A £350 million share buyback, cost savings initiatives as well as a failed takeover bid meant 2022 was a rather eventful year for publisher Pearson, which resulted in the shares rising more than 50 per cent over the period.
But analysts at Bank of America reckon that, despite the positive momentum since Andy Bird took over the education group in 2019, its valuation is “now looking stretched”.
They worry that Pearson will lag the rest of the market in terms of recovery on the other side of a recession and believe there are questions over the long-term growth of its higher education division.
While the analysts think the company’s move into direct-to-consumer offerings opens up “incremental” growth opportunities, they say this will expose it to more competition. They reckon Pearson could struggle to fetch an attractive price for its online programme management arm, a division that was put under strategic review last year.
With many things to be worrying about this year, Bank of America thought it best to downgrade the stock from “neutral” to “underperform”, a “sell” in old money.
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The shares were marked down 56p, or 5.7 per cent, at 898½p.
Strength among retail and banking stocks pushed the FTSE 100 to its highest since early April. It rose 48.26 points, or 0.6 per cent, to 7,633.45 as investors toasted positive Christmas updates from Next, a bellwether of the high street. The more UK-focused FTSE 250 closed up 72.36 points, or 0.4 per cent, at 19,463.43.
While big-name high street brands enjoyed a day in the sun, takeover excitement pushed banks higher. While Standard Chartered was in the spotlight after a rival confirmed it had been considering a multibillion-pound bid, the move injected life into other banking shares. Barclays rose by 4½p, or 2.6 per cent, to 172½p, Lloyds Banking Group was up by 1p, or 1.8 per cent, at 48½p and NatWest up 5p, or 1.8 per cent, at 279½p.
Another big winner was HSBC, which closed up 22p, or 4 per cent, at an 11-month high of 565½p after Jefferies tipped its clients to buy the stock. Its analysts believe the bank is geared to China’s re-opening and reckons it will return $10 billion via share buybacks in 2023 and the year after, plus a $4 billion special dividend on top of ordinary payouts.
Heavyweight miners also played their part in holding up the FTSE 100. Companies including Anglo American, up 139p, or 4.4 per cent, at £33.19, benefited from a rebound in copper prices after China’s southern manufacturing hub of Guangzhou set out plans for a near-$1 trillion investment package this year. Rio Tinto advanced 95p, or 1.6 per cent, to £59.40, Antofagasta rose 56½p, or 3.6 per cent, to £16.11, and Glencore was up 7½p, or 1.5 per cent, at 514p.
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Airlines continued to fly high on the back of positive updates from Wizz Air and Ryanair. Shares in Wizz Air jumped another 269p, or 12.8 per cent, to £23.64 each; easyJet extended its winning streak for a third session, rising 21p, or 5.9 per cent, to 375½p, and IAG, the British Airways’ owner, ticked up 4p, or 2.8 per cent, to 138½p.
Elsewhere, it emerged that the chief executive of HeiQ had snapped up £84,000 of shares on the same day that the textiles technology group’s shares more than halved on the back of a profit warning.
Carlo Centonze bought 300,000 shares at 28p apiece on January 4, a stock filing showed, taking his total stake in the company to 6.2 per cent. His vote of confidence lifted investors and HeiQ shares recovered 2½p, or 9.3 per cent, to close at 29½p.
Acute revenue issues hit Angle
A bleak trading update led shares in Angle, the FTSE 250 firm which provides liquid biopsy analysis, to tumble by nearly a third to their lowest level in a decade.
The company said that headwinds worsened during the second half of last year and it anticipates that operating losses for 2022 will increase to £22 million, 28 per cent more than the £17.2 million loss it made in 2021. It said revenues for the year were expected to total just over £1 million.
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About £500,000 in sales that were due last year are expected to be recognised in 2023, reflecting delays in receiving patient samples or in progressing through the order process.
This year’s revenues are still expected to be “materially” below market expectations.
“Due to the current adverse market conditions, the need across the industry to control expenditure has affected a number of pipeline opportunities with some customers focusing on their nearer term assets with additional buyer caution,” the group said.
The update led Berenberg to “significantly lower” its near-term sales forecasts and halve its revenue estimates for 2022 to £1 million.
The shares closed down 17¾p, or 37 per cent, at 30¼p.
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Wall Street report
Upbeat jobs data after the Federal Reserve’s firm message that it will not cut interest rates any time soon offset news of China’s plan to reopen borders with Hong Kong. The Dow Jones industrial average fell 339.69 points, or 1 per cent, to 32,930.08.