May 17, 2016

Pegler’s market report – 17.05.16: Equity exodus continues at pace

As published in the Brighton Argus (17.05.16) Business on page 21 under the title Pegler’s Market Report:

Equity exodus continues at pace

The equity exodus continued at pace as investors pulled cash out of equity funds, with outflows now at 5-year record levels. Similar data was recorded for the eurozone region, which has now reached its 14th straight week of redemptions – its longest streak of outflows since February 2008.

Supergroup, the fashion retailer behind the SuperDry brand, grew revenues by a fifth last year after opening 24 new stores. The FTSE 250 company, which houses an exclusive collection from the actor Idris Elba, expects profits to continue to grow. The positive trading update was welcomed by investors, sending shares in the retailer up strongly.

Shares in broadcaster ITV dropped after it lowered its forecasts for advertising revenues for the first half of the year. A “backdrop of uncertainty” caused by the Brexit debate is affecting the UK advertising market, ITV’s chief executive has warned. It comes after KPMG’s media tracker last month revealed that economic uncertainty at the start of the year caused brands to spend more tentatively on advertising. However, ITV reported strong growth in other areas of its business, prompting chief executive Adam Crozier to call it a “good start to 2016”.

Anglo-German company TUI, which also owns the First Choice brand in the UK, announced it wants to offload its Specialist Group as part of a drive to streamline its business to focus on its core package holiday and cruise offerings. It comes a fortnight after Tui agreed to sell its online booking business Hotelbeds for €1.2bn to private equity house CVC and the Canada Pension Plan Investment Board.

Shares in Purplebricks, the online estate agent, drifted lower, despite pointing to strong growth in the first half of the year. Revenues at the online estate agent have more than quadrupled in the last year, although concerns about the company’s success remain. The fledgling company said that revenues for 2015 were expected to be around £18.5m, 445pc higher than in 2014. It is due to report its final results on June 16. Trading through the second half of the year was strong although it declined to reveal how many homes it had helped sell or let. The company works by providing a valuer, called a Local Property Expert, who will come to the seller’s home, after which the seller can instruct Purplebricks to list their home on its online platform for a fixed fee.

By David Pegler, Brighton Capital Management