The FTSE 100 was well up this morning as investors waited for Liz Truss to announce her U-turn on the recent mini-budget. However, once Truss announced her actual measures, some of those gains were reversed. The index closed up 8 points at 6,858.79.
In today’s update we look at a big share price rises for Ocado, easyJet and Superdry. Read on for those and for some of today’s biggest fallers too.
Shares in Ocado (OCDO) have risen 4% to 454p after US supermarket chains Kroger and Albertsons said they wanted to merge. Ocado provides technology that Kroger uses at six automated warehouses for home delivery. The current plan is that Ocado will help build 20 automated warehouses for Kroger, but if the merger gets approval from the regulator, there’s clear scope for more warehouses and more online sales. Kroger currently has 8% of the US grocery market while Albertsons has 5% of the market.
The news is a welcome fillip for Ocado. Even after today’s rise the shares are still down by 70% this year as investors worry that losses will continue for years to come. Ocado has already invested heavily in its technology and it’s not getting an adequate financial return yet. What’s more, Ocado announced last month that sales at its UK business – a joint venture with Marks & Spencer (MKS) – are expected to slip backwards this year. The company was also forced to raise £575 million from shareholders in the summer to help pay for further development in its technology.
The founder and CEO of Superdry (SDRY) has splashed £2 million on shares in the fashion retailer. That’s a significant vote of confidence in the company. Julian Dunkerton bought just over 1.8 million shares this week at an average price of 111p a share. Before this purchase, Dunkerton already owned 17.8 million shares – a 21.7% stake. The shares have soared 10% today to 121.8p
The purchase follows encouraging results last week when the firm returned to profit for the first time since 2018. Dunkerton said the retailer was ‘cool again’ with strong demand for items such as parachute pants and Afghan coats. Dunkerton’s decision to buy more shares is understandable given that Superdry is trading on a multiple of just six times earnings.
The Petrofac (PFC) share price is up almost 5% at £1 exactly after Peel Hunt upgraded the oil services company from ‘hold’ to ‘buy’. The broker thinks positive news flow from contract wins will boost sentiment around the stock. Peel Hunt has reiterated its 125p price target on the stock.
Petrofac was hard hit by the pandemic and it’s still losing money. Its debt levels are also on the high side. However, the higher oil price can only help Petrofac.
Sentiment towards airlines has improved dramatically in the last couple of days and easyJet (ESY) shares are up almost 6% today to 310p. Both easyJet and IAG (IAG), the owner of British Airways, gave positive updates yesterday and today the CEO of Lufthansa was also upbeat about prospects for the industry.
easyJet said yesterday that it expected operating profits for the three months to September to come in at around £535 million, which is impressive. Admittedly, profits are always much higher in the summer for most airlines but things are clearly moving in the right direction. The airline has also taken out insurance to partially protect itself from a high oil price which is reassuring.
Shares in International Distribution Services (IDS), which owns Royal Mail, have crashed almost 10 % to 189p after Royal Mail said it would cut up to 10,000 jobs over the next year. The company also reported a first-half loss of £219 million, down from a profit of £235 million a year earlier. The expected loss for the full year is around £350 million. Royal Mail blames industrial action for the poor financial performance and the job cuts.
Harbour Energy (HBR) is an oil producer mainly focused on the North Sea. Its share price is down 4.5% at £4. It would be vulnerable to any windfall tax on oil producers and, although nothing has been announced along those lines today, you still can’t rule it out. Yes, Liz Truss is now going ahead with the increase in Corporation Tax that was originally planned by Rishi Sunak, but she hasn’t reversed enough tax cuts to pay for the energy price caps and keep government debt down.
That said, Harbour is paying out a chunky 5% dividend yield. So if you’re confident that the oil price will stay high, it could be a decent income bet.
Rio Tinto (RIO) had some bad news overnight about its planned takeover of a Turquoise Hill Resources, a Canadian mining firm. Rio Tinto already owns a majority stake in Turquoise Hill, but the mining giant wants to take full control. That’s looking a bit less likely now that the fifth biggest investor in Turquoise Hill, Sailingstone Partners, has said that it will vote against Rio Tinto’s bid.
Rio Tinto’s share price is down 2% today at £47.74.
Shares in BAE Systems (BAE) have performed strongly this year, up 43% so far on the basis that war in Ukraine must be good news for defence contractors like BAE. Today the shares are down 3% at £7.95 although there’s no obvious reason to think the good times are over yet for the company.
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