Graeme Evans explains mixed responses to results from some of the markets most popular names.
The snapshot on trading through the teeth of the Covid-19 storm also revealed more robust numbers from plant hire firm Ashtead (LSE:AHT), but there was no respite for easyJet (LSE:EZJ) after it admitted it will not meet an initial target for running at 40% capacity this quarter.
Followers of AIM-listed favourite Fevertree Drinks (LSE:FEVR) were also left disappointed as shares slipped 2% in the wake of its interim results, even though the company said it had been trading well in the US and in shops and other off-trade outlets.
Overall, the FTSE 100 index gave up an early lead to trade slightly lower after surging 2.7% yesterday on the back of a strong performance by dollar-earning companies due to Brexit-driven sterling weakness.
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The biggest top-flight riser was packaging firm DS Smith, whose shares were up 7% after the company said it was in a position to pay an interim dividend. Trading has been in line with expectations, buoyed by a surge in demand from e-commerce customers.
Credit checking firm Experian went some way to justifying its premium stock-market valuation when it said revenues growth for the quarter to September 30 should now be between 3% to 5%, rather than up to 5% lower as it had previously expected.
Shares rose another 3% to near record highs at 2,875p, but analysts at UBS think there’s the potential to be trading at 3,150p.
Ashtead, meanwhile, was praised by broker Jefferies for materially outperforming rivals in a first-quarter performance that was 18% ahead of City forecasts. Steady trading in the Sunbelt US division was accompanied by a brightening outlook in Ashtead's smaller Canada and UK businesses.
Jefferies has a price target of 3,350p, which compares with 2,744p after today's rise of 52p.
In the FTSE 250 index, Royal Mail surged by as much as 19% after disclosing a 34% jump in parcel volumes driven by internet shopping trends.
While this meant better-than-expected revenues in the five months to the end of August, Royal Mail said the dramatic shift towards handling more parcels and fewer letters increased costs by £85 million in the period. This raises the prospect of a material loss for 2020-21, with the company unlikely to return to the black without substantial business change.
Low-cost airline easyJet triggered a 6% slide in its share price after disclosing how this week's decision to add seven Greek islands to the UK's quarantine list will impact operations.
It also continues to thin its schedule to focus on profitable flying, meaning that it no longer expects to fly the 40% of planned capacity it had forecast in a recent update.
The company said: “Given the many changes to government restrictions since our Q3 update, the lack of visibility and the continued level of uncertainty, it would not be appropriate to maintain any forward-looking financial guidance, for FY20 and FY21, at this time.”
CEO Johan Lundgren repeated calls for the government to overhaul the quarantine system and also to provide sector-specific support, such as the removal of air passenger duty for a year.
There was better news on trading from Halfords (LSE:HFD), whose stores have been well placed to benefit from staycation trends. Like-for-like sales in cycling have risen 59.1%, while holiday-related car products such as roof bars and boxes were up 28.4%.
With overall sales up 5% on a like-for-like basis in the 20 weeks to August 21, half-year profits are now expected to be in the range of £35 million to £40 million. But Halfords warned that significant uncertainty remains for the second half, not helped by a natural fall-off in the relative strength of cycling and staycation products during winter months.
Shares, which rose from 50p in March to 196.6p by early June, were off 6p at 178p today.
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A reassuring update also failed to help Fevertree shares, which fell 43p to 2,077p. A 35% decline in half-year earnings to £23.8 million reflected the impact of lockdown restrictions on pub and bar sales, but off-trade business was ahead of expectations and trading at the start of the second half has also been encouraging.
CEO Tim Warrilow noted strong momentum in the company's new US market, as well as further consolidation of Fevertree's number one position in the UK.
He added: “People's interest and excitement about mixing drinks at home has really taken hold over the lockdown period, attracting more households to the Fevertree brand than ever before.”
Fevertree increased its interim dividend by 4% to 5.41p a share.
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