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The Expert View: Unilever, Allied Minds and JD Sports

Our daily roundup of analyst commentary on shares, also including Auto Trader and Restore.

by Michelle McGagh on Apr 07, 2017 at 05:00

If you would like to receive news alerts on any of the stocks mentioned in The Expert View, click on the star icons below to add them to your favourites.
Key stats
Market capitalisation£112,934m
No. of shares out2,840m
No. of shares floating1,211m
No. of common shareholdersnot stated
No. of employees168832
Trading volume (10 day avg.)2m
Turnover45,225m EUR
Profit before tax4,448m EUR
Earnings per share1.56 EUR
Cashflow per share2.11 EUR
Cash per share1.11 EUR

Unilever review is good news for shareholders, says Hargreaves

Consumer staples giant Unilever (ULVR) has announced the outcome of its business review, which Hargreaves Lansdown said would have a ‘significant’ impact.

Although the shares were little moved by the news, trading flat at £39.51 at the time of writing, the review announces the company will now target an underlying operating margin of 20% by 2020, up from last year’s 16.4%.

There will also be higher shareholder returns comprising a 12% increase in the dividend this year and the launch of a €5 billion (£4.3 billion) share buyback programme. The foods and refreshment business will be combined into one and the spreads division will be sold or demerged.

Analyst George Salmon said the big news for shareholders was ‘the more aggressive plans for increasing profitability’ after investors’ hopes were raised by the Kraft bid.

‘Following the swift rejection of Kraft Heinz’s interest, Unilever shareholders would have been expecting the group to flex its muscles, and it is certainly doing that,’ he said.

‘While the group is set to take on more debt, a series of efficiency drives means it is confident of some pretty chunky increases in profitability in the coming years.’

Key stats
Market capitalisation£412m
No. of shares out234m
No. of shares floating212m
No. of common shareholdersnot stated
No. of employees359
Trading volume (10 day avg.)1m
Turnover3m USD
Profit before tax-62m USD
Earnings per share-0.29 USD
Cashflow per share-0.35 USD
Cash per share0.53 USD

Jefferies upgrades Allied Minds after write-downs

Jefferies has upgraded Allied Minds (ALM) despite large write-downs as it believes the new chief executive’s cull is a positive move for the company, which specialises in commercialising intellectual property from universities.

Analyst Ken Rumph upgraded his recommendation from ‘underperform’ to ‘hold’ but reduced the target price from 254p to 195p. The shares were down 6.8%, or 12.7p, at 172p at the time of writing.

That follows last week’s double downgrade and a slashing of the target price from 584p to 254p.

‘We downgraded Allied Minds on the expectation that the new chief executive would want to cull the portfolio, to release resources and focus on the most promising portfolio companies,’ he said.

‘This has happened more quickly and broadly than we expected, but we see this $147 million hit [from the closure of seven businesses] as decisive rather than panicked or precipitate.’

He added the cull ‘makes sense and should allow the results meeting and future to be focused on validating and realising value from the remainder’.

Key stats
Market capitalisation£3,836m
No. of shares out975m
No. of shares floating923m
No. of common shareholdersnot stated
No. of employees854
Trading volume (10 day avg.)3m
Profit before tax£127m
Earnings per share12.65p
Cashflow per share13.71p
Cash per share1.04p

Liberum: market too pessimistic on Auto Trader

The market has become overly pessimistic on Auto Trader (AUTO), according to Liberum, but new car registration data should improve sentiment.

Analyst Ian Whittaker reiterated his ‘buy’ recommendation and target price of 530p on the stock, which was trading flat at 388p at the time of writing.

‘Private new car registrations grew 3.6% in the first quarter, which should improve sentiment around Auto Trader as it has become overly pessimistic due to worries regarding the UK automotive market,’ he said.

‘Consequently Auto Trader’s shares are trading on a one-year forward price/earnings ratio of 20.5x which is a historic low since initial public offering and represents a 21% discount to its historic average.’

Key stats
Market capitalisation£3,835m
No. of shares out973m
No. of shares floating403m
No. of common shareholdersnot stated
No. of employees12602
Trading volume (10 day avg.)1m
Profit before tax£98m
Earnings per share10.03p
Cashflow per share15.35p
Cash per share22.19p

JD Sports set for more stellar growth, says Peel Hunt

Peel Hunt is expecting more ‘stellar’ growth at JD Sports (JD) when the fashion retailer announces its preliminary results next week.

Analyst Jonathan Pritchard retained his ‘buy’ recommendation and target price of 400p on the stock, which was trading flat at 389p at the time of writing.

‘JD’s prelims next Tuesday will show further stellar sales-led growth. Profit before tax will be up 130% in two years,’ he said.

‘Progress will continue to be impressive: expecting double-digit like-for-likes to persist is probably asking too much, but we said that last year and the year before.’

He added that the international equity story was gathering pace with expansions into Malaysia and Australia.

Key stats
Market capitalisation£m
No. of shares out112m
No. of shares floating106m
No. of common shareholdersnot stated
No. of employees1798
Trading volume (10 day avg.)m
Profit before tax£11m
Earnings per share9.80p
Cashflow per share17.84p
Cash per share11.96p

Berenberg initiates coverage of Restore

Berenberg has initiated coverage of archivist, storage and workplace relocation specialist Restore (RST), which is managing to grow in a fragmented market.

Analyst Sam England initiated with a ‘buy’ recommendation and a target price of 435p on the stock, which was trading up 1.5%, or 5.6p, at 363p at the time of writing.

‘The company has grown strongly in recent years as it has benefited from both underlying market growth and the opportunity to consolidate the fragmented records management industry in the UK,’ he said.

‘However, with the recent acquisitions of Wincanton’s records management business and PHS Data Solutions, we believe the business has the scope for significant future growth both by deepening its position in its core document storage business and further expanding in ancillary markets like scanning and shredding.’

England added that the UK records management market is ‘highly fragmented’ with a number of small, regional businesses leading to an ‘inefficient market’.

‘We believe Restore will continue to look for consolidation opportunities across storage, scanning and shredding to grow share and scale,’ he said.

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Look up the shares

  • Unilever PLC (ULVR.L)
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  • Allied Minds PLC (ALML.L)
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  • Auto Trader Group PLC (AUTOA.L)
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  • JD Sports Fashion PLC (JD.L)
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  • Restore PLC (RSTP.L)
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