Archived article
Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
“UK markets pushed forward on Wednesday with miners leading the FTSE 100 higher. Fresnillo, Evraz and Rio Tinto were the top sector performers.
“European Central Bank President Mario Draghi said the ECB was ready to further delay a planned interest rate hike if conditions in the eurozone deteriorated. European stock markets were largely unmoved on the comment,” says Russ Mould, Investment Director at AJ Bell.
Debenhams
“Sports Direct continues to dangle a carrot in front of Debenhams but it has yet to feed the horse.
“The latest episode in the retail soap opera is a 5p per share takeover proposal that comes with a big long list of conditions before it will make a proper bid.
“Debenhams’ board is faced with a sticky situation. They clearly dislike Mike Ashley and his team yet any takeover proposal must be considered with shareholders’ interests at heart.
“The business is in a very difficult position both financially and operationally and here we have a party which believes it has a solution to both issues.
“Debenhams has sunk so far down into its hole that time is running out before it disappears altogether.
“So far Debenhams has said that Sports Direct’s plan isn’t enough to address its immediate funding requirement so it looks like it will pursue a restructuring plan that will provide financial relief but wipe out shareholders.
“But shareholders may consider that Sports Direct’s proposal could provide a huge difference as their investment would still be worth something.
“Debenhams really needs to put pride and ego to one side and have a proper conversation with Sports Direct about whether its proposal has merit or whether it can provide another solution.”
Bellway
“A decade of growth in volumes is a track record not to be sniffed at for a housebuilder and that’s what Bellway has delivered as today’s first half results show.
“The group says it currently has capacity to build 13,000 units per year (against around 10,500 in the last 12 months) and on its current trajectory there’s no reason to think over time it couldn’t catch up with industry leaders which are churning out upwards of 17,000 units per year.
“However, volume growth is one thing and profitability is another. The company is beginning to experience some pressure on margins in a softening housing market – down from 22.5% to 21.5%. Guidance is for this pressure to continue in the second half and the cancellation rate is also creeping up too as Brexit uncertainty hits consumer confidence.
“At the very least Bellway’s management has been upfront about the likelihood of a narrowing of its margin performance for some time, and the combination of lower selling prices and rising construction costs is one all of its peer group has to face.
“Its strategy to continue growing despite reduced profitability is not one which will necessarily be replicated elsewhere though, and time will tell if this is a sound approach or not.”
These articles are for information purposes only and are not a personal recommendation or advice.