Stock Watch: 5-9 March 2018

Emma-Lou Montgomery
Emma-Lou Montgomery
Fidelity Personal Investing2 March 2018

While mid-range restaurants such as Prezzo, Strada and Chimichanga are struggling as cost-conscious diners tighten their purses, and even celebrity chefs like Jamie Oliver are failing to persuade enough diners to splash out on meals out, it’s not all doom and gloom for the casual dining sector.

Takeaways and ‘grab and go’ style offerings - like Greggs the bakery chain is moving into, as reported in last week’s Stock watch - are bucking the trend. On Tuesday we get full year results from food delivery service Just Eat (JE.) which piggy-backs on high street restaurant chains and independents alike. It has clearly whet investors’ appetites since it floated in 2014. So much so that in December it joined the ranks of the FTSE 100 following a third quarter update which saw revenues leap 47%. Full year profits are expected to come in between £515 million and £530 million.

Domino’s Pizza Group (DOM) is another food chain that looks as though it is as equally appealing to hungry diners as it is to investors. Full-year profits, which are due to be announced on Thursday, are expected to show another winning year for the takeaway and delivery pizza chain. The group managed to exceed the market’s already positive expectations in the last quarter, with sales up 18%.

A big spend on advertising and investment in its online ordering system should have kept full-year sales looking tasty and seen off competition from the likes of Pizza Express. Working with the aforementioned Just Eat as well as another food delivery company, Deliveroo, saw online sales rise 15% in the last quarter.

Pre-tax profits for the whole year are expected to beat the best-case scenario forecast of £91 million. And then there’s the World Cup to look forward to in summer and the potential for another surge in sales from hungry footie fans.

Q4 results, due on Wednesday will be the first time we hear from Peter Jackson, the new chief executive of Paddy Power Betfair (PPB). He has taken over from long-serving Breon Corcoran and investors and the wider market will be interested to hear his initial thoughts on the company, which has seen good trading at its Australian and US businesses in recent times.

While the threat of regulation always hangs over the sector, its online sports betting business has been strong and holds it in good stead to meet the £450 million-£465 million that has been forecast for profits.

Gone are the days when G4S (GFS) was a laughing stock, more notorious for its errors over prisoner whereabouts and tagging dead offenders, than what it could do right. Those days are gone though and with a tough-talking South African at the helm, in the form of Ashley Almanza, signs are that this set of Q4 results should show more solid progress.

Back at the half-year point, revenues stripping out the effect of forex were up about 6%, as were profits. Disposals helped to knock net debt to £1.6 billion or 2.8 times earnings before tax and amortisation. At the time it said that emerging markets and the Middle East, which account for more than a third of revenues, were sluggish. But it expected revenues to continue to grow by between 4% and 6% a year.

Analysts have been highlighting improvement in profit margins, productivity programs and especially demand for its automated cash handling business. Its Cash360 system allows retailers to outsource their cashing-up process. Investors who have seen a decline in the share price since last spring will be looking for further signs of improvement. Exane BNP Paribas has upgraded the shares to “neutral”.

Important Information

The value of investments can go down as well as up so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.