Airport caterer SSP Group (LSE:SSPG), vets business CVS Group (LSE:CVSG) and sofa retailer DFS Furniture (LSE:DFS) today had varying degrees of success restoring confidence after heavy share price falls.
The worst performing of the trio was food-on-the-go firm SSP, down another 15.6p to 229p despite forecasting 2023 revenues near the top end of previous guidance at £3 billion.
Chief executive Patrick Coveney added that the Upper Crust owner is in the midst of a good finish to the year, with “real momentum” across the business heading into 2024.
He highlighted SSP’s focus on higher growth markets such as North America, which now generates about a quarter of total revenues.
Revenues in the region are set to be at 127% of 2019 pre-Covid levels, but with more growth to go for based on a presence in about 30 of the top 80 airports in North America and less than 10% overall market share in the air channel.
In the UK and Ireland, sales this year are expected to be in line with pre-Covid levels after being held back by ongoing industrial action in the rail sector.
While the company is seen by some City analysts as an attractive way to play the recovery in air travel, the shares have struggled for direction over much of this year.
They have fallen from 281p in June, with today’s retreat not helped by SSP pointing to earnings per share towards the lower end of its earlier 7p-7.5p guidance and amid a warning over the translation impact of a stronger pound on next year’s performance.
Covenant restrictions have prevented the company from paying dividends, but July’s bank refinancing means it is expected to resume distributions with 2023 results.
Broker Peel Hunt, which has a price target of 350p, trimmed its earnings forecast for next year but sees scope for a special dividend should trading improve as the company hopes.
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In the FTSE All-Share, DFS Furniture jumped 7p to 114.2p after full-year results showed the retailer fighting hard “in one of the toughest economic climates we have experienced”.
Chief executive Tim Stacey added: “Whilst we are confident the upholstery market will recover, forecasting the specific timing and pace of the recovery is challenging.”
Despite the weak and uncertain market conditions, Stacey continues to expect a modest year-on-year increase in pre-tax profit for 2024 and has also reiterated longer-term forecasts that DFS can deliver £1.4 billion of revenues at an 8% margin.
Today’s results for the year to 25 June showed a 5.3% drop in revenues to £1.1 billion and 49.2% decline in pre-tax profits to £29.7 million. DFS, which reported a record 38% market share, thinks a margin of 5% is still achievable even without any recovery in conditions.
A dividend of 3p a share is due to be paid on 29 December, down from 3.7p the year before but in line with guidance given at March interim results.
The shares have fallen by a quarter this year but Peel Hunt, which has a 200p target price, said the company deserves a much higher rating. It added: “DFS continues to win market share as its stores and products are more appealing than its competitors. We expect further gains ahead; the heat must be unbearable for some of DFS’s peers.”
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The results-day improvement of 61p to 1,570p for CVS came with the AIM-listed stock under a cloud after the Competition and Markets Authority (CMA) launched a review of the veterinary sector for household pets. The watchdog plans to issue an update early next year.
CVS has about 500 vets practices in the UK, Australia, Netherlands and Ireland, including nine specialist referral hospitals and 39 dedicated out-of-hours sites.
Today’s annual results showed revenues up 9.8% to £608.3 million, with like-for-like growth of 7.3% at the top end of 4% and 8% guidance. Pre-tax profits rose 49.7% to £53.9 million and CVS said it would pay a 7.1% higher final dividend of 7.5p a share on 8 December.
Shares were comfortably above 2,000p prior to this month’s disclosure by the CMA, valuing the company at around £1.5 billion.
Peel Hunt believes the drop in share price has been significantly overdone, although it adds that it will likely take time for the outcome of the CMA review to become clear.
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