Wizz Air upgrades guidance, and Wickes sales grow ahead of demerger from Travis Perkins

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“The FTSE 100 climbed back above 7,500 this morning as strong results from consumer electronics giant Apple and focus on the latest decision on US interest rates helped distract from China’s coronavirus,” says AJ Bell Investment Director Russ Mould.

“Still, investors will be watching news from Asia nervously as the number of people infected with the virus in China exceeds that seen in the SARS outbreak in the early noughties."

Wizz Air

“Budget airline Wizz Air’s boost to annual profit guidance may have been expected by the market after both Ryanair and EasyJet released buoyant updates in recent weeks.

“The central and Eastern Europe focused carrier is looking to build on a strong third quarter performance, with recent investment in expanding its services expected to provide a boost in the fourth quarter and into the next financial year.

“The growth story is built on increased passenger numbers but also on rising ancillary income – representing the charges levied for extras such as excess baggage or seat booking.

“This accounts for a much bigger proportion of the company’s overall revenue than its rivals. Ancillary income is stable unlike fluctuating passenger fares, so this is positive for the business, however it could ultimately backfire if it alienates potential fliers.

“For example, the company recently announced an auto check-in service which is available with its ‘Wizz Plus’ ticket, offering several benefits but this can be multiples of the cost of a ‘Basic’ ticket.

“Wizz’s dominant position in its core markets does limit the risk of people turning to a competitor, while its European focus should insulate it from the impact of China’s coronavirus on the travel sector, for the time being at least.

“Innovation could help keep it ahead of the pack, with reports the company is considering a ‘Netflix-style subscription’ service, where passengers pay a monthly fee for an unlimited number of flights.’

Travis Perkins / Wickes

“With the demerger of DIY chain Wickes from builders’ merchant Travis Perkins fast approaching, shareholders will be paying closer attention to the state of the business they will soon be inheriting as a standalone entity.

“Today’s update is encouraging. There’s little doubt Wickes is a bit of a fixer-upper, operating in a difficult market where increasing numbers of us don’t have the time, confidence or inclination to take on DIY jobs ourselves. Weak consumer confidence has just added to the sector’s woes.

“However, this latest report on progress at Wickes reveals solid like-for-like sales. A refreshed approach will involve a more digital focus, with a greater emphasis on providing services to those pursuing home improvements, likely through its existing ‘Do-it-for-me’ operation.

“The lofty-sounding ambition of a Wickes project in every home sounds impressive, although it seems highly unlikely to become a reality.

“Investors would probably settle for the company making the most of the strength of the Wickes brand, adapting to homeowners’ changing needs and keeping a tight lid on costs as they’ve promised. That could lay the foundations for a solid future as a separate business.”

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