Interactive Investor

Three mid-cap shares in demand and one horror show

18th May 2023 15:21

by Graeme Evans from interactive investor

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Chinese stake-building at Aston Martin are among the highlights in this trading session, but a former star continues to crash and burn. Our City writer has the details.

    A deal backing the “tremendous potential” of Aston Martin Lagonda Global Holdings Ordinary Shares (LSE:AML) turbocharged its shares today in a lively FTSE 250 session that saw Future (LSE:FUTR) shares crash to a three-year low.

    Aston Martin jumped 33.6p to 264.8p as it emerged Chinese automotive company Geely had spent £234 million on becoming the luxury carmaker’s third-largest shareholder.

    Executive chairman Lawrence Stroll called the move a significant step as he looks to build an ultra-luxury British performance brand.

    He said: “They offer us a deep understanding of the key strategic growth market that China represents, as well as the opportunity to access their range of technologies and components.

    “Geely share our vision for Aston Martin and want to be a more significant shareholder.”

    The investment was struck at a price of 335p, with Geely picking up 42 million shares from the Yew Tree consortium led by Stroll, and also subscribing for 28 million new shares in a move raising £95 million for the Warwickshire-based company.

    Stroll added: “This transaction enables the creation of a long-term partnership with Geely - a relationship that I believe will bring very significant value for all of our shareholders over time.”

    Shares were less than 90p in October but have rallied on recent signs of trading progress, including this month’s 27% rise in first-quarter revenues to £295.9 million as wholesale volumes lifted 9%. The loss for the three months narrowed by a third to £74.2 million.

    Aston Martin shares were not alone in posting a double-digit percentage rise, with the FTSE 250 risers board also seeing a rebound of 38.5p to 336p for former Polypipe business Genuit Group (LSE:GEN).

    The maker of sustainable water, climate and ventilation products reported revenues of £201 million for the first four months of the year and said it now sees annual operating profits being slightly higher than the City consensus.

    Broker Peel Hunt said: “Genuit is operating well in a challenging market. Price increases are partially offsetting lower volumes, and the management team is increasingly focused on the cost base.”

    Other mid-cap stocks on the front foot included low-cost airline easyJet after its results showed a narrower loss of £411 million in the seasonally quieter six months to 31 March.

    Shares rose 4.6p to 525p as the figures met expectations, keeping the airline within striking distance of a return to the FTSE 100 index following a 60% rise in its valuation to about £4 billion this year.

    UBS analysts have a price target of 650p, calling second-half guidance “constructive” after the airline forecast a 20% year-on-year rise in revenue per passenger seat for the third quarter.

    The recent momentum of easyJet and Aston Martin Lagonda in the FTSE 250 is in sharp contrast to the performance of Future, which tumbled another 153p to 893p in the wake of the media company’s half-year results.

    The group, which owns magazines including Four Four Two as well as the price comparison site GoCompare, topped 3,940p at the end of 2021 but has been a high-profile casualty of the flight from growth and tech-focused stocks.

    Sentiment has also been hit by the recent departure of Zillah Byng-Thorne, who transformed Future from a £30 million small-cap company during a decade in charge.

    Today’s results showed a 10% fall in half-year underlying revenues to £405 million as operating profits dipped 3% to £130.3 million.

    The decline was driven by the Games, Entertainment & Technology business, where revenues have been affected by weaker audience trends due to pressure in consumer technology markets and impact of a Google algorithm change.

    While the half-year performance was in line with guidance, new boss Jon Steinberg said the full-year results will be towards the bottom end of City hopes.

    Peel Hunt said it expects an 8% downgrade to City forecasts on the back of the results. The broker added: “While we continue to believe the Future model is strong, audience trends can be unpredictable, and until we see a sustained change, there is no guarantee we are at the bottom of the downgrade cycle.”

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