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The Expert View: Provident, JD Sports and Savills

Our daily roundup of analyst commentary on shares, also including Tate & Lyle and National Express.

by Michelle McGagh on Jan 17, 2018 at 05:00

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Key stats
Market capitalisation£1,220m
No. of shares out148m
No. of shares floating143m
No. of common shareholdersnot stated
No. of employees3261
Trading volume (10 day avg.)1m
Profit before tax£350m
Earnings per share179.95p
Cashflow per share197.54p
Cash per share151.38p

Peel Hunt: profitability problems at Provident

Doorstep lender Provident Financial (PFG) may be working through its issues but there remains ‘significant uncertainty’ over future profitability, says Peel Hunt.

Analyst Stuart Duncan retained his ‘hold’ recommendation and target price of 870p on the stock after the company revealed its home credit division was on track to lose £120 million for 2017, at the upper end of previous forecasts for losses. The shares slumped 10.7% to 822.6p yesterday on the news.

‘Our current forecast profit before tax of £125.6 million looks overly optimistic,’ said Duncan. ‘The shares currently trade on c.10x December 2018 earnings, although there remains significant uncertainty as to the level of profitability going forward.’

Key stats
Market capitalisation£3,786m
No. of shares out973m
No. of shares floating405m
No. of common shareholdersnot stated
No. of employees16218
Trading volume (10 day avg.)2m
Profit before tax£309m
Earnings per share18.38p
Cashflow per share25.37p
Cash per share25.44p

JD Sports profit upgrade something to cheer, says Hargreaves

Sportswear retailer JD Sports (JD) has upgraded its profit forecasts and although performance isn’t as strong as before, it has maintained momentum in a tough market, says Hargreaves Lansdown.

The company upgraded its profit forecasts for the year to £300 million after robust trading in the second half, with like-for-like store sales rising 3%.

The shares were up 6.2% at 388.3p yesterday on the news.

‘The festive season was a test of mettle for retailers, and one which has highlighted the gulf between the strong and weak players in the sector. JD sports falls into the former category,’ said analyst Laith Khalaf.

‘Performance was no means as stellar as it has been in recent times, but then conditions are tough on the high street right now, thanks to the financial pressure on the UK consumer. JD Sports was probably insulated to some extent by its purchase of Go Outdoors, as the December cold snap prompted shoppers to stock up on winter warmers.’

Key stats
Market capitalisation£1,410m
No. of shares out142m
No. of shares floating132m
No. of common shareholdersnot stated
No. of employees32361
Trading volume (10 day avg.)m
Profit before tax£143m
Earnings per share47.72p
Cashflow per share62.27p
Cash per share159.93p

Savills cash haul provides opportunities, says Numis

Estate agents Savills (SVS) has been buoyed by performance in the UK and Asia and the cash accumulated by the company could allow further acquisitions this year, says Numis.

Analyst Chris Millington retained his ‘add’ recommendation but increased the target price to £11.20 after a full-year trading update highlighting better than expected performance for 2017.

‘This is another strong performance from Savills, which has clearly performed very well in the UK and Asia and is benefiting from its broader geographic scope and its asset management activities,’ he said.

‘While we leave estimates unchanged for 2018, we note Savills’ past record of outperforming forecasts and also that we expect net cash of c.£100 million at year-end, which clearly gives scope for earning enhancing acquisitions.’

The shares rose 2.9% to 993.5p yesterday.

Key stats
Market capitalisation£3,202m
No. of shares out465m
No. of shares floating458m
No. of common shareholdersnot stated
No. of employees4146
Trading volume (10 day avg.)2m
Profit before tax£437m
Earnings per share54.12p
Cashflow per share85.74p
Cash per share56.17p

Jefferies: a new start for Tate & Lyle

A new chief executive at Tate & Lyle (TATE) means a fresh start for the group, says Jefferies, which believes now is the time for re-evaluation.

Analyst Martin Deboo retained his ‘buy’ recommendation and target price of 750p on the stock after Tate announced chief financial officer Nick Hampton would succeed Javed Ahmed as chief executive.

‘We view the chief executive transition positively and see it as a catalyst for further re-evaluation of the shares by the market,’ he said.

‘We see three priorities for Hampton: keeping operational performance humming, turbocharging the specialty food ingredients strategy, and broadening the shareholder base. We have some confidence that Hampton can deliver on all of these. A fresh start for Tate beckons.’

The shares were flat at 689p yesterday.

Key stats
Market capitalisation£1,938m
No. of shares out512m
No. of shares floating439m
No. of common shareholdersnot stated
No. of employees44977
Trading volume (10 day avg.)m
Profit before tax£341m
Earnings per share21.85p
Cashflow per share52.95p
Cash per share62.16p

Liberum: US tax reform to accelerate National Express earnings

National Express (NEX) will benefit from US tax reform and continued strong trading and Liberum believes the bus operator deserves its premium rating.

Analyst Gerald Khoo retained his ‘buy’ recommendation and target price of 390p on the shares, which fell 2.6p to 378.8p yesterday.

He said the cuts to US tax rates would provide a ‘modest benefits’ to earnings per share but that benefit was moderated by the starting point for the tax impact being worse than expected.

‘We raise our 2018 and 2019 earnings per share forecasts by 3%,’ he said. ‘Current trading remains encouraging, but we are mindful of the potential translation risk if the US dollar continues to depreciate. Overall, with lower risk and greater diversification, the premium rating remains deserved.’

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Look up the shares

  • Provident Financial PLC (PFG.L)
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  • JD Sports Fashion PLC (JD.L)
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  • Tate & Lyle PLC (TATE.L)
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  • National Express Group PLC (NEX.L)
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  • Savills PLC (SVS.L)
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