Interactive Investor

Two stocks setting the market alight this trading session

Despite a weak session for the FTSE All-Share index, there are a couple of exciting shares moving rapidly higher. City writer Graeme Evans rounds up the action, including some big losers.

5th December 2023 16:01

Graeme Evans from interactive investor

Results-day tailwinds behind On The Beach Group (LSE:OTB) and the strong seasonal performer discoverIE Group (LSE:DSCV) ensured their shares jostled for top spot in the FTSE All-Share today.

The pair reached mid-afternoon up by more than 15%, whereas FTSE 100-listed Ashtead Group (LSE:AHT) and the mid-cap speciality polymers firm Victrex (LSE:VCT) remained under pressure despite the upbeat comments of bosses in their respective presentations.

The boost of 98p to 702p for customised industrial electronics firm discoverIE — one of the five stocks in our Consistent Winter Portfolio six-month trading strategy — followed a better-than-expected margin performance in half-year results.

House broker Peel Hunt, which reiterated its 1,000p target price, praised the operational efficiency gains driving the 140 basis point step-up in operating margin to 12.9%. It added the company’s medium-term target of 15% looked “more like a milestone than a destination”.

Alongside today’s 17% rise in operating profit to £28.6 million, the company reported that the supply chain inventory correction in its markets now looked to be largely complete.

Two high-margin acquisitions were completed for £65 million, with chief executive Nick Jefferies reporting that the pipeline of future deals was stronger than ever.

This underpins an operating model where over two-thirds of the group’s operating profit growth over the last 12 years has been generated from acquisition and integration.

He added: “We are well positioned to continue this proven approach and remain a consolidator in a fragmented market for customised industrial electronics.”

The group employs about 4,500 people across 20 countries, with its main operating units in locations including the UK, China, Sri Lanka, India and North America.

The day’s other big rise came from On The Beach after annual results showed that demand for holidays has held up well despite the ongoing economic uncertainty.

The company generated £1 billion in annual bookings for the first time as revenues rose 18.7% to £170.2 million and pre-tax profits by 66% to meet City expectations at £23.6 million.

Chief executive Shaun Morton added: “This year we have seen the majority of consumers protect - not sacrifice - their holiday, a trend that our research shows will continue.”

He reported strong momentum in the first nine weeks of the financial year as total transaction value lifted 26% and winter bookings by 34%. Peel Hunt has a price target of 300p and said the company looked to be well placed after its investment in “brand, technology and supply”.

Results-day fallers included Ashtead, even though the FTSE 100-listed Sunbelt equipment hire firm said end markets in North America remain robust as demand is supported by the increasing number of US mega projects and recent legislative activity.

Shares have been under pressure since last month’s downgrade to full-year guidance, which Ashtead blamed on a lower level of emergency response activity related to natural disasters in North America and the longer than anticipated actors’ and writers’ strikes.

Despite these headwinds, Ashtead still delivered another record performance today as half-year revenues jumped 16% to $5.57 billion (£4.4 billion) and earnings per share by 6%. It spent $705 million (£558.6 million) on 16 bolt-on acquisitions in the period.

Chief executive Brendan Horgan said the recent investment would enable Ashtead to take advantage of “substantial structural growth opportunities”.

The shares today fell 168p to 4752p and are down 10% since last month’s downgrade, having peaked above 6,400p as one of 2021’s best performing FTSE 100 stocks.

Other fallers today included the performance polymers business Victrex, down 23p to 1,426p in the FTSE 250 index after chief executive Jakob Sigurdsson reported a 16% decline in annual profits to £80 million in “one of the most challenging years” for the chemicals sector.

Volumes fell 24% and revenues by 10% to £307 million amid significant weakness in the electronics and energy and industrial sectors, but Sigurdsson believes the company is well placed for a macroeconomic recovery.

His new strategic targets include mid-term revenue growth of 5-7%, with upside potential to 8-10% driven by the further commercialisation of so-called mega programmes. Pre-tax profits have the opportunity to grow faster than revenue, he added, as operating leverage improves and overhead investment moderates.

The shares are down by about 45% since summer 2021, including 12% this year.

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Related Categories

    UK shares
    Commodities
    Consumer goods and services
    Industrials
    Technology