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Good week for the markets but setbacks for Reckitt and Clarkson
A few disappointments regarding growth levels and profit warnings failed to sour what was otherwise a decent week on the markets with the FTSE 100 having risen by 2.7% and the FTSE All-Share up by 2.6% in the seven days to 24 April.
ID management company GB Group (GBG:AIM) outstripped full year adjusted operating profit expectations by 14%.
Organic revenue jumped 17% to £119.7m and net cash of £13.4m was up significantly on £5.2m a year earlier.
Analysts raised forecasts across the board with stockbroker Peel Hunt saying ‘it is clear that directionally, momentum is biased towards medium-term outperformance’.
Small analytics business D4T4 Solutions (D4T4:AIM) managed a modest beat on profits for the year to 31 March 2018 despite a miss on revenue (£20m versus £23.2m expected).
More subscription income rather than licences (which are paid in full upfront) was the cause although that bodes well for improving earnings quality in the future because they are typically more sticky.
RECKITT SHARES UNDER PRESSURE
Investors punished Reckitt Benckiser (RB.) for missing first quarter sales targets. It reported 2% organic sales growth which was below consensus expectations for 2.6%. Investment bank Liberum reckons Reckitt can get the organic sales growth rate to 4% in the long-term.
A stronger US dollar has created a headwind for support services group RWS (RWS:AIM). That, together with a disappointing performance from recent acquisition Moravia, weighed on investor sentiment towards the stock.
In essence, RWS has laid the foundations for a potential profit warning as it says earnings would miss expectations if current foreign exchange rates persist in the second half of its financial year.
CLARKSON BATTLING ROUGH SEAS
Volatile global markets hit shipping services provider Clarkson (CKN) as several clients delayed signing new business deals due to difficulties raising funds.
Lower freight rates in the tanker market and the weaker dollar also played a role in a profit warning on 23 April.
Panmure Gordon analyst Colin Smith forecasts that underlying pre-tax profit for the year to 31 December 2018 will fall to £45.1m, down from £50.2m in 2017.
Smith is confident Clarkson’s performance will stabilise after 2018, leaving his forecasts unchanged in 2019 and beyond. (DC/SF/LMJ)