Dechra Pharmaceuticals and Footasylum
Archived article

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“The FTSE 100 gets off to a strong start on its first trading day of the autumn, gaining 0.6% to 7,478.98. The index endured a difficult August, falling by more than 4%,” says AJ Bell Investment Director Russ Mould.

Dechra Pharmaceuticals

“Today’s mixed update from veterinary products specialist Dechra Pharmaceuticals shows the dangers of a high valuation colliding with less than positive news.

“The company’s shares have been on a gravity-defying run – up more than five-fold in the last six years. This was fine if the company continued to deliver profitable growth. And the strong dynamics behind the animal drug market helped underpin this.

“On the face of it, Dechra’s full year results still look good with underlying profit, excluding the impact of accounting adjustments on some acquisitions, up more than 20%.

“What may be concerning the market are references to contingency plans for a ‘hard Brexit’ and the fact an increasing number of distributors are focusing on the sale and marketing of their own products.

“These factors could prevent the company churning out the same stellar numbers as it has done historically.”

Footasylum

“The strong start retailer Footasylum made after its November 2017 IPO now feels an awful long time ago.

“After a damaging profit warning back in June, the company is now warning 2019 earnings will be significantly down on previous guidance at less than half the £12.5m it posted for the year to February 2018

“Management’s argument that its core, fashion-conscious 16-to-24-year-old demographic would continue to spend on trainers and t-shirts whatever the economic backdrop has been heavily undermined.

”The business has also not helped itself, pointing to unforeseen delays in new store openings and upsizing of existing outlets.

“Ultimately it is questionable whether investors will still share management’s continuing confidence in the ‘long-term prospects’ of the group.”

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

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The daily market update is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.