BP has appointed Murray Auchincloss as their new CEO four months after Bernard Looney left his position following the discovery of undisclosed relationships with staff.

The new CEO comes in at a time when BP is under increased pressure to push forward with its green agenda and a generally difficult time for the FTSE 100 company.

Auchincloss will have to contend with subdued oil prices and a poor valuation compared to US peers.

“The decision to appoint Murray Auchincloss as chief executive of BP on a permanent basis was greeted with the shrug it deserved by the market,” said Russ Mould, investment director at AJ Bell.

“There will be some disappointment about the failure to appoint an external candidate for the first time in its history to shake things up and revive a business which has trailed behind its US counterparts in recent years.

“Mr Auchincloss is a continuity candidate, in that he was on the board as CFO under Bernard Looney when the oil major drew up its plan to retreat more rapidly from hydrocarbons than its industry peers, and that he was appointed interim CEO when Mr Looney was sacked. As such, the board must be happy with this strategy, even if it was subsequently refined and the pace of the switch toward renewables and away from oil and gas was slowed down, and the idea is presumably that Mr Auchincloss can continue to implement it.”

Mould continued to explain that the new CEO has a job on their hands to impress investors after a period of relative underperformance versus peers.

“Investors have, thus far, been less pleased than the board, given how BP’s shares underperformed those of Shell as well as its American and European peers during Mr Looney’s tenure. Nevertheless, they may welcome some degree of calm in the company’s boardroom, given that three of its past four CEOs did not depart at a time of their choosing.

“Mr Auchincloss will still be expected to put his own stamp on the business and will get his first opportunity to introduce himself to the market properly with the company’s full year and fourth quarter results on 6 February.”

Ibstock shares were slightly weaker on Wednesday after the company announced a 21% drop in full-year revenue to £405m.

The brickmaker has been dogged by slow demand from the residential sector amid a drop in new home sales.

Ibstock will hope the worst is behind them. However, by their own admission, the market remains highly uncertain, and cost inflation persists. 

That said, trading has been in line with management’s expectations, and analysts suggest 2024 could be the year the industry turns around and supports higher revenue for the group.

Although shares were down 3% at the time of writing on Wednesday, the stock has had a good run since the lows towards the end of last year.

UK Investor Magazine published an article titled ‘Ibstock: start buying the brick maker in preparation for the UK property recovery’ in September last year.

We wrote:

Indeed, for all the gloom attached to the UK housing market, Ibstock’s performance in 2023 hasn’t been that bad. 

In the first half of 2023, the brickmaker generated more revenues of £223m, only 14% down on the same period last year.

Things may get worse in the second half, but with the stock trading at 6.4x historical earnings, there is plenty of wiggle room for a long-term hold.

Things did get worse in the second half, but the forward-looking nature of the markets coupled with deep value in Ibstock shares sent the stock higher into the new year.

Despite the challenges faced by the industry, Ibstock remains a cyclical play for the UK property recovery. The company is taking measures to reduce costs, which will result in a leaner business when the market improves.

“It’s no real surprise to see Ibstock wrestling against the struggles of a housing market slowdown. Residential volumes have dropped significantly in 2023, and the group expects business to remain subdued over the near term,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

“To combat the challenging market backdrop, Ibstock reduced headcount and pulled back on production, carefully matching supply with demand to try and avoid a build-up of inventory. This involved the permanent closure of the group’s brick factory in Surrey, which will cost the group around £20mn over the current and prior year. This isn’t great news and raises questions about the group’s ability to ramp up production quickly when the market turns. In the meantime, cost-cutting measures remain the key route to protecting group margins.”

“There are some very early signs the worst may be behind Ibstock now. Cost inflation appears to have eased and the fact that lenders are becoming more competitive on mortgage rates is a major positive for homebuyers, which ultimately feeds through to increased demand for Ibstock’s products.”

Vodafone and Microsoft have announced a massive 10-year partnership to transform Vodafone’s customer experience using Microsoft’s AI and cloud services. Vodafone will invest $1.5 billion over 10 years in the strategic collaboration.

The partnership will provide highly personalised customer experiences across Vodafone’s platforms, leveraging generative AI and Microsoft’s Copilot. Vodafone aims to boost productivity and efficiency for employees through Copilot’s AI capabilities.

Microsoft intends to invest in and partner with Vodafone’s standalone global IoT platform, connecting 175 million devices worldwide. This opens opportunities for third-party developers on Azure through open APIs.

In Africa, Microsoft will help scale M-Pesa, already Africa’s largest fintech platform, and launch new cloud-native apps on Azure. A purpose-led program seeks to enrich 100 million African consumers and 1 million SMEs through digital literacy, skilling, and access to financial services.

For European enterprises, Vodafone will distribute Microsoft’s cloud-based services including Azure, security, and Teams Phone. This supports Vodafone’s goal to become Europe’s top platform for business.

Finally, Vodafone will modernise its data centres on Azure, improving responsiveness and operational efficiency. Virtual data centres will replace physical ones across Europe.

Despite outlining a raft of measures that should ultimately boost customer retention, investors may be disappointed by the muted reaction in Vodafone shares, which barely budged on Tuesday.

“Vodafone might have been hoping that news of a strategic partnership with Microsoft, involving the market’s hottest theme, AI, would have delivered more of a kicker to a moribund stock this morning,” said AJ Bell’s Russ Mould.

“The company is planning a significant outlay as it looks to use Microsoft’s generative AI technology to build out its ‘Internet of Things’ connectivity plan. It wants to develop new digital and financial services for small and medium sized businesses in Africa and Europe and revamp its data centre cloud strategy.

“As the benefits of the partnership come through, they may help to provide some forward momentum to a business which has been stuck in reverse for years.”

European equity markets were showing signs of fatigue amid the ‘will they, won’t they’ back and forth in expectations around whether major central banks will cut rates in the early months of 2024.

After a sharp rally in stocks based on expectations of US rate cuts as early as March 2024, several Fed officials have moved to dampen enthusiasm around lower borrowing costs, and famous investors have highlighted the risks to equities if the Fed doesn’t cut rates.

Markets initially shrugged these comments off, but with an ECB official joining the growing chorus of caution, European stocks fell yesterday and started Tuesday on the backfoot.

“The FTSE 100 slipped to a one-month low, dragged down by healthcare and financial stocks. Part of the problem is central banks constantly teasing the prospect of rate cuts but then refusing to commit, which is causing unease among investors. There are plenty of signs that inflation is coming down and this is fuelling the rate cut expectations on the market, yet central banks are being spectacularly stubborn,” said Russ Mould, investment director at AJ Bell.

“To stir the pot, UK wages grew at their slowest pace in almost a year, extending the view that inflationary pressures are easing. Data points like these don’t seem enough to put central banks on a different path and we’re facing the risk that the likes of the Bank of England and European Central Bank will act too late to avoid a sharp economic slowdown.

As Mould alludes to, there is a careful balance between acting to control inflation and pushing an economy into recession. The longer rates remain elevated, the risk of economic deterioration increases, risking fallout in stocks.

Ocado’s bumper Christmas

Over the past two years, Ocado has increasingly traded like a US technology share rather than a UK premium food retailer. Speculation that Amazon could swoop in for their solutions business demonstrates that the food retail business plays second fiddle in some investors’ minds.

That said, Tuesday saw Ocado shares jump after a strong performance in their retail partnership with Marks & Spencer.

“Ocado retail has delivered a robust end to its financial year. The instantly-recognisable delivery vans have been scurrying all over the country, delivering a higher volume of items than last year as the number of active customers brushes one million,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.

“Keeping the top of the revenue funnel filled with more customers is crucial because shoppers are buying less per-shop on average. This could be a function of pressure on incomes. Price growth is also slowing as inflation comes off the boil, which is another reason volumes need to stay propped up overall.”

Ocado shares were over 3% higher at the time of writing.

Rightmove sinks

Rightmove was the FTSE 100’s big casualty on Tuesday after being downgraded by analysts at JP Morgan. Rightmove’s position as the most used and trusted property portal in the UK may be under threat from increased competition.

“Rightmove was the biggest faller on the FTSE 100 after a rating downgrade from JPMorgan, sliding 4%. US group CoStar recently bought property portal OnTheMarket to enter the UK market and that has raised fears among investors and analysts that Rightmove’s dominance could finally be challenged. CoStar is a big player in the States and has the muscle to really upset Rightmove’s long-standing market position,” Russ Mould said.

Ocado shares stormed higher on Tuesday after the premium online food retailer said it achieved record sales over the peak Christmas trading period for its joint venture with Marks and Spencer.

Ocado shares were over 7% higher at the time of writing on Tuesday.

Customers keen to secure Ocado delivery slots in the days running up to Christmas by booking earlier in the year helped drive a record performance throughout the festive period.

Strong Christmas sales will compound a 10.9% increase in sales during the 13-week Q4 2023 period to the end of November. Average orders during the period grew 6.3% to 407,000 per week and the average basket value increased 3.8%.

For the 52-week period to 26th November 2023, Ocado’s sales grew 7% to £2,357.5m as active basket sizes increased 2.7% in the full year.

Most importantly for investors, Ocado said they saw positive EBITDA for the unit in the full-year period.

“In what was a 2023 of mixed fortunes for Ocado, having said only in November it could take 3+ years for the online grocer to reach its potential, a very strong Q4 has seen them reach almost one million customers and grow revenue by 10.9%,” said Adam Vettese, analyst at eToro.

“In this current economic climate they have had to price match some of the big guns like Tesco to compete and with a very cash intensive business they are going to have to hope they can retain and grow this customer base further. With this being a joint venture with M&S, it could well be possible that consumers treated themselves to a luxury Christmas haul and may revert to the norm now they are feeling the January pinch.

“Ocado has said they will meet their forecast of returning to positive earnings for 2022/23 and given we are starting to see grocery inflation cool as well as improvements in order delivery they may well have more chance of shoppers sticking with the habits that saw them have such a successful festive period.”