Market Report: Outlook on luxury goods gives boost to Burberry
Thursday 25 November 2010
All the talk may be of austerity measures and budget cuts, but there was a distinct feeling of opulence on the top-tier index yesterday as Burberry rose up the leaderboard.
The upmarket clothing retailer found itself in handsome form thanks to Bernstein, which predicted a bright 2011 for the luxury-goods companies. The broker maintained its "positive bias" on the sector and noted that it had seen "another exceptional year".
With the sector providing eight straight quarters of "relative share-price out-performance" since 2009, Bernstein's analysts said 2011 may see more of the same and that Burberry, which is working on expanding its presence in Asia, could enjoy top-line growth of up to 12.5 per cent.
The British company, which has recently been using the "Harry Potter" actress Emma Watson as a model, was also helped by a positive read-across from the States. There, the jewellers Tiffany posted a rise in profits during the third quarter of 27 per cent, which played its part in Burberry's surge of 42p to 1,050p.
Overall, the FTSE 100 managed to avoid a fourth-straight day of falls, as it put on 75.82 points to 5,657.1. With the ONS confirming third-quarter GDP growth of 0.8 per cent and some positive data from the US, including a fall in jobless claims, there was enough to calm investors shaken this week by concerns over the eurozone as well as the border clash between North and South Korea.
Top of the pile was Compass, as it posted forecast-beating profits in its final results. The largest catering firm in the world said that it was benefiting from an increase in outsourcing thanks to government spending cuts, and it increased its annual dividend by a third, resulting in its shares being pushed up 38.5p to 566p.
Companies in the business-services sector came under the beady eye of Goldman Sachs' analysts, who elevated Intertek and Capita onto the broker's conviction buy list. With a gain of 97p to 1,850p, it was Intertek which benefited the most, but Capita did not do too badly for itself, up 20p to 676.5p.
Rolls-Royce has experienced a number of false dawns since the failure of one of its engines in a Qantas plane prompted its share price to plummet. Yet, following Tuesday's announcement that the Australian airline is to put some of its A380 fleet back into operation, there was more good news yesterday as the engineering giant revealed a $1.2bn (£760m) deal with Emirates. The contract, under which Rolls-Royce will provide engine maintenance, resulted in a second day of rises, with it adding 17p to 615.5p.
Autonomy suffered a dramatic late nosedive to finish in last place, after the software company said that it was continuing to work on an acquisition. It added that "recent developments" could mean its original time scale may be exceeded, leading it to shed 80p and finish on 1,271p.
Capital Shopping Centres (CSC) was also one of the few companies on the blue-chip index to see a fall in its price, as it announced that it was in discussions about buying the Trafford Centre in Manchester in a deal worth £1.6m. In addition, CSC said that it was considering placing a number of new shares, and investors clearly weren't ecstatic about either bit of news, as it dropped 18.1p to 337.4p.
A number of media companies on the FTSE 250 were examined in a report from Singer Capital Markets, with the broker focusing on those with B2B publications ahead of DMGT's preliminary results, which will be released today.
The broker's analyst Johnathan Barrett said that the update from the publisher of the Daily Mail, which put on 7.5p to 564.5p, is expected to "signal that in broad terms recent recovery trends in the B2B industry are intact". He added that it "could act as a catalyst for some of our preferred names that have eased back during the recent market weakness". Of the firms highlighted by Mr Barrett, United Business Media made the biggest move, up 12p to 640.5p. Less impressive was Informa, which added 0.6p to 405.7p despite Singer saying it believed it "has the best quality of earnings in the UK B2B sector".
No one on the mid-tier index was able to match Provident Financial, however, as the doorstep credit company's latest update calmed fears about the effects of the Government's welfare cuts. According to the firm, fewer than 1 per cent of its customers who use its Home Credit service will be hit by the announced benefits cap of £500 a week. Evolution Securities kept its "buy" advice on the stock, and investors were in agreement as it soared 66.5p to 841.5p
On the Alternative Investment Market, Thor Mining was forced to release a statement after the company's price shot up by more than 70 per cent. The miner claimed it did not know of any explanation that had been "announced to the market", and added that it was "not in possession of any information requiring an announcement". Thor's price did end up edging back a bit before the end, but it still finished up 0.8p on 2.35p.
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