FTSE static, TUI’s strategic progress and relief at Pendragon results

“The UK stock market is static following yesterday’s small recovery. The FTSE 100 moves up a mere 2.6 points in early trading to 7,179, perhaps due to a lack of major corporate news to drive trading volumes,” says AJ Bell Investment Director Russ Mould.

TUI

“Tour operator TUI has reported a satisfactory first quarter trading update with seasonal losses down sharply and a reiteration of full year guidance.

“Much of TUI’s future is about investing money into cruise ships and hotels which are considered to be higher quality growth channels for the business.

“The company’s cruise ships and hotels accounted for 56% of TUI’s earnings in 2017. They generate stronger margins and are less seasonal, thereby helping to spread earnings across the year rather than concentrating them on certain months.”

Pendragon

“An 11%+ share price hike in response to weak 2017 results from car dealership Pendragon can be attributed to investor relief that life hasn’t got worse for the company, given a difficult market backdrop for the car seller.

“A 3.1% increase in revenue delivers a 20% decline in profit to £60.4m, in line with a profit warning delivered in October last year, and 2018 performance is guided to match expectations.

“The business has been badly affected by falling demand for new vehicles as people scale back spending on big ticket items. There is unlikely to be much respite on this front with the latest industry figures showing new car registrations down 6.3% in January.

“Management’s response is to pivot to the larger and more stable used car market, with the aim of doubling its revenue in this area by 2021.”

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