Today’s Markets: MKS and TSCO Lower After Small ‘Improvements’ in Profits, European Equities Slightly Weaker

Companies

Flurry of corporate profits in UK today … it’s time to run through some of the highlights. Retailers have been strong so far and Tesco and Marks have continued the theme, although expected improvements in full-year earnings have been rather muted and stocks fell early in trading. Investors were ready for a little more, but should note that every little bit counts.

Tesco (TSCO)

Tesco’s figures do not disappoint, overall, despite difficult comparative figures a year ago. Best market share in four years, strong Clubcard membership and Christmas sales up more than 9% compared to 2019, + 2.7% compared to last year. Considering the blockages of last year, this is impressive. Booker’s sales + 20% thanks to the resumption of foodservices despite the positive impact of Omicron and convenience stores. Profit outlook is improving – management says it expects annual profit “slightly higher” than previous forecast peak of £ 2.5-2.6 billion. But UK Q3 LFL’s +0.2 percent was below the expected +0.6 percent. Stocks fell more than 1%; typical after-benefit results model for Tesco. How Tesco uses its Ladder and Clubcard to deal with headwinds in price and inflation will be key for the year ahead, even if it gets into very good shape there. Investors should keep in mind that Tesco is starting to waste a lot of money and dividend yields are attractive.

Marks & Spencer (MKS)

Marks & Spencer made other good progress over Christmas. Food sales increased 12.4% as good in-store momentum continued through Christmas. Impressively, in the update, MKS says the company generated its “highest Christmas sales on record,” with growth in December in line with quarterly performance. Clothing and home sales increased 3.2 percent, but within this framework, full-price sales increased 45 percent. In-store sales are down 10 percent, but online +50 percent is in the right place. International sales increased 5.1 percent, thanks to the doubling of the online component.

Having previously, at the time of the half-year results in November, raised the profit outlook for the full year to ‘in the order of £ 500million’ from the £ 300million to £ 350million range sterling established in May, management now says it expects a full year profit before tax and adjustment items of at least £ 500million. This is not a hardware upgrade as such, but one that will keep investors focused for the long term and hope that this means a return of the dividend when the results for the year are announced later in the year. ‘year. Stocks rose 85 percent last year, rallying alongside much stronger retail performance. Shares fell 4% this morning, possibly due to a more subdued earnings outlook. Much of the good news – as evidenced by the rally in equities in recent months – had materialized after the large profit increase in November. Today’s update continues the good news but does not materially alter the narrative.

ASOS returns to normal

Asos (ASOS) seems to have settled into some normalcy after the lockdown. It has been a roller coaster ride for the past 18 months. When the lockdowns began, the online retailer’s demand for clothing skyrocketed, as did its share price. However, supply chain issues have verified this and its market capitalization is now back to where it started.

Its recent trade update hit 5%, which was a bit below consensus. The growth is mainly due to a 13% increase in turnover in the UK. The increased demand for outerwear suggests that people are no longer totally averse to having fun. Growth in the United States has also been satisfactory, up 7% (11% at constant exchange rate) and now it has launched its partnership with the Nordstrom factory outlet, the hope will be to continue its expansion.

The problem is, supply chain issues persist. Gross margin declined 400 basis points to 43 percent due to the increase in freight prices. ASOS has also used airplanes to get its goods on time, which is more expensive than traditional ships.

These prices will eventually normalize. And when they do, the sales growth generated compared to last year’s tricky comparators will seem a little softer. The share price jumped 11% at 9 a.m. this morning. LIKE

Kaki posts bullish trading update

Despite rising costs, the dislocation of supply linked to the pandemic and a slight increase in the average selling price, the home builder Khaki (PSN) plans to report an underlying operating margin of around 28% when it releases 2021 numbers in March.

This would be in line with 2020 profitability and translate into operating profits of around £ 1bn, against projected revenue figures of £ 3.61bn.

Management is also encouraged by the outlook, and Persimmon believes the price of its homes – around 18% below the national average selling price – puts it in a strong position to serve first-time buyers and the many people for whom it is home. pandemic has prompted a reassessment of “the type of accommodation they want to use”. The average sale price was £ 237,050, up 3% from 2020, but lower than the average nationwide rise in new and old house prices, which Persimmon attributed to a change in the “Regional mix of sales”.

However, the market appears to have been disappointed by the lack of commentary on excess cash yields and special dividends – as well as a relatively subdued response to the coating question – initially pushing stocks down 3% on the market. the trading session this morning.

Others

Halford (HFD) stayed on course for the full year (-3 percent at the start of the session), Dechra (DPH) +1.7 percent with results in line. Hays (HAS) +1 percent after posting a record quarter with fees up 37 percent. Perfect conditions for recruiters with staff shortages everywhere. Campaign (CSP) -15%, said trade was below expectations; CEO Iain McPherson steps down.

Digital infrastructure trusts continue to raise funds

Digital infrastructure 9 (DIG9) announced a placement of new ordinary shares at 108p each – a 1.5% discount on the closing price from January 12 and a 4.5% premium on the net asset value (NAV) of the portfolio from the end of June 2021. The board of directors of the trust, which was only launched last year, said it was currently “mostly fully deployed / committed” and had identified a pipeline of around £ 325million in new investment. Rival Cordiant Digital Infrastructure (CORD) announced its own equity investment plans earlier this month. Comic

Hydrogen Trust looks to the future

HydrogenOne capital growth (HGEN), the hydrogen sector fund launched last summer, deployed 46% of the net revenues raised at the launch, including 37% in three private companies and 9% in 19 listed positions. In an update, the trust’s board said the investments span the “full hydrogen value chain”, with most of the focus on the UK and the EU.

The board now expects the proceeds from its 2021 launch to be fully rolled out by the second quarter of this year, adding that its pipeline of potential investments was “about 10 times greater than the remaining net proceeds. of the launch available for deployment ”. The company is therefore considering options for further fundraising. Comic

Tech Trust cuts costs

The board of directors and the investment manager of the Polar Capital Technology Trust (PCT) agreed to reduce and simplify its fees following a review. Currently, the basic management fee has four tiers, with 1% charged on the first £ 800million of assets, 0.85% between £ 800million and £ 1.6 billion, 0.8 % between £ 1.6bn and £ 2bn and 0.7% above.

From May, a basic management fee of 0.8% will apply to the first £ 2bn of assets, with a charge of 0.7% between £ 2 and £ 3.5bn and 0 , 6% on higher assets. No changes have been made to the performance fee of the trust. Comic