as perverse as it seemed at first glance. Against the backdrop of a 75% drop in stock prices due to last year’s excess float, the growth in orders of any size almost seems reassuring. In a cost-of-living reduction in which takeaway food is an obvious savings for the home, the slowdown could have been worse (and may still be in the future).
And the maintenance of the orientation of operating margins for the whole year should not be ruled out, within the range previously announced of between -1.5% and -1.8%. It suggests that Deliveroo has found some savings and is adapting to tougher business conditions.
However, it takes away from the overall picture and little has really changed. The long-term economy of the delivery game is still a guess from anyone and a large gross transaction value of 3.56 billion pounds in six months has yet to pay off in the case of Deliveroo. The competition is intense and the consolidation script is uncertain.
This is still a company whose stock market value of £ 1.6 billion is mainly due to the cash it raised afloat. The market remains understandably skeptical. In short, a crisis in the cost of living cannot be a good development.
Direct Line joins the accumulation of car insurers
Another day, another benefits notice from a car insurer. This time, it was Direct Line who told an unfortunate story of severe price inflation in the claims department. Car vital parts have been delayed in malfunctioning supply chains, repairs take longer and customers travel in complimentary vehicles for weeks, at the expense of insurers.
All of this confirms that Saber Insurance, the specialist vehicle insurer that warned about profits last week, was in the money when it said the problems are sector-wide and have not been covered by the increase in insurance premiums. Stock prices have fallen across the sector. Saber has dropped 44% since the warning. The hotline is down 18% in the same period. And the Admiral, of whom a notice of benefits is surely only a matter of time, is a quarter down.
This industry-wide joke for shareholders doesn’t well reflect the collective ability of city analysts to spot problems. Aren’t these experts meant to control used car prices, garage repair rates, and insurance premiums so the rest of us don’t have to? As companies explain, most of this stuff has been an open industry secret for weeks.