January 10, 2017

Pegler’s market report – 10.01.17: A decent start to the year

by David Pegler

in Insights Press Releases

As published in the Brighton Argus (10.01.17) Business on page 21 under the title Pegler’s Market Report:

A decent start to the year

The index of the leading 100 UK public firms enjoyed its longest run of record closes in 20 years, as the benchmark set another all-time peak. After a stellar run in the final days of 2016, the blue chip index extended its end-of-year rally, which began on December 28, into the new year.

The recent rally has been driven by the persistent weakness in sterling together with President-elect Donald Trump’s commitment to boost infrastructure spending when he takes office later this month, which has also contributed to the bounce in international earners within the index.

US employment increased by slightly less than expected in December. However, a strong rebound in wages pointed to sustained labour market momentum.

EasyJet’s passenger numbers rose last year despite some severe turbulence. The no-frills budget airline carried more than 74m people in 2016, up from 69.8m in 2015, despite taking a multi-million pound hit in the wake of the Brexit vote and issuing its first profit warning since 2009.

Royal Mail has launched a consultation into changes to its final salary pension scheme amid threats of strike action from unions. Royal Mail said it cannot afford an increase to the annual £400m it currently contributes, having calculated that it needs to increase its payments to £1bn in order to keep running the fund. Around 90,000 workers will be affected by any changes, although the move will not have an impact on anyone who has already retired.

High street cobbler Timpson’s has bought the dry cleaning arm of Johnson Services Group for £8.25m. Dry cleaning has been one of Timpson’s fastest growing services in recent years, along with mobile phone repairs, and the deal comes as the firm looks to diversify away from traditional shoe repairs. Johnson’s business, which includes Johnson Cleaners, Jeeves of Belgravia, and Jeeves International, made total revenue in the year to December 2015 – the most up-to-date figure available – of £46.2m. Profits in the same period were £2m.

Sales at Persimmon for the second half of 2016 were 15pc up from the same period in 2015, helping one of Britain’s biggest housebuilders post a 8pc rise in revenue and shrug off post-Brexit concerns. Full-year revenues rose to £3.14bn, with the company selling a total of 15,171 new homes compared to 2015’s 14,572. The average selling price also increased by 4pc to £206,700.

Retail stocks became the biggest laggards after Next cut its profit forecast for the financial year, blaming disappointing Christmas trading and “exceptional” levels of uncertainty in the sector. Its peers were also rattled by the torrid trading update, with Marks & Spencer, Primark owner Associated British Foods, Dixons Carphone and Debenhams all coming under selling pressure as investors looked for value elsewhere.

By David Pegler, Brighton Capital Management