Pets at Home found itself in the doghouse after a broker called time on buying in the pet-care retailer. Analysts at Shore Capital say uncertainties surrounding the business do not justify a “buy” recommendation, and instead they have moved to “hold”, citing issues at its new distribution centre and the competition regulator’s review of the veterinary services market.
Management said teething problems at the distribution centre resulted in lower product availability from August to mid-September, suppressing like-for-like growth.
Though these temporary issues are now resolved, Eleonora Dani, an analyst at Shore Capital, says it has heightened uncertainty surrounding annual profits, adding pressure on the second half to deliver more than 55 per cent of the annual profit.
“This is particularly concerning, given that the elevated price-to-earnings ratio reflects a level of optimism that, in our view, does not adequately account for the existing risks and uncertainties,” Dani said.
Dani and her team have trimmed their annual revenue estimates by £14 million to £1.47 billion and are forecasting flat pre-tax profits of £136 million. They say while the Competition and Markets Authority’s review is unlikely to result in a negative outcome for the FTSE 250 company, it has added uncertainty.
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Investors were spooked by the bank’s bearishness, and Pets at Home fell 14p, or 4.6 per cent, to settle at a ten-month low of 291p.
Despite the bleak start, a late-afternoon rally among utilities, miners and heavyweight healthcare stocks helped to snap the FTSE 100’s four-day losing streak.
The index, aided by a weak pound, closed up 14.87 points, or 0.2 per cent, to 7,389.70, with Rio Tinto securing the top spot with a gain of 169½p, or 3.5 per cent, to £50.60 after analysts at Barclays lifted their recommendation to “overweight”, given the miner’s gearing to iron ore where they see solid demand, constrained supply and overly bearish consensus forecasts.
A recovery in copper prices gave a boost to Antofagasta, up 2.4 per cent at £13.28, while United Utilities picked up 26p, or 2.6 per cent, to £10.38 as investors tracked a slide in bond yields. Investors moved in AstraZeneca after the US regulator accepted a review of its FluMist Quadrivalent self-administered flu vaccine. The shares bounced 338p, or 3.4 per cent, to £104.38.
A weak pound supported the FTSE 100, whose constituents include global companies generating revenue in foreign currency. The operator of the Holiday Inn and Crowne Plaza chains, IHG, rose 102p, or 1.8 per cent, to £58.64 and shares in Diageo, the world’s biggest spirits maker, popped 34p, or 1.1 per cent, to £31.19.
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The cross-border payments firm CAB Payments was the star of the session, for all the wrong reasons. The group, whose shares slumped 71.9 per cent, or 155¾p, to 60¾p after cutting its full-year revenue forecast, acted as the main drag on the FTSE 250, which ended the day down 64.89 points, or 0.4 per cent, at 16,994.10.
Experian was the largest faller in the senior index, losing 276p, or 10.3 per cent, to £24.11 as a weak sales outlook from TransUnion, the American credit reporter, unnerved investors this side of the Atlantic.
Barclays’ warning that competition for savers’ money was eating into its margins soured sentiment. Its shares fell 9½p, or 6.5 per cent, to 134¾p, while Lloyds Banking Group, set to update the market today, fell 1p, or 2 per cent, to 40¾p and NatWest, also due to report this week, shed 7½p, or 3.5 per cent, to 207¾p.
FD Technologies falls to loss
FD Technologies’ shares fell to levels not seen in nearly a decade yesterday as a challenging first half forced bosses to slash its full-year profit and sales forecasts.
The group, which specialises in providing software and services to financial institutions, swung to a pre-tax loss of £4.5 million for the six months ending August 31, against a £1.1 million profit a year earlier, on lower revenues of £142.5 million.
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While revenues at the Aim-listed group’s KX software business rose 12 per cent to £37.7 million, sales from its First Derivative business and MRP, its marketing analytics specialist, fell on challenging market conditions and increased caution among customers.
Because bosses anticipate similar market conditions throughout the rest of the year, they now expect to generate adjusted underlying earnings of between £24 million and £26 million, lower than the £38 million to £40 million previously forecast.
They now forecast annual revenues of between £285 million and £295 million, down from previous guidance of £315 million to £325 million.
The shares tumbled 406p, or 31.3 per cent, to 890p.
Wall Street report
After Monday’s mixed session indices were positive as upbeat forecasts from Coca-Cola and others boosted hopes about the health of corporate America. The Dow Jones industrial average rose 204.97 points, or 0.6 per cent, to 33,141.38.
