We look at some of the big announcements and the market reaction to them
Thursday 24 Jan 2019 Author: Tom Sieber

With the New Year well underway there have been plenty of news items to catch investors’ attention of late. There was a reminder of the continuing pressures on the airline sector as Ryanair (RYA) and EasyJet (EZJ) landed the market with mixed updates on 18 January and 22 January respectively.

Ryanair warned on profit again, lowering guidance from a range of €1.1bn to €1.2bn down to €1bn to €1.1bn in the 12 months to 31 March 2019.

It pinned the blame on lower winter fares, although chief executive Michael O’Leary expressed his hope the pressures on the industry as a whole would shake out some of the competition.

An update from EasyJet was better received despite flagging a £15m hit from the drone disruption at Gatwick in December as the company unveiled 13.7% revenue growth in the last three months of 2018 compared with the same period in 2017.

On 17 January Whitbread’s (WTB) Premier Inn operation was exposed to the harsh glare of the market post the £3.9bn sale of Costa Coffee to Coca-Cola. Investors largely ignored a £500m buyback to punish the company for a 0.6% decline in like-for-like sales.

The weak trading update raises question marks about whether investors will want to stick around once the proceeds from the Costa sale have been distributed as promised.

One of the more obvious casualties in the FTSE 350 was cyber security firm Sophos (SOPH) which updated on trading on 18 January. Wiping off more than a fifth of the company’s market value, the market was spooked by the same concern which dogged a similarly poorly received update in November.

Namely the level of growth in billings, or new business invoiced in the period under review, is slowing.

Up just 2% in the third quarter and for the year-to-date, compared with 3% in the first half, billings offer a better measure of how sustainable growth really is as revenue, which was up 7.3%, can include income from previously-agreed contracts.

In the small cap space AIM-quoted Arena Events (ARE:AIM), which provides seating and other equipment and services for sporting, commercial and cultural events, hit the skids as higher-than-anticipated costs in its UK business led to profit downgrades.

With the shares diving to 37.8p, investors who participated in a £20m fundraising at 60p per share in September will be feeling particularly sore.

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