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“After rallying on Thursday, the FTSE 100 grinds to halt on Friday, sitting still at just under 7,200. Next week could be more interesting as there are some big names reporting results including Tesco and ASOS, as well as trading updates from several recruitment companies which should provide insight into corporate confidence when it comes to hiring new staff,” says AJ Bell Investment Director Russ Mould.
AO World
“In order for AO World to be a blockbuster business it is going to have to produce the magic word beginning with ‘p’. Sadly for shareholders, it could take another two years before it hits the gold run and makes a profit at the group level, judging by analyst forecasts.
“While its latest trading update shows revenue growth, the business remains loss making. To its credit, full year treading is expected to hit market forecasts, which is a bonus when you consider AO has a history of missing expectations.
“Operations in mainland Europe appear to be making progress judging by the company’s comments and a reduction in promotional activity in UK hasn’t stopped sales growth in that territory.
“The focus for the next few years will be on the rate of cash burn, essentially how much money the business has to spend to further increase scale and start making a positive return.”
Motorpoint
“The latest numbers out of the UK car market have been pretty horrible with the revelation just this week that new car sales slumped 15.7% in March. Small cap independent car dealer Motorpoint appears to be bucking this negative trend.
“The company says it is ‘cautiously optimistic’ on the used car element of the market which it focuses on, as it flags an 18% increase in full year revenue and guides for profit to be at the top end of expectations.
“The used car market tends to be less cyclical than purchases of new cars. In the 2007-09 downturn, peak to trough new car registrations fell 17%, while used car registrations held up comparatively well, with a 9% drop.
“Motorpoint also has scope to capture market share as it currently has just 12 sites across the UK. It is in the process of evaluating opportunities for its thirteenth retail site with several options under review.”
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