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The Expert View: Whitbread, Unilever & Carpetright

Our roundup of analyst commentary on shares, including St James’ Place and Dialight

by Michelle McGagh on Oct 25, 2017 at 05:01

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Key stats
Market capitalisation£6,805m
No. of shares out183m
No. of shares floating180m
No. of common shareholdersnot stated
No. of employees42044
Trading volume (10 day avg.)1m
Turnover£3,106m
Profit before tax£806m
Earnings per share230.89p
Cashflow per share348.30p
Cash per share34.37p

Consumer squeeze worries Whitbread investors

Whitbread (WTB) may benefit from the continued expansion of Premier Inn and Costa Coffee but half-year results yesterday showed the group is not immune from the squeeze on UK consumers, says Hargreaves Lansdown.

The company reported underlying pre-tax profits had increased 6.7% to £328 million on revenue up 7.4% to £1.67 billion in the six months to 31 August. Growth was helped by the opening of over 2,000 new Premier Inn rooms and 108 new Costa stores.

However, the shares dropped over 5% or £2.09 to £37.33 as an expected boost from ‘staycationers’ failed to materialise at Premier Inn, with growth in UK revenue per available room, or RevPar, shrinking to 1.8% from 3.1% in the first quarter.

‘Unfortunately, rapidly increasing revenues isn’t enough to guarantee chief executive Alison Brittain a good night’s sleep, since the group is also having to cope with a whole raft of cost headwinds, from labour to the cost of coffee and business rates,’ said Hargreaves analyst Nicholas Hyett.

While noting that inflationary pressures on the business should ease, he added: ‘However, having pushed through price increases itself, Whitbread will be well aware of the pressures facing the purses of UK consumers. Weaker like-for-like numbers this time round will add to worries that customers are feeling the pinch,’ he said.

Key stats
Market capitalisation£116,059m
No. of shares out2,810m
No. of shares floating1,177m
No. of common shareholdersnot stated
No. of employees168832
Trading volume (10 day avg.)4m
Turnover46,925m EUR
Profit before tax8,030m EUR
Earnings per share1.62 EUR
Cashflow per share2.19 EUR
Cash per share1.15 EUR

Liberum: Unilever needs sales growth to advance

Unilever (ULVR) shares have been hit by the miss on third quarter expectations and will remain under a cloud until the consumer goods giant can demonstrate a pick-up in organic sales, says Liberum.

Analyst Robert Waldschmidt retained his ‘hold’ recommendation and increased the target price from £38.70 to £39.60 on the stock, which added 16.5p, or 0.4%, to £41.37 on Tueday.

‘Unilever reiterated 2017 guidance for 3-5% organic sales growth and more than 1% rise in underlying earnings before interest and tax margin,’ he said.

‘Since the [Q3] results, Unilever’s shares are off nearly 10% as investors question if management’s bold margin targets are detracting from the group’s ability to deliver top line growth.

‘While Unilever remains on track to deliver solid earnings per share and cash-flow growth, we expect valuation will remain capped until there is evidence of organic sales acceleration.’

Key stats
Market capitalisation£122m
No. of shares out68m
No. of shares floating64m
No. of common shareholdersnot stated
No. of employees3206
Trading volume (10 day avg.)m
Turnover£458m
Profit before tax£27m
Earnings per share1.01p
Cashflow per share18.64p
Cash per share18.41p

Carpetright facing further problems, says Shore Capital

Carpetright (CPR) has warned profits could be hit by ‘volatile’ trading conditions and Shore Capital is concerned about the impact a slowdown in consumer spending will have.

Analyst George Mensah reiterated his ‘hold’ recommendation on the stock, which slipped 5p or 2.8% to 175p after a first-half trading statement.

The UK’s largest flooring retailer saw group sales increase 1.8% in the 25 weeks to 21 October but overall sales growth in the UK fell 0.8%, with management attributing its re-positioning of its beds business as a factor, combined with further store closures.

Management stated that it expects first half profits to be below the previous year, but for performance to pick up again in the second half.

‘While clearly progress is being made in terms of the proposition and we view the strategy put in place by management as sound, we believe the volatility reflected in the consumption of big ticket spending and increased competition presents a risk to trading,’ said Mensah.

Key stats
Market capitalisation£6,303m
No. of shares out529m
No. of shares floating494m
No. of common shareholdersnot stated
No. of employees1735
Trading volume (10 day avg.)1m
Turnover£11,355m
Profit before tax£497m
Earnings per share21.34p
Cashflow per share23.33p
Cash per share65.58p

Numis backs ‘resilient’ St James’ Place after positive Q3

Numis is expecting wealth manager St James’s Place (SJP) to deliver growth in the short term and longer term will prove itself to be a ‘resilient asset gatherer’. Analyst David McCann retained his ‘add’ recommendation and target price of £13.85 on the stock, after a third quarter trading statement showed funds under management rose to £85.7 billion from £83 billion at the end of June.

McCann said that after ‘several years of only small growth in the overall cash result, this year we are forecasting a significant increase’ and he thinks ‘the market will react positively when it sees such growth being reported’.

Over the longer term, he said: ‘We continue to hold SJP in very high regard and believe it should continue to be a core long-term sector holding for many investors. We believe that the business will continue to demonstrate that it is one of the most consistent and resilient asset gathers – and retainers – regardless of the economic conditions.’

The shares gained 16p or 1.4% to £11.86.

Key stats
Market capitalisation£218m
No. of shares out33m
No. of shares floating32m
No. of common shareholdersnot stated
No. of employees2173
Trading volume (10 day avg.)m
Turnover£182m
Profit before tax£20m
Earnings per share-8.62p
Cashflow per share13.23p
Cash per share24.61p

Dialight fumbling in the dark after warning, says Peel Hunt

Peel Hunt expects sales at lighting retailer Dialight (DIA) to ‘re-accelerate’ despite a profit warning created by ‘production challenges’.

Analyst Andrew Shepherd-Barron retained his ‘hold’ recommendation but slashed his target price from 920p to 720p. The shares, which plunged 15% on Monday following a profits warning linked to production problems at its factory in Mexico, slipped a further 25p or 3.6% to 665p yesterday.

‘Problems with the outsourcing programme are unfortunate in their own right, but they also mean that there will now likely be almost no organic growth in lighting revenue in full-year 2017 for the third year running,’ said the analyst.

‘Once it re-accelerates as we expect, the stock will be interesting, but this needs more evidence than we have to date,’ he said.

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Look up the shares

  • Whitbread PLC (WTB.L)
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  • Unilever PLC (ULVR.L)
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  • Carpetright PLC (CPRC.L)
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  • St. James's Place PLC (SJP.L)
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  • Dialight PLC (DIAL.L)
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