M&S
317.5p +11.5p
Venture
836.5p +24.5pSIR STUART Rose was guarded in his choice of words yesterday. Green shoots? Certainly not. Situation stable? Perhaps, maybe. "So far, so good" was how the Marks & Spencer chief ch
ose to sum up recent trading at the 125-year-old high street stalwart, which has been caught in the whirlwind of recession.
The prudence follows a pick-up in first-quarter sales. More precisely, the data was less negative than in the fourth quarter of the last financial year, when M&S suffered a 4.2 per cent slump in takings.
During the latest period – spanning the 13 weeks to 27 June – like-for-like sales were down just 1.4 per cent on a year earlier, with food sales off a trifling 0.5 per cent. Encouragingly, total group sales, which factor in new stores, both at home and overseas, rose 2.9 per cent. Total UK sales were up by 1.7 per cent.
Given that the consumer backdrop a year ago was equally gloomy, they're not the sort of numbers to scream from the rooftops. For seven quarters on the trot, underlying sales have been languishing in negative territory. Yet, many in the City had been bracing for little improvement on the dismal fourth-quarter numbers, so yesterday's relatively good news helped to push shares in the retail heavyweight 3.8 per cent higher.
M&S has been slow to respond to the spending malaise, particularly in its relatively upmarket food business, but has recently made changes, introducing new products, price cuts and promotions. The lowest-price "wise buys" range has grown to account for just under a fifth of all food sales as the chain looks to counter similar offerings at rivals Waitrose and Sainsbury's.
General merchandise sales, spanning clothing and homewares, were down 2.4 per cent in the first quarter, but that compared with a forecast drop of 3-5 per cent.
The improved trading figures are likely to provide short-term support for M&S's shares. Although the stock has lagged the DJ Stoxx European retail index by 9 per cent over the past year, shares have climbed about 50 per cent this year on recovery hopes.
Brokerage Numis Securities has already added £26 million to its M&S profits forecast, but its estimate for a surplus of £550m in the year to March is still down on this year's reported £604m – itself a 40 per cent drop on a year earlier.
Pali International analyst Nick Bubb is not budging with his "sell" rating on M&S shares. "They're (the Q1 numbers] better than expected," he says. "But the weather's been good, the comps (comparative figures from last year] softer and they've been cutting prices. So it's difficult to give them too much credit."
Hardly music to the ears of Rose, who firmly believes that the "actions we are taking are working". But it might just lift some of the pressure on the executive chairman ahead of next week's eagerly-anticipated shareholder bash. Succession concerns, bonus rows and criticism over the retailer's lacklustre performance have dominated coverage of M&S in recent months.
Rose, who has come under fire for combining the roles of chairman and chief executive against corporate governance guidelines, intends to stick to his guns and leave in 2011 after taking on a new chief executive next year.
"My job along with the board is to concentrate on running the business, getting it through the recession, doing the hard nitty-gritty work in the engine room … and frankly I'm not concerned about it (the succession row]," he said yesterday. Nevertheless, that AGM is still likely to prove a lively affair.
EVEN Mike Wagstaff conceded it was "bizarre" that he was praising the government for its changes to the tax system in the same week that a House of Commons select committee warned that the sector's existence was at risk and that the tax breaks were inadequate, writes Hamish Rutherford.
The Venture Production chief executive said tax breaks announced in April to encourage the development of marginal fields could create a benefit of up to £100m for Venture and "had to" make some fringe fields viable, the stated aim of the plan.
Oil executives are not known for their praise for a UK government that has been accused of using the sector as a piggy bank. One executive told me recently that the tax UK tax regime in the past decade has been more stable in Uganda than in Britain.
Only two months has passed since the changes were announced, so its full impact has yet to be revealed and Wagstaff, who happens to be defending an approach for his company from Centrica, may have an interest in talking up the scheme.
But with oil prices rising and tax breaks applying to more than ten of its fields, Venture's prospects may not be as dependant on receiving a bid from Centrica as it seemed a few months ago.
Bryan Johnston of Brewin Dolphin
ONE TO WATCH
Bunzl
512.5p +10p
Scotsman says HOLDBUNZL is an international distribution and outsourcing company and its markets are wide-ranging, including food services, groceries, cleaning and safety and healthcare.
Its products include packaging, films, labels, first-aid products, point-of-purchase displays, stationery, bags and cleaning and hygiene supplies.
The group is also involved in supplying the leisure sector with products such as napkins, disposable tableware and catering equipment.
Bunzl's operations are sensitive to economic trends. The first quarter of the year was particularly challenging but, in a recent trading update, Bunzl said matters had not deteriorated any further; indeed, half-year revenue rose 17 per cent, helped by currency exchange rates. Nevertheless, margins are under pressure, particularly in the UK.
Bunzl may not be the most exciting company in the world, but it has a sound modus operandi and margins of 60 per cent are satisfactory.
A constituent of the FTSE 100 index, Bunzl's size may help it to deliver economies of scale that some of its competitors may struggle to achieve and this could give it an important edge.
Inevitably, Bunzl has a currency dimension, while it is also exposed to the pressure of rising raw materials, particularly oil and wood pulp, although these have eased over the past 18 months or so.
Bunzl's shares have not participated to any extent in the improvement in investment markets this year, currently trading about 10 per cent below the start of the year and substantially off the 750p of the middle of 2008. With a yield of 4 per cent, Bunzl looks a solid proposition, sound, if unlikely to offer great financial fireworks.
• The value of your investment could fall and you may get back less than you invested. You should take professional advice if you have any doubt about the suitability of this company for your portfolio.
Public-sector work helps WSP hold steady
SMALL BUT BEAUTIFULBUILDING and environmental consultancy WSP Group yesterday told investors that trading for the first half of 2009 was in line with expectations as its business from the public sector remained stable.
WSP, headquartered in London with operations throughout the world, said the private sector continued to be difficult across all territories, with a marked slowdown in its businesses in the UK, United States and particularly in the Middle East.
In a trading statement, WSP said: "The ongoing lack of liquidity in Dubai is affecting both the resolution of existing contracts, which remains extremely slow, and conversion of the pipeline of future projects."
The group, which offers management, planning and environmental advice, however, said its public-sector activities remained stable, with its businesses in the UK, Northern Europe and the US trading well.
WSP, which has a market value of about £135 million, stressed it was well financed with a £150m committed credit line to 2013, and that while its net bank debt was higher than at last year-end, it was comfortably within its banking covenants.
"Across all our markets we continue to watch our cost base," WSP added.
Rise in oil and gas production gives boost to Venture
SCOTS STOCKSVENTURE Production rose 3 per cent yesterday after it reported a 16 per cent rise in its first-half production.
The Aberdeen-based oil and gas company said it was on track to record a modest rise in production for the full year.
Meanwhile, Centrica has until 13 July to make a firm bid for Venture or walk away.
Shares in Aberdeen-based Venture closed up 24.5p at 836.5p.
Dana Petroleum, another Aberdeen-based oil company which has been the subject of takeover speculation, rose 15p, or 1.1 per cent, to 1,417p.
Elsewhere in the sector, Africa-focused Bowleven rose a quarter of a penny to 65.5p, despite news that fund management giant Blackrock had taken up more than 17 million shares in its recent rights issue.
Aberdeen Asset Management rose 3p to 127p after announcing the completion of its acquisition of Credit Suisse's asset management business, with asset outflows at the top end of analyst forecasts.
British Polythene Industries shares leapt 13 per cent after the company said first-half profits would be "comfortably ahead" of previous expectations. Shares rose 18.75p higher at 161p, their highest level since February.
