CEOs making a difference – three share ideas

Prior to taking the reins this year, Unilever CEO Fernando Fernandez was the Group’s Chief Financial Officer. His narrative hasn’t swayed far from the Growth Action Plan unveiled under the reign of his predecessor, with the focus concentrated on doing fewer things but doing them better.

Progress looks encouraging.

Investment into Unilever’s portfolio of Power Brands is supporting a healthy mix of price and volume growth.

Further, a spinoff of the Magnum Ice Cream Company is targeted for the end of this year. Despite cost and currency headwinds, these actions provide scope for further expansion in the gross margin, which is sitting at a 10-year high.

We see Unilever’s geographic diversity as a strength, and its end markets are holding up well. Although operational issues and tariffs are impacting performance in Latin America.

Fernandez’s financial credentials are reflected in his focus on efficiency and performance. He’s on track to deliver the €800mn of cost savings promised in the Growth Action Plan by the end of 2026, one year ahead of target.

Turning to talent, the company’s already reduced its administrative headcount by 18% in as many months.

The CEO’s gaze is now turning to its 200 leaders where he expects a quarter of managers who aren’t meeting the required quality thresholds to be replaced.

Under Fernando Fernandez’s leadership Unilever looks well placed to deliver consistent mid-single digit sales growth. The valuation isn’t too demanding either. But macroeconomic uncertainty and execution risks means investors need to be prepared for some road bumps.

Out of all the CEO’s we’ve focused on, Novo Nordisk’s recently appointed captain has the biggest hill to climb. Maziar Doustdar’s arrival follows two profit warnings so far this year.

The company’s been struggling to maintain its competitive position in its core GLP1 drugs for diabetes and weight loss. Having led the group’s International Operations since 2015, he knows the business inside out.

Some investors may have been hoping for a fresh pair of eyes to turn the ship around. But ‘Mike’ Doustdar comes with a strong track record of tackling challenges in Novo’s core markets.

It's early days, but he’s already identified improved innovation in diabetes and obesity as a core priority.

Cost-cutting is also on the cards, which doesn’t necessarily go hand in hand with doubling down on research. But it’s important to approach drug development in a disciplined fashion, and there are some signs of progress.

The company’s scrapped two experimental medicines where doubts had been raised about their commercial prospects. There’s also been some pipeline wins with an approval of weight loss jab Wegovy for liver disease and some strong data on heart disease.

Looking ahead, the refreshed management team is gearing up for a launch of its oral weight loss pill which should benefit from first mover advantage, as well as a favourable clinical profile compared to expected launches from Novo’s peers.

However, there’s no guarantee of success.

Meanwhile policy on drug pricing, tariffs, patent expiration and illegal competition remain serious hurdles to overcome.

The current valuation looks to be pricing in many of these concerns, and we still see an enormous market opportunity. But Maziar Doustsar certainly has his work cut out if he’s to win back investor confidence.

Legal & General’s CEO Antonio Simoes is rapidly approaching his two-year anniversary and there’s a lot he can be pleased with.

A more streamlined organisational structure and the disposal of non-core units such as its US protection business, and UK housebuilder CALA, have helped the financial services group to concentrate on its priority markets.

That’s also shored up the balance sheet, supporting a generous 9.4% dividend yield. There’s the potential for further share buyback, too. Of course, nothing is guaranteed.

The group’s injected some much-needed investment into the Asset Management division as well as a new leadership team. We’re hopeful this will have a positive impact on the division’s performance. But the pension risk transfer business remains the core profit driver.

The group takes on legacy corporate pension scheme liabilities for which it receives a lump sum which is then managed, for a fee, by the Asset Management Division. This circular flow within the business means L&G can deliver strong margins on its bulk annuity business, which is a core benefit of the model.

It’s now hoping to replicate its UK success in the US, where it’s relying on a partnership model to mitigate execution risk.

There are many strings to L&G's bow, with bulk annuities at its core. It’s a strong player in an attractive market, and so far we’re impressed with Antonio Simoes’ efforts to strengthen the business.

While the valuation doesn't look to have gotten ahead of itself, there are near-term risks, especially with economic conditions across the globe coming under pressure.