Avast and Grafton

“Dollar weakness once again drags on the FTSE 100, leaving the blue chip index trading 0.3% lower at 7,545. In contrast, Asian markets are in much better health including a 0.6% rise in Japan’s Nikkei 225 index.

“Unhelpful to the London market is the fact that not a single FTSE 100 company has issued corporate results or trading updates on Wednesday. News tends to influence trading volumes,” says Russ Mould, Investment Director at AJ Bell.

Avast

“After a rocky start to life on the stock market with its IPO priced at the bottom end of guidance and the shares then falling for the first two months as a listed business, antivirus expert Avast has at least passed one major test – namely delivering results that meet expectations.

“On paper, you would have thought the £2.2 billion cyber security group is in a good place given heightened consumer awareness of cyber risks amid high profile attacks on major companies. Yet Avast’s key problem is that a large number of its 435 million customers only use its free products.

“The company’s challenge is to get more of these customers to upgrade their accounts and pay for more sophisticated security against hacking attacks and malware.

“Of the 11.67 million customers paying for at least one product, there is some progress with the average number of products per customer and average revenue per customer both going up in its half year to 30 June. Yet the pace of growth (3% and 3.5% respectively) may not be exciting enough to entice investors who are drawn to the fast-moving world of technology.”

Grafton

“There is art as well as science to managing a company listed on the stock market. One element that the management of private firms don’t have to consider to the same extent is managing expectations.

“The guidance given alongside today’s strong first half results from building materials supplier Grafton look a classic example of under-promising in the hope of over-delivering.

“Better than expected profits and a robust start to the second half suggests that unchanged full year guidance could be a bit conservative.

“As well as providing some scope for outperformance it also provides a measure of insurance if the UK or Irish businesses are impacted by Brexit-related uncertainty.

“Encouragingly the acquisition of central London DIY chain Leyland SDM, which completed earlier this year, is making a good early contribution to the business.”

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