July 17, 2018

Pegler’s market report – 17.07.18: They think it’s all over…

by David Pegler

in Insights Press Releases

As published in the Brighton Argus (17.07.18) Business section under the title Pegler’s Market Report:

They think it’s all over…

High street stalwart Next rallied back towards a two-year high after investors believed the group could benefit from M&S store closures and may be the winner in ‘mid-market’ clothing.

Although there was some positive news for M&S as news spread that stocks were running low of Gareth Southgate’s trademark waistcoat ahead of England’s semi-final match against Croatia. The waistcoat has become a cult fashion item since the England manager began wearing it at the World Cup and sales have apparently more than doubled.

Bookies were among the few in London cheering England’s World Cup semi-final defeat after escaping a potential £100m hit if Gareth Southgate’s team managed to bring football home. England was the most popular bet to win the tournament at bookies, attracting 19pc of all bets made by punters, according to Oddschecker. With its odds of winning the tournament dwindling from 25/1 to just 4/1, it estimated that UK bookies were bracing for a £100m hit if the previously unfavoured team had been victorious.

TUI and Thomas Cook were among the market’s fallers on worries that hot weather and the World Cup had hit demand for package holidays.

The cut-price books, crafts and toys chain The Works has shrugged off the troubles on the high street with plans for a £100m stock market listing that will give its private equity owners and management a potential £36.7m payout. Its chief executive, Kevin Keaney, said the 447-strong chain was aiming to open 50 more outlets a year as the market was “crying out for a really family-friendly retailer”.

The Works said it had set its initial share price at 160p, which equates to a market capitalisation of £100m when the company joins the stock market on 19 July. The offer will raise £65.2m, of which £28.5m will go to the company, mostly to pay off debts, while £36.7m will go to shareholders. The Works was bought out of administration by the private equity firm Endless and Anthony Solomon, an entrepreneur, in 2008 for an estimated £15m. In the past three years, sales have risen 14% to £189.3m and underlying profits are up 14% to £12m.

Meanwhile, the government published its proposal for a post-Brexit partnership with the European Union. The proposed “association agreement” would recreate many aspects of the existing economic relationship between Britain and the EU for goods and services. The plan sparked the resignations of senior ministers Boris Johnson and David Davis.

Next week we have important data on UK employment, inflation and retail sales. Last month the number of people in work in the UK increased by 146,000 to 32.4m, the annual rate of consumer price index (CPI) inflation was 2.4% and retail sales volumes increased 0.9%. Investors will be looking for where we go next.

By David Pegler, Brighton Capital Management