Buyers mob Burberry, Tate & Lyle and Howden Joinery, but dump Halfords

by from interactive investor |

It's easy to run for cover when volatility strikes, but this trio of outperformers make the case for staying invested. Graeme Evans explains.

From Burberry proving the doubters wrong to resilient trading at Tate & Lyle, today's session offered a timely reminder for jittery investors about the earnings potential still on offer from leading companies in London.

Burberry's shares rose 2% and Tate consolidated recent gains as the FTSE results season continued in positive fashion after October turbulence.

There was also a flying start for one of the stocks in our recently-launched Winter Portfolio, with Howden Joinery up almost 3% on the back of a good quarterly trading performance.

Investors need to tread carefully, however, as demonstrated by popular dividend stock Halfords tumbling another 5% after half-year results.   

•    Winter Portfolios 2018 - winners revealed

A year ago, Burberry shares were in a similar position after new CEO Marco Gobbetti's decision to reinvent the company as a super luxury brand.

Many investors expressed concern about the short to medium-term pain associated with the transition, which pitched Burberry into a fierce marketplace dominated by the likes of Hermes and Dior.

It's still early days, but Gobbetti says he has been energised by the "exceptional" response to the brand’s new creative vision as well as Riccardo Tisci's first collection for the fashion house.

Improved financial results will take longer to achieve, however, with Burberry today reporting a 4% drop in operating profits to £178 million for the half year. Significantly for investors, full-year guidance remains unchanged as Burberry is on track to deliver £100 million of cumulative cost savings.

Gobbetti's long-term aim is for Burberry’s new market positioning to drive sustainable growth and higher margins, alongside attractive returns for shareholders. Today, the interim dividend was pegged at 11p a share.

Source: TradingView   Past performance is not a guide to future performance

At Tate & Lyle, shares are back where they started 2018 thanks to a decent run since April. There was further progress today when the sweeteners and ingredients specialist recorded a 2% rise in adjusted profits to £166 million and said it was on track to meet guidance for the full year.

The upturn in share price follows the promotion of Nick Hampton to CEO from chief financial officer in April. The former PepsiCo executive has sharpened the focus of Tate on its customer base, as well as looked to accelerate portfolio development and simplify the business.

Today's resilient results performance was achieved despite the impact of cost inflation from materials and transport in North America.

Source: TradingView   Past performance is not a guide to future performance

In the FTSE 250, the performance of Howden Joinery continues to impress after a 6.1% rise in like-for-like revenues for the period from June 17. This was driven mainly by volumes and comes despite comparisons with strong trading a year earlier.

Analysts at Davy said Howden should deliver annual profits growth of between 4% and 5% in 2018. They added:

"We believe the overall outlook for the group remains positive, underpinned by its successful and focused business model."

Howden's strong record earns it a place among the five stocks in our Consistent Winter Portfolio for 2018/19. The kitchen supplier has delivered positive returns for each of the past 10 winters, with an average return of 22.4%.

Like Burberry and Tate & Lyle, motoring and cycling products retailer Halfords is looking to implement a new strategy. Under new CEO Graham Stapleton, this has seen a more services-driven approach and the creation of a "super specialist shopping experience".

Half-year profits fell 17% to £30.5 million, but the full-year outlook is unchanged as Halfords looks for a shift in its sales mix towards less discretionary categories.

Much will now depend on Christmas trading and favourable winter weather.

Halfords, which offers a dividend yield of almost 6%, improved cash flows by 10% in today's half year figures and Stapleton said he had been encouraged by the initial progress of his strategy. Shares, however, are doiswn 20% since May.

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