Just Eat’s rivals gobbling up market share may hit margins
JUST Eat’s attempts to fend off fierce competition from Deliveroo and Ubereats might make a tasty proposition in the long term but will take a bite out of the food deliverer’s near-term margins. Deutsche Bank’s warning sent the firm sinking to the bottom of the FTSE 250.
Just Eat, which could leap into the FTSE 100 at the next quarterly reshuffle, is likely to reinvest its recent revenue beat on its partnerships with branded restaurants but shareholders will have to swallow some margin pain first, analyst Silvia Cuneo argued, adding that Peter Plumb, the firm’s new chief executive, who has come from Moneysupermarket. com, could also opt to expand geographically to keep up the pace with rivals.
The food delivery pioneer served up more double-digit revenue growth last month and its fierce battle for market share with newer entrants Deliveroo and Ubereats convinced the Competition and Markets Authority to approve its £200m takeover of Hungryhouse earlier this week. After rallying on the CMA approval on Thursday, investors delivered a slice of humble pie, weakening Just Eat’s shares by 21.5p to 802.5p.
Elsewhere, Mediclinic
International suffered a bout of jitters ahead of the deadline to submit a bid for smaller peer Spire Healthcare, slipping 23p to 555.5p. The FTSE 100 firm has until the end of Monday to confirm an offer for Spire but the mid-cap healthcare provider’s management has already warned its shareholders that the 298.6p-per-share offer undervalues the firm.
Mediclinic, which already owns 29.9pc of Spire, also cast doubt on the deal on Thursday by saying that an offer was not guaranteed and that it needed to take the target’s recent share price surge into consideration.
The market cap of fast fashion Asos eclipsed retailing stalwart M&S for the first time in what is being seen as a major power shift within the retail sector.
The Aim-listed giant climbed 106p to £58.49, taking its valuation to £4.91bn, helping it leapfrog M&S’S £4.89bn.
Tough talking watchdog Ofwat could drag down
United Utilities’ earnings, HSBC told clients, to send the firm sliding to the bottom of the FTSE 100. Downgrading to “hold”, HSBC argued that a tough outcome from the regulator’s price review next year and renationalisation under a Jeremy Corbyn government remain key risks for the firm. It added that high RPI and a high proportion of index-linked debt could also have a negative effect on earnings with the utility firm finishing 36.5p lower at 798p.
Funeral services provider
Dignity continued its slide after warning about competition in the sector on Monday. The FTSE 250 firm, which dipped a further 117p at £18.48, has been trying to head off price-slashing competitors by acquiring rivals but the grim outlook pulled its shares down by a total of 25pc just this week.
Finally, the FTSE 100 continued to be the least volatile index in Europe as stocks pulled back again following Thursday’s rebound, with the blue-chip index nudging down just 6.26 points to 7,380.68.