Mitchells & Butlers, Crest Nicholson and Micro Focus

“The FTSE 100 is now trading a mere 40 points from its all-time high of 7,778 achieved in January 2018 (on a market close basis). The blue chip index is trading 0.2% higher on Wednesday at 7,738 thanks to strength in natural resources stocks. Investors will be watching the market very closely to see if a new record can be set today or at least before the weekend,” says AJ Bell Investment Director Russ Mould.

Mitchells & Butlers

“Rising sales and falling profits would suggest the pubs-to-restaurants operator is struggling to cope with margin pressures. Increased costs are certainly to blame in Mitchells & Butlers’ case.

“A strong business would react by pushing up prices, effectively passing on higher costs to the consumer. However mass-appeal casual dining companies like Mitchells & Butlers are in such a weak position due to the challenging industry backdrop that they can’t risk alienating customers with higher prices.

“The industry is still going through a discounting phase, doing anything they can to drive up sales even if it means making a smaller profit.

“Mitchells & Butlers, whose estate includes Harvester, Toby Carvery and All Bar One, had already told shareholders they wouldn’t be getting a half year dividend and it dances around the issue today in terms of when the dividend will be making a comeback.

“It says a decision will be made at the end of the year but it seems clear that the company is trying to set expectations as low as it can, thus giving it room to keep the dividend suspended if there’s any indication of further pressure on the business at the year-end.”

Crest Nicholson

“There have been question marks over whether the housebuilders can maintain or even improve on their strong margin performance of late and today’s update from Crest Nicholson will only reinforce those doubts.

“Full year margins at the mid cap firm are expected to be at the bottom of its guided 18% to 20% range thanks to build cost inflation of 3% to 4% and flat house prices.

“Lower levels of profitability could have implications for future dividends if the margin trend worsens.”

Micro Focus

“The $40m licensing deal announced by software firm Micro Focus is small fry in the context of the group’s $3.9bn of revenue forecast by analysts for the year to October 2018.

“However, it helps tip the scale to ensure its first half will be better than the downbeat guidance given alongside a highly damaging profit warning in March.

“And it is therefore not a bad way for Stephen Murdoch to start his tenure as chief executive having stepped up from his chief operating officer role.

“Micro Focus is just the latest in a litany of names to get tripped up by a transformational acquisition, but Murdoch says progress has been made in ‘improving both the discipline and speed of execution within the business’.

“He will need to deliver a consistent period of outperformance to show last year’s $8.8bn reverse takeover of HPE’s software business can genuinely create shareholder value.”

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