FTSE up, Hammerson’s odd highlight, ABF’s Primark conundrum and Bunzl’s Amazon threat

“The FTSE 100 starts the week on a positive note, rising 0.5% to 7,281, help by renewed strength in mining and consumer goods stocks,” says AJ Bell Investment Director Russ Mould.

Hammerson

“It seems odd that Hammerson regards its proposed acquisition of shopping centre investor Intu Properties as being its highlight of 2017. That deal didn’t go down well with the market and it hurt Hammerson’s share price so much that the suitor is likely to be kicked out of the FTSE 100 at the quarterly index reshuffle announced this Wednesday.

“Hammerson on its own seems to be doing fine, as illustrated by a 28% rise in full year pre-tax profit for 2017. Adding Intu to the mix increases its exposure to the struggling part of the bricks and mortar retail industry which is a risky move.

“A rise in the number of people shopping online has led to many physical stores being closed across the country as the weaker retailers are flushed out. Hammerson is managing to stay healthy thanks to its exposure to premium outlets which continue to drive earnings growth.”

Associated British Foods

“You have to wonder when Associated British Foods will finally give in and spin out Primark as a separately-listed business. Food and clothing seem a bizarre mix and don’t always sit well with investors who increasingly want focus on a particular area rather than conglomerate diversification.

“Today’s trading update shows mixed fortunes for the group. Primark sales are very good in the UK but the retailer’s overall like-for-like sales were down 1% for the half year to 3 March.

“ABF’s sugar business is expected to show a drop in revenue and profit for the six month period as a result of lower EU prices. Grocery, ingredients and agriculture interests seem to be doing fine.

“Activist investors are all the rage at the moment and asset separation is one of their preferred methods of extracting value from a complex business like Associated British Foods.

“There’s no talk at present regarding such action, but this is certainly a situation you cannot rule out happening.”

Bunzl

“Bunzl is one of those stocks that rarely excites as it is selling stuff that companies need in order to do business – but not the end products those companies sell to their customers. Good examples are slates to display cakes and coffee cups to disposable gloves and ear plugs.

“Bunzl’s shares have been weak since last summer on concerns about Amazon becoming a competitive threat in the distribution sector. Today Bunzl reports full year results ahead of market expectations, helped by stronger organic growth, acquisitions and an FX tailwind.

“Pre-tax profit is up 7% at constant exchange rates to £409.3m. The dividend has been lifted by 10%, continuing its 25 year track record of dividend growth.

“With figures like that, it’s no wonder someone like Amazon may want to have a slice of the pie. Bunzl has managed to make a name for itself thanks to large economies of scale – however, Amazon clearly has that advantage too.”

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