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“The UK stock market starts the new week in a positive mood, nudging ahead 3 points to 7,297, propped up by strength in airlines, banks and utility companies,” says AJ Bell Investment Director Russ Mould.
Reckitt Benckiser
“Consumer goods firm Reckitt Benckiser is guiding for a 2% to 3% increase in like-for-like revenue in 2018 but having promised the same in 2017 and only delivered flat sales, this pledge seems to have limited credibility with the market. Hence the stock was the biggest faller on the FTSE 100 this morning, down more than 3%.
“Like-for-like growth of 2% in the final three months of last year offered some reason for encouragement but the company also pointed to some margin pressure in 2018 after its level of profitability came in slightly below expectations in 2017 at 27.1%.
“Investors are likely to be watching the progress of Reckitt’s reported bid for US firm Pfizer’s consumer health business where its rival bidder is pharmaceutical giant GlaxoSmithKline.”
McColl's Retail
“The acquisition by McColl’s Retail of 298 Co-op convenience stores announced in July 2016 has helped to push its annual revenue beyond the £1bn mark for the first time.
“While this shows the business has considerable scale, it is still only making tiny margins which leaves very little breathing room if something goes wrong. Net profit margins were a mere 1.25% in its 2017 financial year.
“McColl’s is effectively a volume game, trying to sell as many items as possible to customers. It has been trying to find new ways to entice people into its shops, such as having Post Office and Subway concessions. A deal is also in place for Morrisons to supply fresh food and groceries to its stores.
“Yet competition remains fierce, particularly as Tesco will have greater buying power for its convenience stores assuming its takeover of Booker is approved by shareholders.”
Dart Group
“Shares in Jet2.com airline owner Dart Group are soaring off the back of a very positive trading update where it says pre-tax profit for the year to 31 March 2018 will be materially ahead of expectations.
“The board will be very pleased that the airline industry is no longer having to slash prices to sell tickets, particularly as Dart has been investing heavily in its airport operations. Dart credits a more normalised pricing environment as a key reason behind today’s bullish trading update.
“Despite the positive share price reaction to the announcement (+13%), Dart says it remains cautious on pricing. If you look back at previous trading updates from the company, it has a tendency to lay out the risks to the business and not simply get carried away by certain bright spots. That’s a sensible strategy and increasingly rare among quoted companies.
“Long-term investors often favour businesses which under-promise and over-deliver and Dart certainly looks like it wants to fall under this description.”
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