Interactive Investor

Shares round-up: Whitbread, Taylor Wimpey, Hays

14th January 2021 14:16

Graeme Evans from interactive investor

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A rundown of today’s standout performers on ‘Super Thursday’.

Whitbread (LSE:WTB), Taylor Wimpey (LSE:TW.), Hays (LSE:HAS) and a resurgent Halfords (LSE:HFD) were among today’s standout performers as investors got a closer look at how Covid-19 disruption is impacting UK plc.

The deluge of corporate updates was largely positive for share prices, although fashion retailer Boohoo (LSE:BOO) fell 3% despite reporting UK sales growth of 40% and Associated British Foods (LSE:ABF) dipped in the FTSE 100 index after revealing a £1 billion sales hit from Primark store closures.

Investors in smaller companies were among other beneficiaries of Super Thursday after shares in homewares firm Portmeirion (LSE:PMP) jumped as much as 12% and luxury car competition business Best of the Best (LSE:BOTB) raced ahead 38% on its pledge to pay a special dividend next month.

The wider London market took the updates in its stride, with the FTSE 100 index enjoying its first positive session of the week and the FTSE 250 index up 1%, helped by investors returning to British Gas owner Centrica (LSE:CNA) in the wake of a rare profits upgrade.

The clear pace-setter in the top flight was Premier Inn owner Whitbread, with shares rebounding 4% to 3,188p on the back of relief that like-for-like sales in the UK only fell 55% in the November quarter compared with 76% lower for the second quarter.

Analysts at UBS said this represented outperformance of 9% versus the rest of the market, although trading in the subsequent weeks has deteriorated after a fall of 73% in December.

Vaccine breakthroughs have previously boosted the shares from just above 2,100p in late October, and a strong balance sheet should mean the company is well placed to take advantage of structural opportunities once the leisure market recovers.

Taylor Wimpey has already embarked on its buying spree after disclosing in a trading update that it had agreed terms on £1.3 billion of land comprising 93 sites and 22,600 plots. This is significantly ahead of its normal rate and according to chief executive Pete Redfern represents high-quality land available at attractive margins.

Some of the money for the purchases was raised from shareholders in the summer, when conditions in the housebuilding sector were far from certain. Redfern has been encouraged by the ongoing resilience of the UK housing market since then, after ending 2020 with an order book more than 23% higher than a year earlier at £2.7 billion.

As well as the land buying, Taylor expects to resume dividend payments alongside annual results in early March and is also weighing the possibility of a special dividend the following year.

Shares rose 3.65p to 164.90p but UBS believes the FTSE 100 stock has the potential to reach 210p. The bank's forecasts include a 2020 dividend of 3.8p and £100 million special dividend.

Like Whitbread, the recruitment firm Hays has reasons for cautious optimism after reporting a decline in net fees of 19% in its second quarter compared with 26% in the previous three months. The figure was better than City forecasts for 22% and prompted shares in the FTSE 250 company to surge by 4% or 5.6p to 147p.

Even though fees in the UK rebounded in both the private and public sectors, chief executive Alistair Cox stressed that the company’s markets remain significantly impacted by the pandemic. It is also too early to quantify new lockdowns in Europe, although there is encouragement in Australia after activity increased when local restrictions eased.

With Hays continuing to boast a strong balance sheet and leading market positions, analysts at Jefferies believe the company is well placed for a 2022 recovery and swift return to special dividends. The bank has a price target of 155p.

One of the best performing retail-focused stocks of the pandemic continues to be Halfords after its shares rose another 6% to 295p following its third-quarter update.

The period included a record Christmas week as continuing favourable trends in cycling contributed to an overall 7.7% jump in like-for-like sales in the 13 weeks to 1 January. This was despite motoring being down 8.4%, although Halfords said this figure was a pleasing performance relative to UK traffic volumes being 25% lower.

As well as cycling sales 35.4% higher, the company has boosted profitability in this high-performing category. Stores remain open during the lockdown but the outlook for the fourth quarter is uncertain due to motoring being seasonally more important in the period.

Shares are at their highest level in more than two years, having rallied from 53p in March.

Strong seasonal trading also benefited Portmeirion after the maker and distributor of brands including Spode and Royal Worcester said it expects revenues for 2020 to be at least 6% ahead of market consensus. This follows strong online growth, with e-commerce platforms now accounting for about 13% of total sales.

Having increased investment through 2020, chief Mike Raybould said the company had an exciting pipeline of new products to target key markets this year. Shares added 40p to 540p, the highest level since March, but Panmure Gordon analyst Sanjay Jha upped his target price by 60% to 920p — equivalent to 15.7 times 2022 earnings.

He said: “The foundations for today’s positive announcement were laid in early 2019 when the current CEO, then the finance director, recognised the potential to build brand value that only online marketing and fulfilment could afford.”

Best of the Best was one of the biggest risers on AIM after it said revenues for the six months to October jumped to £22 million from £7.6 million a year earlier. It has seen further sales momentum since then as it benefits from switching car competitions to online only.

The strong trading means it will be able to return £3.75 million to shareholders with a 40p a share special dividend on February 5. Shares surged 490p to 2,040p.

 

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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