Must read: FTSE 100, Pearson, ARM, Rightmove

Our head of investment rounds up the morning's big news.

GLOBAL MARKETS 

European markets are trading higher, with stocks in Italy and Germany leading the gains after a choppy week to kick off March. The FTSE 100 looks set to finish the week more than 1% higher and is still up by more than 5% year-to-date.

• Invest with ii: Open a Stocks & Shares ISA | ISA Investment Ideas | Transfer a Stocks & Shares ISA

PEARSON 

Pearson (LSE:PSON) reported an 11% rise in adjusted operating profit in 2022 to £456 million, slightly ahead of expectations, while underlying revenue grew by 5% to £3.8 billion. The education publishing group kept its profit outlook unchanged and said it is confident of further group underlying sales growth in the low to mid-single digits. It announced a full-year dividend of 21.5p versus 20.5p in 2021 and said it is on track to deliver cost efficiencies of £120 million in 2023, in line with its previous forecast from January. 

Pearson has been laser focused on digitisation, attempting to position itself as a Spotify or Netflix for education through its Pearson Plus subscription, giving users access to all its textbooks for $14.99 a month. Pearson has also been diversifying its offering by spreading beyond higher education into workplace training as well. Upskilling, reskilling, and digitisation have allowed Pearson to top earnings expectations in 2022 with particular strength in workforce skills, English language learning and virtual learning. It has also benefited from favourable currency movements. Offsetting this to some extent was weakness in higher education driven by a drop in enrolments. Pearson has been tackling the inflationary pressures through property cost savings. 

• FTSE for Friday: something important happening to FTSE 100

Investors are excited about the opportunities that Pearson is grabbing, and this has been reflected in its impressive one-year share price performance, up over 45% making it one of the best performing stocks on the FTSE 100. However, its lack of share buyback announcement is putting pressure on the stock today which is languishing at the bottom of the FTSE 100. Also, a lot of its positive news has already been priced in, weighing on shares in today’s trade. 

ARM 

Softbank-owned Arm said it is aiming for a US IPO this year, as expectations fade that the British chipmaker could be heading for a London-listing. This is a blow to the UK government and the City of London post Brexit as Arm pins its hopes on New York, where some of the world’s biggest tech companies have floated including Apple Inc (NASDAQ:AAPL) and Tesla Inc (NASDAQ:TSLA). 

While the FTSE 100 enjoyed relative resilience last year partly because of its lack of technology giants, allowing it to avoid the ‘tech-wreck’, this has also long been a criticism of the UK blue chip index which has struggled to attract key behemoths in the sector. There have also been some high-profile disasters in UK tech with Deliveroo (LSE:ROO)’s IPO flop and THG Ordinary Share (LSE:THG)’s share price slide. Arm’s abandonment of London is another kick in the teeth for the Square Mile’s attractiveness among international investors as a go-to destination for technology giants.

RIGHTMOVE 

Rightmove (LSE:RMV) reported a full-year operating profit of £241.3 million falling short of analysts’ expectations for £241.3 million. However, it reported an 11% increase in average revenue per advertiser, a closely watched metric as well as a jump to its dividend from 4.8p to 5.2p per share.

The property website has been caught up in the chaos in the housing market, with falling house prices, volatile mortgage rates post mini-budget and a weak macroeconomic backdrop. Earlier this week, housebuilder Persimmon (LSE:PSN) shares slid 10% after warning of a potential slide in new home sales. Rightmove’s rival Zoopla said this week that sellers were being forced to slash asking prices by an average of £14,000 in order to generate a sale with 40% of homes on its site facing price reductions. 

Shares in Rightmove got off to a strong start to the year in January amid hopes that mortgage rates would start to ease later this year and a boost to risk appetite among investors. However, that optimism faded in February with shares shedding more than 10% over the past month.