May 22, 2018

Pegler’s market report – 22.05.18: All good on the jobs front

by David Pegler

in Insights Press Releases

As published in the Brighton Argus (22.05.18) Business section under the title Pegler’s Market Report:

All good on the jobs front

The number of people in work in the UK reached a new record, according to official data, while wages grew in real terms for the second month in a row. But productivity dropped sharply.

There were 32.34m people in work in the three months to March – nearly 200,000 more than in the previous three months and 396,000 higher than a year earlier, according to the Office for National Statistics (ONS).

The UK’s employment rate – the proportion of people aged 16 to 64 years in work – was 75.6pc, the highest since comparable records began in 1971. Unemployment fell 46,000 to 1.42m, giving an unemployment rate of 4.2pc, the joint lowest since 1975.

Meanwhile, average weekly earnings increased by 2.9pc excluding bonuses and by 2.6pc including bonuses, compared to a year earlier.

However, UK productivity fell during the first three months of 2018, dashing hopes of an improvement raised by strong growth in the second half of last year.

Struggling retailer Carpetright has launched a £60m fundraising to help rescue the business from its precarious financial position.

The flooring-to-beds company has issued new shares at 28p each, marking a 16pc discount on its closing share price of 33.25p on May 17.

The share sale will be used to bankroll the firm’s costly overhaul plans. These include £6m for restructuring its store estate, £12.5m to pay off an unsecured loan from major shareholder Meditor and £33m for capital investment.

Taylor Wimpey has pledged to boost dividends and announced new business goals for the next five years. Due to increased confidence in the housebuilder’s ability to deliver growth, dividends will rise to roughly 7.5pc of group net assets – from 5pc at present.

Shareholders are also in line for a special dividend in 2019 of £350m, taking 2019 total dividends to about £600m – equivalent to a yield of over 9pc. Taylor Wimpey updated investors on its strategy and announced new goals for the next five years, including increasing its return on net operating assets to 35pc.

The competition watchdog has confirmed it is looking into Sainsbury’s planned £15bn merger with Asda with an invitation for suppliers, customers and other interested parties to comment on whether they think the deal will harm competition.

Market darling Fever-Tree Drinks finally lost some of its fizz after the tonic maker failed to deliver its customary earnings upgrade to growth-thirsty shareholders. After riding Britain’s gin craze wave, Fever-Tree has upgraded its profit guidance in 12 of its trading updates since its initial public offering in 2014.

In the week ahead investors will be focussing on UK inflation once again after consumer price inflation (CPI) fell to 2.5pc in March. There will also be more data on UK retail sales and economic growth. Expect full-year results from Ryanair, Halfords, Marks & Spencer, SSE and Tate & Lyle.

By David Pegler, Brighton Capital Management