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News & Tips: Ted Baker, Bellway, Domino's & more

Equities are off a little as the world digests the outcome of the Trump-Kim summit
June 12, 2018

London shares have given up some gains as traders digest the outcome of the historic summit between the US and North Korea. Click here for The Trader Nicole Elliott's latest thoughts on the markets. 

IC TIP UPDATES:

The market’s harsh reaction to a trading update from Ted Baker (TED) seems overdone to us. True, the performance from the retail side of the business was a tad slower than usual, but e-commerce and wholesale continued to perform exceptionally well in a challenging environment. Furthermore, analysts at Liberum point out that a two-year compound growth rate of 15 per cent across retail sales is, in fact, very strong. Buy on this morning’s dip.

A trading update from Bellway (BWY) confirmed that not all housebuilders are feeling the pinch. This is because average selling prices are relatively low at £280,000, which means that with Help to Buy, potential buyers have to find a relatively modest £14,000 deposit. Reservations in the period from February to June were up 5.4 per cent, while margins remain strong at 22 per cent. Over 10,000 homes will be built in a year for the first time ever. Buy

Ahead of its annual general meeting later today, Warpaint (W7L) chairman Clive Garston said the integration of Retra Holdings, which was acquired in November last year, is going to plan with both operational and sales synergies coming through. The order book for Christmas sales at both Retra and Warpaint’s own-brand W7 are ahead of this time last year. Shares were up nearly 3 per cent in early trading. Buy.

Park Group (PKG) reported a 7 per cent rise in operating profits last year, boosted by a 2 per cent rise in customer billings. Its corporate business misses profit expectations slightly, following a customer delay, although work has now begun on the project. Meanwhile the consumer division posted a 4 per cent rise in billings. Buy.

KEY STORIES:

If Boohoo.com’s (BOO) first quarter sales firmly beat expectations, then why are the shares down so sharply in early trading? Maybe it’s because some brokers are concerned that the fast-fashion retailer can’t support its own, supersonic, growth. Sales accelerated by more than 50 per cent in the opening period, driven mainly by company-owned brand PrettyLittleThing. Gross margins also rose by 100 basis points to 55.2 per cent. But analysts at Liberum have downgraded their view this morning on account of boohoo’s toppy valuation, not to mention an ever-increasingly competitive field.

OTHER COMPANY NEWS:

British American Tobacco (BATS) has reiterated its goal to reach £1bn in revenue from its next generation products by the end of 2018. The tobacco group saw the volume of cigarettes sold fall by 3.5 per cent during the first half of this year so far, but this is a slower rate than the wider market. BATS expects sales and profit growth to be weighted towards the second half of the year, and operating profit and EPS will be adversely impacted by exchange rates. Shares were up nearly 1 per cent in early trading.

Domino’s Pizza Group (DOM) is on the hunt for a new chief financial officer after the group announced that Rachel Osborne will step down with immediate effect to pursue “other career opportunities”. Shares fell 6 per cent in early trading.

Shares in Oxford Instruments (OXIG) are up nearly 5 per cent this morning after the research tools maker reported that adjusted pre-tax profit was up by more than a third to £42.3m during the year to March. The reported order book increased by 5 per cent to £134m, but strip out the US healthcare division and the order book was up by 18.4 per cent at constant currency. Chief executive Ian Barkshire said good progress has been made on the “Horizon” growth strategy, including investment in R&D.

Sports betting has been legalised in the state of New Jersey after the federal law banning such gambling was overturned last month. Casinos and race track will immediately be allowed to accept wagers in person, and online and mobile betting is expected to be allowed from next month. Paddy Power Betfair (PPB) and William Hill (WMH) have both recently signed agreements that further their presence in New Jersey.