Mindful Money’s weekly shares watch: Dixons Carphone, Wolseley & Halfords

1st June 2015


Shareholders in Wolseley will be hoping the European Central Bank’s quantitative easing package will have aided sales for the heating and plumbing giant across the continent when it updates the market with its latest interim management statement on Tuesday.

The firm, which is also highly geared to the US housing market, has recently highlighted continuing improvement in the sector there, and over the past six months the group has enjoyed a 14% share price lift.

Sheridan Admans, investment research manager at The Share Centre says: “The businesses in Europe have not fared as well in recent years but investors will be hoping to see some of the ECB stimulus measures showing up in their trading. The recent appreciation of sterling may dampen US revenues when converted back.”

Admans, who has the firm down as a ‘buy’, however adds that investors will also be expecting to see further benefits from the company’s cost cutting programme. Ahead of the update, the overall broker consensus is pointing towards a ‘cautious buy’, with analysts at Jefferies International and Barclays Capital having recently issued positive notes on the firm.

Fellow FTSE 100 constituent and PC World owner, Dixons Carphone, up 12% over six months, follows up with its fourth quarter trading update on Wednesday.

Looking ahead to its report Keith Bowman, equity analyst, at Hargreaves Lansdown Stockbrokers says that on the back of ongoing market share gains, single digit like for like (LFL) sales growth is forecast.

He says: “UK LFL sales are likely to have slowed from the 8% growth seen in the Christmas third quarter, although still assisted by warranty offerings on such products as TVs. An update on the move of Carphone Warehouse stores into existing Currys and PC World stores could be given, whilst a reiteration of the £80m of cost synergies by 2016-17 may feature.”

Admans, who has the firm on his ‘buy’ list, says: “Rivals have reported good growth in demand for 4G mobile services in particular so investors will be looking for news on that front, as well as any indications of the level of cost savings the group is expecting from the merger of Carphone Warehouse and Dixons in August last year. In January the company said it expected full year profits in the range of £355m-£375m so further guidance on that will be of interest to investors.”

Ahead of the firm’s report and with merger cost savings being squeezed and the company seen as a likely beneficiary of the expected growth in the so-called ‘internet of things’, the analyst consensus opinion currently signifies a ‘strong buy’, with the likes of Investec and Citigroup both recently coming out in support of the group’s stock.

Friday sees car parts, camping and bicycle retailer, Halfords report its full year results. Over the past 12 months, shares in the FTSE 250 firm have edged down by 2% but are up by 9% over three months. Bowman forecasts that the group’s “wefit” service, which fits car parts such as batteries, and cycling sales, may as in the third quarter, lead fourth quarter sales performance.

“Full year pre-tax profit is forecast to rise by 8.4% to £79m on a consensus basis, with the total full year dividend expected to be up around 9% to 15.56p,” says Bowman.

He adds: “The new Chief Executive, ex McDonalds and having only recently joined, is not expected to provide any strategy update, although a further update on the company’s store revamp programme looks likely – 70 to 75 store upgrades are targeted by management at the year end.”

Prior to the announcement, and with a modernisation investment programme still ongoing, analyst consensus opinion currently points towards a ‘buy’.

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