Dunelm and Hochschild Mining

Wednesday, February 13, 2019 - 10:47

“Global markets are back in business on Wednesday. Major indices in the UK, Germany, France, Spain, Hong Kong and Tokyo all step forward amid an apparent return of confidence by investors no doubt linked to optimism over US/China trade talks.

“In the FTSE 100, industrials, miners, insurers and housebuilders lead the way, with the index nudging up 0.5% to 7,166,” says Russ Mould, investment director at AJ Bell.


“Homewares retailer Dunelm builds on a strong January trading update with first half results showing big growth in revenue, profit and, crucially, cash flow. Borrowings have been significantly reduced.

“The results are achieved despite weak consumer sentiment and suggest the company’s evolving proposition both online and in store is resonating with shoppers – with customer numbers increasing markedly.

“Indeed, unlike many of its rivals this is not a case of internet sales coming to the rescue of ailing bricks and mortar stores. The online side is growing faster but both parts of the business are currently heading in the right direction.

“A more flexible web-based platform is due to launch in the summer and this could help reinforce the company’s position.

“Despite the robust trading, Dunelm cannot escape the dreaded B-word, stockpiling its best-sellers in case of disruption to its supply chain around the UK’s departure from the EU.

“Dunelm is the latest company to announce such plans as the 29 March exit data looms on the horizon.

“While it remains confident of meeting expectations it is unsurprising to see the firm express caution in the face of the continuing Brexit uncertainty and there certainly seems a risk that the sensible precautions the company is taking could result in a hit to profitability.”

Hochschild Mining

“Shutting a mine down because it no longer makes commercial sense to run is one of the toughest decisions a miner can make.

“They’ve put all that hard work and resource turning an exploration project into a commercial operation (or spent lots of money buying it from someone else), making it run more efficiently and hopefully expanding its mine life. To then have all that taken away because of a drop in commodity prices is sheer bad luck.

“In Hochschild’s case, closing down its Arcata mine isn’t a shock because it had already been written off in its accounts.

“There was a glimmer of hope to keep it going because it still contained plenty of precious metal and the geological team had found even more ounces. The company had previously flagged an opportunity to reduce costs but it obviously wasn’t enough to keep the mine alive.

“Hochschild is likely to be particularly sad about the situation because Arcata was its flagship mine when it floated on the London Stock Exchange in 2006.”

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

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.