Main Menu

Market report

Mitchells & Butlers cuts loss | Macfarlane | Omega | Menzies


5pm: Market rises again

The UK’s blue-chip benchmark finished up around 24 points at 7,310 as European markets benefiting from any volatility on Wall Street which was closed for Thanksgiving Day.

Hospitality firms helped the FTSE 100 extend its winning streak into a fourth day.

Whitbread, the owner of Premier Inn, ended as one of the best performers, up 2.8%, following an upbeat note from Jefferies.

It said: “As we move from lockdowns through pent-up demand and on to vaccine-led normalisation we expect a churn in investor attention by the leisure sub-sector. Encouraging data puts the focus on hotels for 2022.”

Compass shares were up 3% to 1581p after Morgan Stanley set a price target of 1800p for the catering company.

Vodafone led the fallers, down 3.65% after its shares went ex-dividend.

Brent oil was quoted at $81.92 a barrel at the London equities close Thursday, pulling back from $82.73 late Wednesday.

9.30am: Drinks in focus

Diageo has been enjoying a strong rally since September and on Thursday was once again the biggest contributor to the FTSE 100.

Investors have been warming to the recovery story as it enjoys greater sales from pubs, restaurants and hotels now that many Covid restrictions have been lifted, says Russ Mould, investment director at AJ Bell.

“Helping to drive shares in Diageo was positive read-across from Remy Cointreau whose shares jumped 9.4% after reporting stronger than expected first half results including operating margins at a new all-time high.

“While there is a growing trend for more people not to drink alcohol, there is also a shift with others preferring more premium spirits which is playing to Diageo and Remy Cointreau’s strengths.”

Year to date Diageo’s share price is up by 33%, meaning it has achieved three times the returns from the FTSE 100 in 2021.

Mr Mould adds that the past few years have been difficult for Mitchells & Butlers, but it finally returned to profitability during its second half period.

“However, it does look like the business is running very hard just to achieve the smallest gains,” he says.

“Mitchells & Butlers has long been a laggard in the pubs and restaurant sector, and one can’t help feel it needs to sharpen its focus. The company says it tries to offer something for everyone, whether that’s a sleepy country pub or a livelier atmosphere in a city centre establishment.

“However, the group has 17 different brands which seems a bit excessive. Perhaps the current environment might force the group to focus harder on what it does best, rather than being something for everyone?”

The FTSE 100 itself was flat as strength in consumer, industrial and healthcare stocks was offset by weakness in technology, energy, financials and real estate.

7am: Mitchells & Butlers

sheep Heid

Pubs group Mitchells & Butlers saw its loss reduce to £42m in the year to 25 September from £123m in the previous 12 months. Like-for-like sales declined by 9.6%.

The owner of the All Bar One and Miller & Carter chains, as well pubs such as the Sheep Heid at Duddingston, said that since trading resumed without restrictions on 19 July, it has seen an encouraging return to like-for-like sales growth.

This has been helped by the lower rate of VAT on food and non-alcoholic drink sales.

Since the year end, like-for-like sales have been in growth of 2.7% as compared to the same period in FY 2019.

“However, cost headwinds present a major challenge to the hospitality sector as a whole, most notably in utilities and employment costs,” it said. 

7am: Macfarlane expects to exceed expectations

Macfarlane lorry

Packaging company Macfarlane said performance since the first half has been robust and the board now expects the group to exceed its previous expectations for the full year.

Sales revenue has grown by 25% in the year to date and group profit before tax is well ahead of the corresponding period in 2020. Both acquisitions made in 2021 are performing well. 

The Glasgow-based company said it expects the remainder of 2021 to remain challenging with input price inflation, supply constraints on certain raw materials and increased operating costs due to staffing pressures.

Some customers are also experiencing supply chain issues which are affecting their demand for packaging. However, the group’s management team remains focussed on effectively managing these challenges.

Net bank debt at 31 October 2021 reduced to £2.0m (30 June 2021: £8.7m).

Stuart Paterson, chairman, said: “The Macfarlane Group performance has been robust in demanding market conditions and is testament to the strength of our business model and the diligence of our people.

“At the interim results we indicated that we expected headwinds in the second half of 2021, so it is particularly pleasing to be once again raising our expectations for the full year.”

7am: Omega loss deepens

Omega Diagnostics, the food and drug testing firm, said COVID-19 revenues “remain extremely difficult to predict” as negotiations over a contract with the UK government continue.

The firm posted an increased statutory loss of £2.75m (H1 2020: £0.28m) for the half year to the end of September.

Simon Douglas, chairman, said: “We are confident that revenues in the second half will see significant growth in Health & Nutrition and for our CD4 product, and while COVID-19 revenues remain extremely difficult to predict they are expected to be more reliant on commercial partnerships than UK Government supply opportunities and are impacted by the timing of pending regulatory approvals being granted.

“Overall, we expect to see an improved sales performance across the group for the full year and to see losses reduced in the second half.”

7am: Menzies extends easyJet contract

Menzies Aviation, the global aviation logistics specialist, has secured an extension to its long-standing ground services partnership with easyJet at 21 airports across Europe.

The contract renewals will see Menzies provide a range of ground services, such as passenger, ramp, cabin cleaning and de-icing, for easyJet flights at major European and UK airports.

Edinburgh-based Menzies has a well-established relationship with the airline, dating back more than 15 years.

Global markets

Oil prices paused as investors waited to see how major producers respond to the emergency crude release by major consuming countries designed to tame rising prices.

Brent crude futures slipped 3 cents to $82.22 a barrel after losing 6 cents on Wednesday.

US West Texas Intermediate (WTI) crude futures fell 9 cents, or 0.1%, to $78.30 a barrel, extending an 11-cent loss on Wednesday.

Attention is switching to the Organisation of the Petroleum Exporting Countries, Russia and allies, known as OPEC+, who will meet next week to discuss oil demand and supply.

In equity markets, Japanese shares advanced on Thursday, led by technology stocks, as investors scooped up bargains following sharp losses in the previous session.

The Nikkei share average rose 0.67%.

Wall Street shares finished higher ahead of the Thanksgiving holiday, with the Nasdaq Composite recovering from the tech gains.

Leave a Reply

Your email address will not be published. Required fields are marked as *

This site uses Akismet to reduce spam. Learn how your comment data is processed.