Greggs back in fashion and Sirius Minerals soars on new development plan

Monday, November 11, 2019 - 10:34

“As we approach mid-November, the FTSE 100 is on track to record the best annual performance since 2016 despite a backdrop of economic concerns, trade wars and Brexit,” says Russ Mould, Investment Director at AJ Bell.

“The 9.4% year-to-date gain should please investors as historically equities have delivered an average 6% to 7% gain each year over the long term. However, it is worth noting that most of these gains were made in the early part of 2019 and the FTSE has experienced a one step forward, one step back pattern since March.

“At the start of the new trading week the FTSE trades 0.5% lower at 7,324 with gains among tobacco makers and housebuilders more than offset by weakness in miners and financial stocks."

Greggs

“Today’s update suggests food-on-the-go firm Greggs is more than a one-trick pony. Having got on something of a roll with its vegan version of a pastry favourite, the company had until today stalled on a lack of earnings upgrades since the summer.

“The vegan sausage roll phenomenon which dominated the start of 2019 for the company might still be having some lasting impacts in terms of brand awareness but there’s no mention of it having direct impact in today’s short but sweet update.

“Despite a tough comparison against strong trading in the same period a year ago, it is impressive that recent trading has been sufficiently encouraging to drive an increase in full year profit guidance.

“The products it sells might not always be the healthiest but its business looks in good shape. Encouragingly, sales growth is being driven by an increase in customer visits, suggesting perhaps that people attracted by the vegan sausage roll are sticking around.

“In a busy world where people don’t always have time to stop for a sit down meal, there has to be a place for outlets which offer affordable hot and cold food and Greggs looks to be serving that need nicely at the moment.”

Sirius Minerals

“Shares in Sirius Minerals have shot up on a revised development plan which reveals the company is looking to raise an initial $600 million from a strategic investor.

“It seems like Sirius’ army of retail shareholders – which are in the tens of thousands – remain optimistic that its potash mine will be built, despite a major funding setback earlier this year.

“A lot of miners make confident statements about finding strategic investors as if you can just pick them off the shelf. In reality they are hard to come by, at least ones which will agree to a deal that doesn’t heavily dilute existing shareholders so they are left with next to nothing.

“At this stage, Sirius has no cards to play. It is desperate for money and will have little bargaining power in any negotiations with a potential strategic investor.

“A third party looking to bail Sirius out of a tricky situation will want the best possible deal for them, as they are taking on considerable risk backing a project which is not yet generating any revenue.”

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.