May 15, 2018

Pegler’s market report – 15.05.18: UK rates left unchanged

by David Pegler

in Insights Press Releases

As published in the Brighton Argus (15.05.18) Business section under the title Pegler’s Market Report:

UK rates left unchanged

The Bank of England left interest rates unchanged at 0.5pc last Thursday, citing weaker than anticipated first-quarter growth and declining inflation.

The bank also cut its forecast for 2018 economic growth from 1.8pc to 1.4pc. However, a rate rise is still expected for August or November this year.

Official statistics also showed the UK’s manufacturing and construction sectors both contracted in March, providing more evidence that the economy made a weak start to 2018.

Embattled retailer Carpetright has secured a £15m lifeline as the group plots a path to firmer financial ground. The under-pressure flooring retailer has been handed an unsecured loan, with an 18pc interest rate and £2.25m arrangement fee, from major shareholder Meditor European Master Fund.

Next upgraded its full-year forecasts after reporting very strong first-quarter sales. Like-for-like sales were up 6pc in the 14 weeks to 7 May on the back of a robust performance from the group’s digital division. Online sales increased by 18pc compared to the same period last year, not much lower than the 22pc posted by online retailing rival ASOS.

While the group said sales for the rest of the year were unlikely to be as strong as in the first quarter, it now expects full-year sales growth of 2.2pc (up from 1pc previously), and group profit before tax of £717m (£705m previously).

Cash flow remains strong and the group expects to generate £300m of surplus cash which will be returned to shareholders via a share buyback.

A US private equity firm is to snap up the company behind property portal Zoopla in a £2.2bn deal. Silver Lake Management – through its Zephyr Bidco subsidiary – is offering 490p in cash per share, representing a 31pc premium on ZPG’s closing share price on May 10.

The deal has received the backing of ZPG’s largest shareholder, the Daily Mail and General Trust (DMGT), which held a 55pc stake in the business after its own online property business merged with Zoopla in 2012. It now has a 29.8pc stake after the company floated on the London market in 2014.

Healthcare shares across the globe came under pressure as investors braced for Donald Trump’s speech on tackling, what he has previously described as, “out of control” drug prices.

Media reports in the US indicate that the US President will target big brand drug makers for ramping up prices and attempting to see off competition by delaying lower-cost copycat drugs reaching the market.

Finally, despite Apple shares soaring 17pc in just under two weeks, the market cap of the world’s leading technology giant just missed hitting $1 trillion, which would be a first for any quoted company.

The rally, which started just prior to Apple reporting quarterly earnings and a $100 billion share buyback has also been propped up by comments from Warren Buffet as his firm Berkshire Hathaway brought up another 75 million shares in Apple.

By David Pegler, Brighton Capital Management