Mindful Money’s weekly share-tips: Sports Direct, Reed Elsevier, Unilever, William Hill and WPP

22nd April 2014


Given the controversy and media coverage Sports Direct International has endured of late, investors will be all ears when the firm updates the market with its latest set of results on Wednesday writes Philip Scott.

The owner of the landmark Lillywhites store at Piccadilly Circus in central London has enjoyed an 88% hike in its shares over the past year on the back of impressive sales and profit growth.

Despite tougher trading conditions in the run up to Christmas, Sports Direct’s third quarter results were encouraging, where the business reported that gross profit was up some 15% to £281m, year-on-year.

But the stock has endured a significant wobble recently. After having a pay-deal rejected by shareholders, the business’s billionaire owner Mike Ashley swiftly offloaded more than £200m worth of his own holdings sending the firm’s shares down some 9% in a single day.

At the same time, in what was viewed as something of a deal-spoiler, Sports Direct also bought an 11% stake in department store firm House of Fraser just as a Chinese conglomerate bought 89%.

Ahead of the firm’s fourth quarter results, Sheridan Admans, investment research manager at The Share Centre, inline with the market consensus has the stock labelled a ‘buy’.

He says: “As the UK economy recovers, and for the first time in six years wage inflation is expected to overtake CPI inflation, investors will be looking for positive news to be reflected in Sports Direct’s results. Investors will also be keen to receive an update on how its plans for European expansion and its recent acquisitions of premium lifestyle brands are progressing.”

Wednesday also sees Reed Elsevier, publisher and owner of information provider Lexis-Nexis deliver its latest interim management statement to the market.

The group has witnessed its stock rise by 16% over the past year as performance improved with steady growth across all its businesses. However, Admans points out there are some concerns over the business being able to keep up this progress.

Currently in ‘buy’ territory according to the market consensus, Admans however rates it a ‘hold’. He says: “Investors will be hoping that growth has been maintained at its exhibition business and that fears that the legal business will be hit by competition and free services are exaggerated.”

On Thursday consumer goods group Unilever reports its first quarter trading update. For the period, a relatively weak performance is forecast for the Dove soap and Liptons Tea owner. The group’s shares are off by 5% over one year but up by 8% in the last three months and it is expected that the timing of Easter and the tough US winter may both potentially impact.

Keith Bowman equity analyst at Hargreaves Lansdown Stockbrokers says: “Ongoing challenges in the emerging markets may also take their toll, while recent events in the Ukraine place a particular focus on the group’s Russian sales. Prior to the announcement, and with concerns for emerging market growth weighed against ongoing management initiatives, consensus analyst opinion points towards a ‘hold’.”

Investors will be keen to see how William Hill’s international expansion programme is progressing when it updates the market with its own interim management statement on Friday. The bookmaker has endured a 15% fall in its shares in the past month, after the government in its latest Budget said that it plans to introduce a new 25% rate of tax on betting machines.

According to broker sentiment, the shares however broadly remain a ‘buy’. Admans, who also has the stock rated a ‘buy’ says: “While we recognise that the sector has been under recent pressure, we are optimistic that the attention William Hill has paid to its corporate structure and strategy in various segments of its operation is starting to pay off.”

The end of the week also sees advertising and public relations giant WPP update the market with its first quarter results. As one of the world’s largest communications groups, the business is often viewed as something of an economic barometer and notably its last update was seen as a bit of a disappointment. Its shares may be up by 23% in the last year but the past three months has seen them slide back by 7%.

Bowman says: “The strength of the pound and its impact on the group’s extensive overseas operations remains in focus, whilst any additional comments with regards to consolidating competitors discounting their pricing provides a further key point of interest. Ahead of the news, and with the media group previously raising its dividend and pointing towards an increase in its share buy-back programme, consensus analyst opinion remains highly favourable in tone, with the shares rated a ‘strong buy’.”

Admans, who is calling the shares a ‘hold’ says: “Investors will as usual be keen to hear the company’s outlook and views on the global economy. Emerging markets have been under pressure of late and this is an area where the group is looking to expand, so comments will be worth noting.”

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