Even good news failed to save mid-cap shares on a day when sellers were out in force. Our City writer picks out the shares grabbing headlines today.
The 20,000 threshold for the FTSE 250 index faded from view today as another warning by Dr. Martens (LSE:DOCS) and falls for Energean (LSE:ENOG) and Harbour Energy (LSE:HBR) led a poor session for mid-cap investors.
The domestic-focused FTSE 250 started the week above the landmark for the first time since August, having rallied by 18% since October on hopes the UK can weather the inflation storm.
This optimism took a knock during today’s weak session for global markets as risk appetite suffered from poor US retail sales figures and expectations that US interest rates will still top 5% later this year.
The uncertain demand backdrop proved to be less than ideal for oil stocks, including Energean as its shares fell 62p to 1,286p. This was despite an update from the Mediterranean-focused company forecasting record results in a year when it also commenced dividend payments.
The business, which recently achieved the milestone of the first gas from its flagship Karish project in Israel, forecast further operational progress in 2023. Peel Hunt reiterated its buy recommendation and target price of 2,000p and said the company’s 2023 guidance pointed to a “transformational year from a production growth and increased profitability standpoint”.
Energean, whose shares have risen by a third since last summer, paid a third quarter dividend of 30 US cents a share on 30 December as part of a recently launched plan to return at least $1 billion (£810 million) to shareholders by 2025.
North Sea-focused explorer Harbour Energy said in its end-of-year update that it delivered about 15% of the UK's domestic oil and gas supplies during 2022, having achieved a production increase towards the top end of its previous guidance.
It remains committed to the UK but adds that a tax rate of 75% caused by the windfall levy made investment less competitive and reinforced an ambition to diversify internationally.
The company, which was created in 2021 through the merger of Chrysaor and Premier Oil, expects to be debt free this year and said it retained the flexibility for shareholder returns over and above its stated $200 million (£162 million) annual dividend.
Having rebounded during a strong start to the year, shares reversed 12p to 310.8p today.
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One FTSE 250 stock continuing to head in the wrong direction is Dr Martens after the bootmaker delivered its second profits warning in as many months.
The latest setback, which came a week before the second anniversary of its stock market flotation at a price of 370p, sent shares skidding 57.3p to 151.9p. It reported third quarter revenues below expectations due to slower direct-to-consumer sales in America and the impact from operational issues at its new distribution centre in Los Angeles.
To make matters worse, it said a knock-on effect from the problems and a more uncertain economic environment are likely to curb revenues growth in the following financial year.
It now expects a sales increase in the mid to high single digits on a constant currency basis, which compared with a revised growth estimate of 4-6% for the current financial period and underlying earnings of between £250 million and £260 million.
The wave of stock market selling also caught Dunelm Group (LSE:DNLM), even though the homewares retailer forecast annual profits ahead of current City estimates after robust Christmas trading.
It revealed that total sales of £478 million in the second quarter were 18% higher than the same period last year and up 48% compared to three years ago, pre-pandemic.
Peel Hunt said Dunelm’s value credentials and range authority continued to resonate across the group’s broad church of customers.
Strong rates of cash generation mean the bank continues to see a cumulative dividend pot of about £450 million over the next two years, equating to a 24% yield split 40%-60% between ordinary and special dividends.
Dunelm’s shares have rallied from 670p at the start of September, but fell back 52p to 1,022p today. Peel Hunt has a price target of 1,375p.
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