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News & Tips: Dignity, Character Group & more

London equities are ending a tough week on a positive note
January 19, 2018

Shares in London were trading in positive territory in morning trading after a tough week. Click here for The Trader Nicole Elliott's latest thoughts on the markets. 

IC TIP UPDATES:

Shares in funeral provider Dignity (DTY) crashed by 50 per cent this morning after the group warned that intense competition from cheaper rivals would force it to cut prices by roughly 25 per cent this year. While results for the 2017 financial year are expected to report in line with market expectations, FY2018 figures are expected to take a serious hit as a result. We advised offloading shares in November at 1,843p. This morning’s update sounds pretty fatal, so we maintain our bear call for now. Sell.

KEY STORIES:

Character Group (CCT) reported in a pre-AGM trading statement that international sales had been “adversely impacted by many factors”, not least of which was the bankruptcy of Toys R Us. But sales continued to grow domestically, and the toy maker has a number of launches lined up for this year under its Pokémon brand. The company had previously warned that the first half of its financial year to February 2018 will fall short on the same period the previous year, but management expect to return to growth thereafter. Shares fell nearly 1 per cent in early trading.

Shares in floorings specialist Carpetright (CPR) collapsed by 40 per cent this morning after the group revealed sluggish post-Christmas trading and a subsequent profit warning. Like-for-like sales fell 3.6 per cent in the 11 weeks ended 13 January 2018, with a decrease of 1.4 per cent within the all-important flooring category, and a further “material decrease” in bed sales. This means the company now expects annual profits to report in the region of £2m-£6m, forcing brokerage Peel Hunt to amend its forecasts for pre-tax profits of £13m to just £3m.

OTHER COMPANY NEWS:

An independent evaluation of Genel Energy’s (GENL) Bina Bawi and Miran West fields has resulted in a 40 per cent increase in estimated 2C resources. The shares are 8 per cent to the good on the update, which the market may have interpreted as a sign of further interest from potential upstream development partners.

Shares in data erasure specialist Blancco Technology (BLTG) were down 12.5 per cent at the time of writing, after a half-year trading update indicated that full-year revenues would be towards the lower end of management’s guidance range. Adjusted operating profit and cash flow, meanwhile, remain in line. During the respective six months, bosses “focused on the immediate priorities required to place Blancco on the best operational and financial footing” after the former chief executive resigned and a review of the group’s accounting for contracts and financial controls. First-half sales were “marginally behind” year-on-year, but management expects trading to improve in the second half, generating positive full-year revenue growth. Sterling’s strengthening has also had a “slightly adverse” impact.

Shares in women’s clothing chain Bonmarché (BON) took a 20 per cent tumble this morning after a mixed Christmas trading update. Like-for-like sales fell by a whopping 9.7 per cent during the 13 weeks ended 30 December 2017, although online sales did make up for this, rising by more than a quarter over the same period. But that still leaves year-to-date like-for-like sales down 2.8 per cent. Given the rest of the casualties in retail this morning, reaction to the shares has been understandably harsh.