FTSE on track for positive returns this week, Segro in strong demand and CVS disappoints again

“The UK stock market has currently risen by 2.6% this week as measured by the FTSE 100, implying some stability following the previous week’s sell-off. Next week will be very interesting to watch given the large number of big companies reporting earnings or updating on trading. Corporate news can stimulate higher trading volumes,” says AJ Bell Investment Director Russ Mould.

Segro

“Industrial properties firm Segro tops the FTSE 100 leader board this morning as a 26% increase in 2017 profit tells a story of strong demand for its warehouses.

“This is underpinned by a shortage of available space as the structural shift in the retail market towards e-commerce continues. As such, the vacancy rate is running at 4% which is below a 5% to 7% target.

“The company, which has pursued a strategy of investing in warehouses near major transport hubs, says the prospects for rental growth remain good, particularly in the UK market.

“This news could have positive implications for other operators in this space including Tritax Big Box REIT, LondonMetric Property, and AIM-quoted Warehouse REIT.”

CVS

“Shareholders in AIM superstar CVS will be disappointed that it is raising new money potentially at a big discount to last night’s closing price. It’s the second blow to investors following a profit warning in November.

“The veterinary services provider has been one of AIM’s biggest success stories thanks to an incredible 563% share price rise in its first 10 years on the stock market. The investment case was centred on the principle that pet owners view healthcare for their pets as a non-discretionary spend.

“The story soured three months ago when CVS revealed a slowdown in sales growth and shortage of clinicians in the UK. Nearly one third of its market value was wiped off in a week after this news.

“The shares had started to recover earlier this year, closing at £12.20 last night. CVS now says it is trying to raise roughly £67m by issuing up to 6.39m new shares at a minimum price of £10.50. That price is a 13.9% discount to last night’s closing price.

“Investors may be surprised at the scale of this discount given how previous fundraisings were carried out. For example, CVS raised £30.2m in December 2016 by issuing new shares at a mere 3.85% discount. In February 2010 it raised £12.2m by issuing new shares at a 2.8% price discount.

“You only have to look at half year results issued today to see why CVS has had to seek a wider discount for its fundraising. Pre-tax profit is down 21.3% to £6.2m and it has hinted that 2018’s dividend may only be the same as 2017’s figure.”

These articles are for information purposes only and are not a personal recommendation or advice.