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The Expert View: Capita, Marston’s and Ted Baker

Our daily roundup of analyst commentary on shares, also including McBride and Learning Technologies.

by Michelle McGagh on Oct 11, 2017 at 05:00

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Key stats
Market capitalisation£3,802m
No. of shares out667m
No. of shares floating661m
No. of common shareholdersnot stated
No. of employees74755
Trading volume (10 day avg.)2m
Profit before tax£37m
Earnings per share5.55p
Cashflow per share44.20p
Cash per share178.57p

Shore Capital has questions for Capita

Outsourcing giant Capita (CPI) has announced a new chief executive and Shore Capital is now waiting to hear whether the appointment will lead to further restructuring.

Analyst Robin Speakman retained his ‘sell’ recommendation following the announcement that Jonathan Lewis from engineering consultancy Amec Foster Wheeler would join as chief executive in December.

Although Lewis comes from a ‘distinctly different’ business Speakman said he believed that ‘given the evident issues faced by the company, leadership is to the fore’.

‘Capita is in a period of transformation, in our view, a long term strategic vision to re-engage with the market is required – qualities highlighted in Lewis by chairman Ian Powell. We welcome this appointment then.’

Speakman added that he was waiting to hear ‘whether future restructuring, a possibly follow-on strategy review, emerges; possibly with further disposals; also, will the commitment to the dividend at current be retained at the expense of a more rapid balance sheet recovery’.

The shares rose 1.3% to 569.5p yesterday.

Key stats
Market capitalisation£684.62m
No. of shares out633.90m
No. of shares floating618.30m
No. of common shareholdersnot stated
No. of employees13,500
Trading volume (10 day avg.)1.93981m
Profit before tax£73.00m
Earnings per share12.57p
Cashflow per share19.46p
Cash per share32.26p

Consumer concerns priced in at Marston’s, says Peel Hunt

The weather meant fourth quarter trading at pub retailer Marston’s (MARS) was poor but Peel Hunt said the market has priced in any concerns about consumer confidence.

Analyst Douglas Jack retained his ‘add’ recommendation but reduced the target price from 140p to 125p. The shares jumped 3.6% to 107.8p yesterday.

Over the past year like-for-like sales increased 1.6% despite the difficult final quarter.

‘Trading was tough in the fourth quarter, mostly due to poor weather, but we are holding our full-year forecasts, which allowed for this,’ said Jack.

‘Over the next few months, there should be greater clarity on the extent to which weather rather than consumer confidence undermined pub trading in July-September. With the shares offering a7% dividend yield, we believe the market has priced in it being a consumer problem.’

Key stats
Market capitalisation£1,219m
No. of shares out44m
No. of shares floating28m
No. of common shareholdersnot stated
No. of employees3166
Trading volume (10 day avg.)m
Profit before tax£47m
Earnings per share104.53p
Cashflow per share151.59p
Cash per share48.45p

Profits up but challenges face Ted Baker, says Hargreaves Lansdown

Designer retailer Ted Baker (TED) is making progress in some areas but Hargreaves Lansdown believes there are challenges in the markets it is hoping to break.

Half-year results from the group showed a 14% increase in revenues and profit before tax up 12.7% to £24.2 million. The retailer increased the dividend 12.2% to 16.6p per share. The shares fell 2.8% to £27.41 yesterday.

Analyst George Salmon said ‘growth may be steady rather than spectacular’ but the Ted Baker team had ‘always left the flashy stuff to the design team’.

‘This approach has served shareholders well in the past, and these results are no exception,’ he said. ‘A smattering of new stores across the world, together with a stellar online performance, means investors are once again in line for double-digit dividend growth.’

However, he said the fact that sales per square foot fell 4.3% in North America means ‘this potentially lucrative geography likely tops the list of global markets Ted describes as “challenging” just now’.

Key stats
Market capitalisation£405m
No. of shares out182m
No. of shares floating180m
No. of common shareholdersnot stated
No. of employees4125
Trading volume (10 day avg.)m
Profit before tax£9m
Earnings per share4.87p
Cashflow per share15.86p
Cash per share14.28p

Liberum backs McBride’s growth plan

Household products maker McBride (MCB) has set out new organic growth targets which Liberum believes are feasible and could lead to higher growth.

Analyst Wayne Brown reiterated his ‘buy’ recommendation and increased the target price from 235p to 260p on the company, which owns the Oven Pride brand among others. The shares dipped 0.7% to 222.4p yesterday.

‘The path to McBride’s new 2-2.5% organic growth target appears credible and increases visibility and confidence on how the company achieves the 7.5% earnings margin target,’ he said.

‘McBride’s wide reach and ability to tailor its offers to suit the limited assortment discounters should allow it to leverage their expansion into new territories. We see potential to expand margin beyond 7.5% through improving mix, further operating leverage and ongoing labour cost reduction.’

He added that breaking into new geographies and channels with mergers could ‘lead to higher growth’.

Key stats
Market capitalisation£337m
No. of shares out570m
No. of shares floating282m
No. of common shareholdersnot stated
No. of employees283
Trading volume (10 day avg.)2m
Profit before tax£-1m
Earnings per share-0.32p
Cashflow per share0.62p
Cash per share1.27p

Berenberg: bigger opportunities at Learning Technologies

Learning Technologies Group (LTGL), the digital learning group, has new targets to hit that will offer bigger opportunities, says Berenberg.

Analyst Benjamin May retained his ‘buy’ recommendation and increased his target price from 65p to 75p. The shares were trading at 59.1p yesterday.

‘Since initiating on Learning Technologies… [on] 31 August, we have increased our earnings estimates by 18%,’ he said. ‘While the shares are up by 25% since [then], management last week formalised a target to achieve earnings of £25 million by 2020, approximately 40% higher than our base-case estimates’.

May said when mergers and acquisitions were also factored in his ‘blue sky scenario’ now yielded a price target of 90p, and even new targets could be surpassed.

‘We value Learning Technologies on a blend between our peer valuation and an upside scenario. With new targets formalised and a new blue sky valuation, our price target moves to 75p,’ he said.

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Look up the shares

  • Capita PLC (CPI.L)
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  • Marston's PLC (MARS.L)
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  • Ted Baker PLC (TED.L)
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  • McBride PLC (MCB.L)
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  • Learning Technologies Group PLC (LTGL.L)
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