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Halfords Group PLC – one positive quarter does not make a trend be – Liberum

Last updated: 12:22 13 Apr 2016 BST, First published: 10:22 13 Apr 2016 BST

Halfords Group PLC – one positive quarter does not make a trend be – Liberum

Liberum slides under bikes, cars and maintenance firm Halfords Group PLC (LON:HFD) and repeats a 'sell', although the broker says there are some clear positives about the group, including a healthy balance sheet.

It also points to a more than 4% divi yield and potential for near term cash returns.

The retailer today posted a 3.2% increase in revenue in the fourth quarter, and  a 1.7% increase  on the full year and said it expect pre-tax profit for the year to April 1 to be in the range of £78-82 mln, as previously guided.

For the year, it posted a 1.5% increase in like-for-like sales in the year to April, driven by a 2.5% sales increase at its autocentres, while bike sales slowed during the year amid intense competition.

Liberum said: "We see a strong Q4 as encouraging, although one quarter does not make a trend and we need to see further momentum before turning more positive". It targets  300p.

The same broker today starts coverage on bellwether retailer Marks & Spencer (LON:MKS).

Last week's trading update showed its food business performing well but weighed down by clothing and new chief executive Steve Rowe saying there was "still more" the group needed to do.

Falling sales densities in general merchandise with rising opex puts much reliance on being able to maintain full-price sales and gross margin accretion, notes Liberum analyst Tom Gadsby.

He said the Q4 update spoke of further price investment but the path was not clear.

"We are encouraged to see an experienced retailer in charge but fear any change could take 18 months to reflect in sales and profits. We initiate with a SELL rating and a 350p target price."

Also in brokerworld today, scribed at Barclays have started covering tech solutions specialist Cobham PLC, upgrading the shares to 'overweight' from 'equalweight'.

US house Jefferies has pumped up the target slightly on Lloyds (LON:LLOY) to 108p from 101p and repeated a 'buy', while the same broker has downgraded the target price on GKN PLC (LON:GKN)  to 360p from 415p previously.

In smaller caps, Midatech Pharma's (LON:MTPH) revenues beat expectations in 2015 with the current year also starting strongly.

The drug delivery specialist, which is at a very early stage of development, today posted revenues of £1.38mln in 2015 with losses of £10.1mln (£8.8mln). Cash holdings at the year-end were £16.2mln.

Broker Panmure Gordon said the better than expected sales during a period of high activity reflects well on management capabilities.

“The parallel strands of commercial and pipeline development bode well for the long-term risk and growth profile of the business,” the broker added.

It has forecast sales this year (2016) will rise to £9.1mln and to £14.5mln the following year.

“With the company’s wider commercial footprint in the US, we expect Midatech to further replicate what it has done with Zuplenz with other product opportunities in due course.”

The broker has a massive target price of 467p or two and half times the current 177.4p, up 10% the announcement of the Zuplenz launch. At that level Midatech was worth around £58mln.

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