Why shares in investment firm St James’s Place are a ‘buy’

Otmane El Rhazi from Mindful Money » Shares.

Graham Spooner, investment research analyst at The Share Centre, explains why he is tipping St James’s Place shares as a ‘buy’…

As a leading financial services company with interests in life insurance and unit trust management, St James’s Place is our share of the week. With products including pensions, offshore products and mortgage advisory services, the company has increased its funds under-management by 22% over the last 12 months.

Investors should be pleased that the final dividend was increased 50% to 14.37p per share, which is higher than the board’s initial prediction. Another positive is that the group’s cash generation remains strong, and it is investing in its back office infrastructure to enhance its UK and overseas distribution capabilities. Those interested should also note that changes to ISAs and pension legislation in 2014 should be a positive for the group going forwards.

We are currently recommending St James’s Place as a ‘buy’. This is due to impacts from the improving UK economy, as well as the group’s expansion into Asia where it could benefit from the country’s growing middle class. We recommend this stock for investors looking to take a medium level of risk, and for those who are looking for both income and growth potential.

 

Supermarket giant Tesco rated ‘neutral’ after Q1 results

Otmane El Rhazi from Mindful Money » Shares.

Supermarket giant Tesco has reported an improvement in UK sales in its first quarter trading statement as the company gets to grips with a new strategy.

 

Like-for-like sales were down 1.3% in Q1 when compared with the same period a year earlier, an improvement on the -1.7% reported in Q4. The numbers were better than consensus expectation, which were for a decline of -2%.

 

Sales were growth due to space expansion has, however, reduced from 1.6% last year to 1% as store openings are scaled back.

 

Brewin Dolphin equity analyst Nicla Di Palma said: ‘The statement is very short, but management commentary highlights that the improvements made to service, availability and lower everyday prices are having an impact with customers more likely to shop at Tesco.’

 

She said that Tesco is continuing with its programme of reducing the number of stock-keeping units – down 20% in the number of lines in 15 categories.

 

Internationally, like-for-like sales performance improved again, with Asia down 3% compared to -4.7% in Q4. External conditions remain challenging in both Korea and Thailand but Eastern Europe and Turkey showed positive sales performance.

 

‘Overall group sales were down 0.5% on a constant currency basis, down 1% at actual rates,’ said Di Palma.

 

‘Management refused to comment on the potential sale of (its marketing company) Dunnhumby and of its South Korean business. As far as property is concerned, management stated that it is looking at alternative uses for the Extra stores it has decided not to build.’

 

Di Palma said the numbers are ‘encouraging’ but further deflation is expected throughout the end of the year.

 

‘Furthermore, the announced cost cuts are modest and further investment sin pricing will reduce profitability compared to last year in our view,’ she said.

 

‘The balance sheet remains problematic, although the sale of assets would help reduce leverage. Rated neutral.’

 

 

Photo-Me shares a ‘buy’ as the group reports robust international progress

Otmane El Rhazi from Mindful Money » Shares.

As Photo-Me reports its fourth quarter numbers, Graham Spooner, investment research analyst at The Share Centre, explains what it mean for investors…

Surrey based photo booth and laundrette company Photo-Me International posted its fourth quarter earnings results. Highlights included a 16.3% rise in full-year underlying pre-tax profit and a dividend increase of 30% to 4.88p pence. The group also reported that it is expanding into South Korea and Poland. This is whilst its new laundry machine venture is progressing well in France and Belgium.

The results, which were good, were held back by the strength of sterling against the euro and yen, and this may have an adverse effect in the year ahead. Potential investors will be pleased to see that, as well as increasing the dividend by 30%, the group plans to increase the ordinary dividend by 10% per annum.  Any net cash on the balance sheet in excess of £50m will also be made available to shareholders as a potential special dividend.

We are currently recommending the group as a ‘buy’ for higher risk investors looking to achieve a higher level of income, alongside the chance of further growth from its expansion into new countries and introduction of new products.

 

Why shares in AIM listed group Iomart are a ‘buy’

Otmane El Rhazi from Mindful Money » Shares.

Helal Miah, investment research analyst at The Share Centre, explains why Iomart is a ‘buy’ for the more intrepid investor…

AIM listed cloud computing company Iomart is this week’s share of the week. Iomart, which provides cloud and data services to a variety of different clients, reported a very good set of full year results. Revenues were up 18% and operating profits up 23%, driven by both acquisition and organic growth. After a number of profit warnings last year the shares have staged a good recovery.

Iomart has made good progress in integrating acquired businesses and continued to build relationships for cloud solutions with major players in the technology industry. There are good prospects for growth with government organisations, which have so far been slow to adopt cloud technologies

Iomart remains subject to takeover speculation by bigger players in the IT space due to its leading presence in cloud computing amongst UK companies. We continue to recommend Iomart as a ‘buy’ for investors looking for capital growth and willing to accept a higher level of risk.

Mindful Money’s weekly shares watch: Telecom Plus, Debenhams & Tesco

Otmane El Rhazi from Mindful Money » Shares.

Despite hitting the market with a profit warning earlier this year brokers are remaining upbeat on utility services provider Telecom Plus, with the shares currently rated a ‘strong buy’.

The FTSE 250 listed firm owns and operates the Utility Warehouse brand, which supplies homes and small businesses throughout Britain with telecommunications as well as gas and electricity services delivered its shock back in April.

As a result its shares are now down by some 41% over the past year and by 37% over six months and Tuesday sees it delivers its preliminary fourth quarter earnings.

Sheridan Admans, investment research manager at The Share Centre is expecting a rebound and has the business on his ‘buy’ list. Looking ahead to this week’s update, he says: “Investors will be hoping that there is not any more bad news relating to weather, energy prices and theft of its gas. As always, average revenue per user will be a closely followed number, along with the number of new customers the group has signed.”

Thursday sees UK high street stalwart Debenhams report its third quarter trading update. The past 12 months has been kind to investors with the FTSE 250’s stock up by 25%.

But this week’s update follows cautious first-half comments from its management. Keith Bowman, equity analyst, at Hargreaves Lansdown Stockbrokers notes that like-for-like sales growth is expected to remain modest near to medium term.

He says: “Ongoing initiatives to increase online sales, push own-label higher margin products and reduce stock inventories may be further underlined, whilst an update on the opening of five new stores this autumn and ahead of its peak Christmas trading period could also feature.”

But prior to the announcement and with management initiatives set against a similar recovery push at rival mid-market clothing retailer Marks & Spencer, Bowman highlights that right now the analyst consensus opinion is pointing to a ‘hold’.

The UK’s embattled supermarket sector will be hitting the headlines again this week, when Tesco reports its first quarter trading update on Friday.

With its shares off by 14% over the past three months, food deflation and a highly competitive pricing backdrop continue to impact the firm. Admans, who has the group down as a ‘hold’ asserts that the new CEO has “a huge task in restoring confidence in the group, which will not be helped by the growth of Aldi and Lidl”.

In terms of what he anticipates from this week’s announcement, he says: “The ongoing problems and restructuring of the group has been well documented. Investors will be hoping that the majority of bad news is now in the public domain. An update on the long-term aims and strategy will be the areas that most sector followers will concentrate on.”

However UK like-for-like sales excluding fuel at Tesco are expected to fall by around 2%, broadly in line with that recently reported at Sainsbury, which was down by 2.1%.

But Bowman says sales for the group’s European operations could surprise to the upside, with recent data from market researcher Kantar suggesting that Tesco had regained its position as Ireland’s biggest grocer.

He adds: “In all, and with further market share losses weighed against corrective action being taken by still relatively new Chief Executive Dave Lewis, analyst consensus opinion currently points towards a ‘strong hold’.”

Auto Trader zooming ahead after first public results since IPO

Otmane El Rhazi from Mindful Money » Shares.

Car classifieds website Auto Trader has reported its first public results since its March IPO.

 

In its first set of results it announced pre-tax profits hitting £10.9 million and sales had increased 8% to £256 million.

 

Trevor Mather, chief executive of Auto Trader, said growth had come mainly from ‘providing greater value to retailers in a marketplace where consumers are increasing researching their next vehicle purchase online’.

 

Graham Spooner, investment research analyst at The Share Centre, said profits ‘dipped slightly’ due to the costs associated with listing on the London stockmarket, ‘however the business has reported high levels of success since launching its IPO’.

 

‘As the UK’s largest online marketplace for new and used cars, the group are constantly looking at launching new products and innovations,’ he said.

 

‘After trialling the international market, the group have retracted and are back to being solely UK focused. Those interested should note that, according to Mather, current trading is in line with expectations and management remains confident for the coming year.’

 

AIM index reaches 20th anniversary – three share tips for intrepid, long term investors

Otmane El Rhazi from Mindful Money » Shares.

As the AIM index marks two decades of trading, Gavin Oldham, executive chairman of broker The Share Centre, shares his view on the junior market and gives three top investments tips…

AIM has become such a feature of the investment landscape that it’s hard to remember that it was founded just 20 years ago: four years after The Share Centre.

A very large number of small and growing companies have raised money, gained profile and new shareholders by being quoted on this key stock market. It’s not always been an easy journey: the number of companies has waxed and waned, secondary market liquidity has often been challenged by too many institutional placings, and at the height of spread-betting fever many active investors were drawn away from the cash market. Investors should note that conditions have however improved significantly in recent years.

In recognition of the very large number of personal investors with a real affinity for AIM stocks, particularly those who choose their own investments, they are now included as eligible for ISA investment.  Stamp Duty on AIM shares has now been abolished.  But they have also held on to their “Business Assets” status and therefore have substantial Inheritance Tax exemptions.

The London Stock Exchange has also matured over the past decades: when I started in the market in 1976, smaller stocks were traded on pitches such as “Treasure Island”.  That matured into the USM, or Unlisted Securities Market, which brought some order but limited recognition.  It was only when AIM was established that the market could really show its true colours: providing finance for the fastest growing and employment – generating SMEs throughout the United Kingdom.

Now we have some substantial companies and real success stories to show and thanks are due to the London Stock Exchange who have persevered with AIM – not one of its strongest revenue streams – to deliver a very special market for future growth.

Three AIM picks for investors

Breedon Aggregates

This company is the UK’s largest independent aggregates business, operating 53 quarries, 27 asphalt plants and 63 concrete plants. The group is expected to be a direct beneficiary of increased infrastructure spending, especially housing, which the group are expecting to grow strongly through to 2018.

In April, a 30% increase in sales revenue was revealed, as was continued demand for the group’s products. The group’s margins have also continued to improve to 14.3%, and for reasons such as these we recommend the company as a ‘buy’ for higher risk investors” seeking growth.

Anpario

This young producer of natural feed additives for animal health, hygiene and nutrition is trying to establish a niche for itself internationally. Final results in March reported a 14% rise in profit to £3.3m on the back of £26.6m revenue. Investors will appreciate that the dividend was increased by 29% to 4.5 pence. Management stated that the new financial year has started well.

We hope Anpario will be a beneficiary on the global pressure on feeding the world’s population. We recommend it as a ‘buy’ for higher risk investors looking for growth in their portfolios.

Iomart

Iomart is one of the UK’s leading providers of cloud computing services. Being exposed to a rapidly growing sector and having partnerships with some of the largest computing businesses, such as Microsoft and Dell, only strengthens its offering. Full year results published in June showed revenues were up 18% to £65.8m as the market for cloud services continues to expand. The net profit also rose by 15% to £8.8m.

With interesting prospects and partnerships, we are recommending Iomart as a ‘buy’ for investors willing to take a higher level of risk and looking to achieve growth in their portfolio.

 

Investors see progress in Findel – and it’s still a ‘buy’

Otmane El Rhazi from Mindful Money » Shares.

As home shopping Findel group reports its full year results, Helal Miah, investment research analyst at The Share Centre, explains what they mean for investors…

This morning, home shopping and educational supplier Findel disappointed the market as large exceptional items led to a net loss of £25.3m. However, there was good progress during the year as pre-tax operating profits rose by 28% to £26.5m and operating margins improved to 7.6% highlighting a particularly strong performance from its Express Gifts business which reported sales up by 4.7% to £302m.

Investors should note that the group’s management team see this as another year of progress for the retailer, with further opportunities for growth within its businesses. Findel has been addressing various issues and focusing on cost cutting and improving distribution channels over the last year. The group is also targeting further profitability within its businesses to reduce its core legacy debt.

As the group continues to improve its strategies and results show proof of progress, we continue to with our ‘buy’ recommendation for investors seeking capital growth and willing to accept a higher level of risk.

 

 

Mindful Money’s weekly shares watch: Whitbread, Berkeley Group & Poundland

Otmane El Rhazi from Mindful Money » Shares.

Premier Inns and Costa Coffee owner Whitbread is scheduled to announce its first quarter trading update on Tuesday, and investors are expecting to hear there has been further growth across the group’s brands.

The FTSE 100 constituent has enjoyed a 19% share price rise over the past year. But its stock have fallen back since it reported strong full year results in late April and over four months are off by 4%.

Nevertheless, Keith Bowman equity analyst at Hargreaves Lansdown Stockbrokers says: “The budget hotelier Premier Inns is expected to report Revenue Per Available Room in the region of 7%, whilst Costa, and potentially aided by the cooler May weather, could see growth of 6%.

“Again in the region of 1% is forecast for its Pub restaurant business,” he adds.

Sheridan Admans, investment research manager at The Share Centre, who is calling the shares a ‘hold’ adds that the surprise news regarding the departure of chief executive Andy Harrison in April was followed by the equally surprising appointment of retail banker Alison Brittain as his replacement.

He says: “She is not due to start until next January but any comments about that will also be of interest to investors.”

But overall, Bowman highlights that with the group appearing to remain on track to meet its own 2016 and 2018 growth targets, “the analyst consensus opinion points towards a ‘buy’”.

House-builder Berkeley Group follows on Wednesday with its full-year results. The last 12 months has been kind to its investors, with the FTSE 250 firm’s shares up 33% over the period.

While the general broker view has the stock in ‘buy’ territory, given its strong rally, sentiment has cooled in the last three months. Admans, who rates the business a ‘buy’, notes that in its previous trading update, it reported good demand but also forecast that activity in the housing sector generally would return to more normal levels this year.

He says: “As a result investors will be watching out for any signs of that in these results. Given the general election outcome, investors will also be interested in any comments on what effect government policy may have on the sector. Berkeley is in the middle of a substantial capital repayment plan to shareholders so income-seeking investors will be keen to hear if the expected 90p payment in September is now confirmed. Any other news on future payments will also be welcomed.”

Discount retailer Poundland delivers its own set of full year 2014/2015 results on Thursday. Given the group’s Dealz outlets in Ireland and weakness in the euro against the pound, full year profit forecasts for the financial year ahead have recently come under some downward pressure according to Bowman.

He adds: “A trading update from peer B&M has also injected caution, whilst uncertainty regarding the group’s takeover of 99p Stores, given its referral to the UK Competition and Markets Authority, still prevails.

More favourably, management may again underline the ongoing rollout of new stores in the UK & Ireland, along with its trial in Spain, whilst Poundland ended the 2015 financial year with net cash of £13.9m. Bowman says: “In all, with currency pressures and takeover uncertainty pitted against its store rollout programme and an expected 19% rise in 2014/2015 pre-tax profit, analyst opinion currently denotes a ‘hold’.”

“Investors cautious” over Royal Bank of Scotland offering

Otmane El Rhazi from Mindful Money » Shares.

As the chancellor George Osborne announces the sale of the government’s stake in RBS, Graham Spooner, investment research analyst at The Share Centre, looks what it may mean for investors… 

George Osborne has confirmed in his Mansion House speech that the government will start selling off its holding in RBS. This comes on the back of recent sales of Royal Mail and Lloyds. The sale is set to start in the near future, but it is likely to happen in tranches over a number of years and will not initially involve the man on the street. The current value of the government’s holding is £32.1bn.

Mr. Osborne has said that “from bailing out the banks to bringing them back from the brink, now is the time for RBS to rebuild itself as a commercial bank no longer reliant on the state, but serving the working people of Britain”. Potential investors may see this move as symbolic of the country moving on and away from the past financial crisis.

It appears that the government feels the shares will be better off in the hands of investors. However, the sale is expected to a difficult one, as the bank is still on the road to recovery and has reported seven years of losses since the bail out. We remain cautious on RBS and believe there are better opportunities for followers of the banking sector, such as HSBC which we currently recommend as a ‘buy’ for lower risk investors looking to achieve income.

Government offloads 15% of its remaining stake in Royal Mail at 500p per share

Otmane El Rhazi from Mindful Money » Shares.

The government has sold-off half of the 30% stake it retained in delivery firm Royal Mail, at a price of 500p pence per share, raising £750m.

In a statement the Treasury said that following independent financial advice, the government decided that it was a good opportunity to realise value for money from a sale of part of its remaining shareholding in Royal Mail.

The Business Secretary, Sajid Javid said the sale “represents good value for taxpayers”.

He said: “That money can be used to reduce public debt, which is how we will deliver lasting economic security for working people.

“Royal Mail has demonstrated that it can thrive in the private sector. It now has the ability to access the funds it needs to ensure that it has a sustainable future and can adapt to the changes in the postal market.”

Speaking last night at the annual Mansion House speech, the Chancellor, George Osborne, said:

“We want to help the Royal Mail attract more investment and serve its customers, and use the money we raise in return to pay down the national debt.

“And we’re also going to make sure that there is a special bonus for the workforce who have done such a great job turning Royal Mail around. Thanks to them, Royal Mail’s share price has risen; so we’re going to give more of the shares to the staff.”

The government intends to gift up to 1% of the shares of the company, worth about £50m, to Royal Mail’s UK employees. These shares will come from Government’s remaining holding and they will be subject to sales restrictions.

This builds on the 10% of the total shares in the firm that were awarded to Royal Mail employees as part of the 2013 flotation.

 

Government announces plans to sell-off taxpayer stake in Royal Bank of Scotland

Otmane El Rhazi from Mindful Money » Shares.

The government has said it is ready to start selling off its stake in Royal Bank of Scotland.

In his annual Mansion House speech on Wednesday night the Chancellor George Osborne announced the time was  right to begin selling off the taxpayers 79% stake in the business.

The government injected £45.5bn into the embattled bank back in 2008 in bid to prop it up during the financial crisis.

The shares are set to be sold-off to City institutions in the coming months. However it is estimated that the sell will incur a £7bn loss.

The government, originally paid 500p a share for the bank, compared with the current price of around 359p.

Bank of England governor Mark Carney said the phased sell-off “would promote financial stability” and benefit the wider economy, according to the BBC.

Workers union Unite however criticised the plan, and urged that the government was “short changing the public”.

But Osborne asserted that the shares will increase in subsequent offerings as confidence grows.

He said: “It’s the right thing to do for British businesses and British taxpayers. Yes, we may get a lower price than that was paid for it – but we will get the best price possible. For the longer we wait, the higher the price the whole economy will pay.”

The chancellor also provided further details of the sell-off of the remaining stake the government has in delivery firm Royal Mail, where workers will share another 1% between them while 15% will be placed with City investors.

Despite the drop in sales Sainsbury’s shares are still rated a ‘buy’

Otmane El Rhazi from Mindful Money » Shares.

As Sainsbury’s updates the market with its first quarter results, Helal Miah, investment research analyst at The Share Centre, explains why the supermarket’s shares are still a ‘buy’ even though it continues to be hit by competition and food deflation…

In its first quarter trading statement reported this morning, Sainsbury’s said that its retail sales fell by 2.1% on a like for like basis. The Chief Executive noted that the ongoing competitive nature of the industry and the level of food deflation were clearly having an impact. However, investors should acknowledge that the share price rose by just over 2% at the opening following a number of positives in the statement.

The volume as well as number of transactions rose as the company continues to invest in improving the quality of over 3,000 own brand products to differentiate from its rivals and enhance its quality credentials. The convenience segment of the supermarket’s business remains in double digit growth mode following the opening of a further ten convenience stores. Furthermore, so far this year 20 click and collect stores have been opened with a target of 100 sites due to be completed by the end of the year.

Despite the challenging conditions, we recommend Sainsbury’s as a ‘buy’ for medium risk, income seeking investors. The company remains our preferred stock in the sector on the back of a good dividend pay-out alongside our belief that it will manage to hold onto market share as it implements several strategies to differentiate itself from its rivals.

 

Sales at Sainsbury’s take another tumble as market competition tightens

Otmane El Rhazi from Mindful Money » Shares.

Sales figures at Sainsbury’s have tumbled once again as a result of what its boss describes as a  “highly competitive pricing backdrop”.

On Thursday, the supermarket published its first quarter trading statement for the 12 weeks to 6 June 2015, reporting that total retail sales for the period were down 2.3%, including fuel.

However like-for-like retail sales were off 3.7%, including fuel.

Mike Coupe, chief executive at the group asserted that trading conditions were still being hit “by strong levels of food deflation and a highly competitive pricing backdrop”.

He added: “These pressures, including the effect of our own targeted price investment, have led to a fall in like-for-like sales for the quarter. We outlined in our Strategic Review in November some of the key actions we would be taking to remain competitive in this environment and are encouraged by some of the early trends that we are seeing in our key trading and operational metrics.”

However volume and transactions continued to grow at the FTSE 100 firm while its online clothing offer also remains popular.

The UK’s major supermarkets have been suffering in recent times as a result of the rise in popularity of the so-called hard discounters including Aldi and Lidl.

Coupe added: “Despite the challenging market conditions, we are confident that we are building on strong foundations and making good progress with our strategy. We continue to invest in our broad range of products and services and our multiple channels to market. These areas represent strong future growth opportunities and contribute towards our resilience in the current trading environment.”

Despite the fall in sales, shares in the group rose by 4%, or 11p, in early trading to 260p.

RPC tipped as a ‘buy’ as it achieves robust sales and profit growth

Otmane El Rhazi from Mindful Money » Shares.

As plastic packaging group RPC reports its full year results, Ian Forrest, investment research analyst at The Share Centre, explains why he is backing the group’s shares…

This morning plastic packaging group RPC announced full-year results that were ahead of market expectations, and trading in its new financial year is on track. Revenues for the year to March rose 17% to £1.2bn, while adjusted pre-tax profits were up 33% to £119m. Investors will be pleased that the company maintained its strong long term track record on dividends, with a further 12% rise in overall payments for the year.

Better still was news that the recent £307m acquisition of European plastic packaging group Promens is now expected to yield annual cost synergies of €30m, which is double the initial estimate. Such acquisitions are already making a contribution and have helped to diversify the group’s customer base and widen its exposure to different markets around the world.

These are a good set of results from RPC showing healthy sales and profit growth, despite headwinds from adverse currency movements and higher polymer prices. Due to the company making progress with its strategy of moving into the fast-growing markets, streamlining its European operations and maintaining a strong dividend policy, we recommend RPC as a ‘buy’ for medium risk investors seeking a balance of income and growth.

HSBC to axe thousands of UK jobs in cost cutting drive

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HSBC is to shed some 8,000 jobs in the UK in a bid to slash costs.

Europe’s biggest bank presently has around 48,000 UK employees and is planning to cut staff from both its retail and investment banking division according to BBC news.

In a statement, HSBC said it was “undertaking a significant reshaping of its business portfolio”.  It intends to sell its operations in Turkey and Brazil, but plans to maintain a presence in the latter “to serve large corporate clients with respect to their international needs”.

The bank is targeting annual cost-saving initiatives of $4.5-5.0bn by 2017, with estimated costs to achieve these savings of $4.0-4.5bn over that period.

The bank added that it also plans to “ringfence” its UK operations. However it said it was also looking to boost its investments in China.

In a statement, HSBC chief executive Stuart Gulliver said: “We recognise that the world has changed and we need to change with it.

“The world is increasingly connected, with Asia expected to show high growth and become the centre of global trade over the next decade. I am confident that our actions will allow us to capture expected future growth opportunities and deliver further value to shareholders.”

Mindful Money’s weekly shares watch: Sainsbury, Home Retail Group & RPC

Otmane El Rhazi from Mindful Money » Shares.

The UK’s embattled supermarket sector will be back in the spotlight again this week when Sainsbury updates shareholders with its first quarter trading numbers on Wednesday.

The nation’s main players in the industry have endured a far tougher time in recent years following the rise of the so-called “hard-discounters” such as Aldi and Lidl.

Over the past year, Sainsbury has endured a 24% share price drop given the more difficult environment and recent data from market research group Kantar has pointed towards a sixth consecutive fall in like-for-like sales at the group.

Looking ahead to this week’s report Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers highlights that a decline in the region of 2.3%, excluding fuel, is forecast, “again impacted by intense competition and ongoing product price falls”.

Sheridan Admans, investment research manager at The Share Centre, which has the supermarket down as a ‘buy’, adds: “The ongoing price war amongst supermarkets in order to combat the challenges they are facing from the likes of Aldi and Lidl has put pressure on margins and profits. Investors will be monitoring own brand sales growth, cost savings and online operations.”

On a more positive note, Bowman says management may once more underline initiatives such as its ‘Value Simplicity’ programme and product quality, whilst likely progress for both its convenience stores and online sales could further feature.

He adds: “In all, and with the company’s differentiated offering set against falling profitability and lingering concerns for the balance sheet, analyst consensus opinion continues to point towards a ‘sell’.

Tuesday sees plastics packaging firm RPC will unveil its full year results. The FTSE 250 group’s shares have continued their steady upward momentum since the company’s last trading update at the end of March, as its financial year was coming to a close. Admans, who has the group on his ‘buy’ list says: “At that point RPC was on track to meet full year forecasts for its revenues, as well as adjusted operating profits, and it raised expectations for the level of benefit it might extract from its recent £307m acquisition of European plastic packaging group Promens.”

But while the firm’s shares are up 9% over one-year and by 16% over six months, brokers are expecting more gains to come, as the analyst consensus is pointing to a ‘strong-buy’.

Admans says: “Investors should focus on all of these factors in the final results announcement, as well as any comments about the outlook for sales and profits in the 2015/16 financial year. The consensus forecast among analysts is for pre-tax profits for the year to March 2015 of £112m, up 28% on the previous year.”

Argos and Homebase owner Home Retail Group deliver its own first quarter trading statement on Thursday. Over the past 12 months its shares have dropped by 17% and Bowman notes the upcoming sales update comes against tough year-over-year comparatives, given last year’s good spring weather and resulting strong performance for seasonal products at both Argos and Homebase.

He says: “Further updates with regards to both management’s early move to reduce its DIY Homebase outlets and its Argos Transformation Plan may feature, whilst initial guidance in relation to current full year profits will be watched for.”

Prior to the update and with growth in like for like sales at both brands having recently been achieved, analyst consensus opinion currently denotes a ‘strong hold’.

Broker calls FTSE 100 paper giant Mondi a ‘buy’

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Graham Spooner, investment research analyst at The Share Centre explains why he is tipping blue-chip international packaging and paper group Mondi as a ‘buy’…

Global international packaging and paper group Mondi is involved at every stage of development, from growing the trees through to the final product. Demand for packaging continues to increase around the world, and with product prices holding up well and manufacturing costs remaining relatively low, we believe this company is an attractive one for medium risk investors.

In a recent trading update, the group reported a 29% rise in first quarter operating profit to €236m, a result of lower costs, volume growth, acquisitions and price increases. Investors should acknowledge that due to these impressive figures, the CEO is confident of making further progress in the year ahead.

The company has recently seen energy as well as chemical costs fall. Additionally, it has been investing in new and existing plants, leading to improved efficiency and lower costs. As a result, profit margins have improved to 12% and net debt has fallen.

Furthermore, Mondi have a wide geographic spread and product diversification, which along with its ongoing efficiency programme, is good news for investors.

In 2013 the group moved into the FTSE 100, which may have come as a surprise to some FTSE followers, as this is not a well-known company. However, we believe Mondi deserves to have a higher profile and the shares, which are up 15% from our February recommendation, remain a ‘buy’ for investors seeking both income and growth.

Parents underestimating how hard it is for children to buy their first home

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The parents of ‘Generation Rent’ are underestimating just how hard it is for their children to take their first step on the property ladder.

The Generation Rent report by Halifax shows there is a wide disconnect between prospective first-time buyers and their parents when it comes to their perception of the first-time buyer market.

Just 12% of parents believe it is ‘virtually impossible’ for first-time buyers to get a mortgage, this rises to 21% of prospective first-time buyers.

However, both parents and their renter children were more pessimistic about the opportunities for buying property in 2012 when 21% of parents and 29% of prospective first-time buyers said it was virtually impossible.

Despite the growing optimism around purchasing a property more wannabe first-time buyers are moving back in with their parents, with 28% doing so this year compared to 24% in 2012.

The number of people who receive help to buy a home from their parents has remained steady with most parents choosing to help towards a deposit. In 2015, 22% of parents helped their children on to the property ladder, compared to 27% last year.

Another 17% contributed towards the cost of moving this year, 5% were guarantors on the mortgage, 6% contribute to the monthly mortgage payments and another 5% bought a property with their child.

Parents who owned their own home were far more likely to help children with a deposit. A total of 57% of parents who own a property contributed or planned to contribute to their child’s deposit, compared to 24% of parents who rent.

Craig McKinlay, mortgage director at Halifax, said: “The Generation Rent report shows a clear divide between parents and their children as regards optimism over getting on the housing ladder.

“In reality there are more mortgages available which require a 5% deposit and first-time buyer numbers are increasing. But whether it is giving their children a cash lump sum or providing a roof over their heads while they save, it is clear the bank or mum and dad will have a role to play in helping their children get on the property ladder fort he foreseeable future.”

 

 

Government is to sell off its remaining 30% stake in Royal Mail, worth £1.5bn, to help cut the deficit

Otmane El Rhazi from Mindful Money » Shares.

The chancellor George Osborne has announced that government is to sell-off its remaining 30% stake in Royal Mail, worth some £1.5bn, in a bid to help cut the deficit.

Presently the government is aiming to clear the deficit by 2018/19 – and it intends to do so without upping income tax or VAT.

At this time, Osborne however has not said whether shares will be available to retail investors. Following Thursday’s announcement, by 2:30pm shares in Royal Mail were down by more than 3% at 508.3p.

Royal Mail was originally floated on the stockmarket in October 2013 at 330p per share. The IPO caused waves of controversy as the shares rallied robustly soon after they floated and as a result, the government was accused of selling off the stock too cheaply.

Commenting on the news, Laith Khalaf, senior analyst, Hargreaves Lansdown said: “The flotation of Royal Mail in 2013 really captured the public imagination, and prompted many people to invest for the first time. The float was so popular, share applications were dramatically scaled back, so we would urge the government to remember to tell Sid this time around too, rather than allocating shares to institutions only.”

 

 

 

Shares in Johnson Matthey fall as the group delivers its full year results but the consensus has it as a ‘buy’

Otmane El Rhazi from Mindful Money » Shares.

Shares in Johnson Matthey have tumbled following the release of its full year results but the analyst consensus still has the chemicals and platinum specialist down as a ‘buy’.

Despite boasting an 8% jump in sales to more than £3.12m and making £496m in profit before tax in the year to the end of March, the FTSE 100 giant witnessed its shares fall by 4%, or 155p to 3,363p in late morning trading on Thursday.

According to brokers at Hargreaves Lansdown, the overall market sentiment has the stock down as a ‘buy’, although conviction had been stronger some three months ago. Liberum Capital today reiterated its own ‘hold’ recommendation, while on Monday brokers at Numis called the business an ‘add’.

Commenting on the results, Robert MacLeod, chief executive of Johnson Matthey said: “Johnson Matthey remains well placed to benefit from major global sustainability drivers and we continue to invest in R&D, our infrastructure and our people, working closely with customers to provide them with innovative and improved solutions.  Supported by a clear purpose and strategy, Johnson Matthey is well positioned to deliver growth for our shareholders through the creation of value adding sustainable technologies.”

MacLeod added however that given the firm has divested its gold and silver refining business and is in advanced negotiations on the sale of research chemicals, he expects the group’s performance in 2015/16 to be only “slightly ahead of 2014/15”.

Looking at the group’s latest market update Helal Miah, investment research analyst at The Share Centre, said that overall its numbers were in-line with expectations.

Commenting on today’s share price fall he noted, that it is possibly due to the outlook for the current year, with management expecting performance to be only “slightly ahead” of last year.

He said: “Investors should acknowledge that there were good performances from both its Emission Control Division, which saw sales up 12% and operating profit up 21%, and its Process Technologies division which saw sales and operating profit up 7%. However, these good performances are likely to be offset by difficulties at its Precious Metals business which saw sales decline by 9% over the last year, as the platinum prices reach new lows and industrial disputes in South Africa.

“We believe the demand for clean fuel emission technologies, such as catalytic converters, will be offset by low commodity prices and specifically the difficulties faced in the platinum market. As a result, we recommend Johnson Matthey as a ‘hold’ for medium risk investors with a balanced portfolio.”

Engineer AVEVA is a ‘buy’ for intrepid investors claims broker

Otmane El Rhazi from Mindful Money » Shares.

Helal Miah, investment research analyst at The Share Centre, highlights why engineer to the oil and gas sectors AVEVA is a ‘buy’ for investors who are happy to take on a bit more risk…

AVEVA is one of the world’s leading engineering software providers to oil and gas sectors. The group sells 3D design software packages to companies to design and manage projects on large infrastructure and industrial plants, as well as information management software to the owner operators.

We like this stock as its latest offering of AVEVA Everything 3D has new efficiencies solutions and has been well received by customers. The group remains on track with its cost efficiency programmes, and investors should appreciate the £10m of cost savings which have been delivered during the year, with a further £3m in annual cost savings targeted.

With a strong balance sheet, AVEVA’s customer list includes the world’s top 10 energy companies, the top 10 chemical companies and a majority of the largest ship yards.

Overall, the company maintains a competitive position in the market with strong barriers to entry. However, investors should be aware that roughly 45% of the group’s revenues come from the oil and gas industry and the plunge in oil prices has, and is likely to continue to cause uncertainty in the group’s short to medium term prospects.

AVEVA is a stock for the contrarian investor who believes in the longer-term recovery potential of the energy sector. We recommend AVEVA as a ‘buy’ for investors seeking capital growth and willing to accept a medium to high level of risk.

Mindful Money’s weekly shares watch: Dixons Carphone, Wolseley & Halfords

Otmane El Rhazi from Mindful Money » Shares.

Shareholders in Wolseley will be hoping the European Central Bank’s quantitative easing package will have aided sales for the heating and plumbing giant across the continent when it updates the market with its latest interim management statement on Tuesday.

The firm, which is also highly geared to the US housing market, has recently highlighted continuing improvement in the sector there, and over the past six months the group has enjoyed a 14% share price lift.

Sheridan Admans, investment research manager at The Share Centre says: “The businesses in Europe have not fared as well in recent years but investors will be hoping to see some of the ECB stimulus measures showing up in their trading. The recent appreciation of sterling may dampen US revenues when converted back.”

Admans, who has the firm down as a ‘buy’, however adds that investors will also be expecting to see further benefits from the company’s cost cutting programme. Ahead of the update, the overall broker consensus is pointing towards a ‘cautious buy’, with analysts at Jefferies International and Barclays Capital having recently issued positive notes on the firm.

Fellow FTSE 100 constituent and PC World owner, Dixons Carphone, up 12% over six months, follows up with its fourth quarter trading update on Wednesday.

Looking ahead to its report Keith Bowman, equity analyst, at Hargreaves Lansdown Stockbrokers says that on the back of ongoing market share gains, single digit like for like (LFL) sales growth is forecast.

He says: “UK LFL sales are likely to have slowed from the 8% growth seen in the Christmas third quarter, although still assisted by warranty offerings on such products as TVs. An update on the move of Carphone Warehouse stores into existing Currys and PC World stores could be given, whilst a reiteration of the £80m of cost synergies by 2016-17 may feature.”

Admans, who has the firm on his ‘buy’ list, says: “Rivals have reported good growth in demand for 4G mobile services in particular so investors will be looking for news on that front, as well as any indications of the level of cost savings the group is expecting from the merger of Carphone Warehouse and Dixons in August last year. In January the company said it expected full year profits in the range of £355m-£375m so further guidance on that will be of interest to investors.”

Ahead of the firm’s report and with merger cost savings being squeezed and the company seen as a likely beneficiary of the expected growth in the so-called ‘internet of things’, the analyst consensus opinion currently signifies a ‘strong buy’, with the likes of Investec and Citigroup both recently coming out in support of the group’s stock.

Friday sees car parts, camping and bicycle retailer, Halfords report its full year results. Over the past 12 months, shares in the FTSE 250 firm have edged down by 2% but are up by 9% over three months. Bowman forecasts that the group’s “wefit” service, which fits car parts such as batteries, and cycling sales, may as in the third quarter, lead fourth quarter sales performance.

“Full year pre-tax profit is forecast to rise by 8.4% to £79m on a consensus basis, with the total full year dividend expected to be up around 9% to 15.56p,” says Bowman.

He adds: “The new Chief Executive, ex McDonalds and having only recently joined, is not expected to provide any strategy update, although a further update on the company’s store revamp programme looks likely – 70 to 75 store upgrades are targeted by management at the year end.”

Prior to the announcement, and with a modernisation investment programme still ongoing, analyst consensus opinion currently points towards a ‘buy’.

Government announces it is extending its sale of Lloyds shares to the end of the year as it offloads another 1%

Otmane El Rhazi from Mindful Money » Shares.

The government has announced that it is extending its Lloyds Banking Group share sale for a further six months.

On Monday the government confirmed it had also sold off a further 1% of its shares in the business, taking the taxpayer’s stake to below 19%.

The latest sale mean that the government has recovered almost £3.5bn for the taxpayer from the trading plan, bringing the total recovered from Lloyds to over £10.5bn.

The plan, launched in December 2014, was due to end no later than the 30 June 2015 but now it set to close by 31 December 2015.

Shares have been sold through the trading plan for an average price of over 80p, above the average 73.6p originally paid for the shares.

The government originally took a 41% stake in the bank after it injected some £20bn into the bank at the height of the financial crisis in 2008.

The Chancellor George Osborne said he was “determined to get on with the job of returning Lloyds to private ownership”.

“That’s why I’m extending the plan for six months so that we can make even more progress in returning money to the taxpayer and paying down the national debt,” he added.

The government also reiterated that it would launch a share sale open to retail investors in the next 12 months. The Treasury confirmed that further details would follow in due course.