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The Expert View: SIG, Unilever and Burberry

Our daily roundup of analyst commentary on shares, also including Redrow and Horizon Discovery.

by Michelle McGagh on Feb 02, 2018 at 05:00

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Key stats
Market capitalisation£920m
No. of shares out592m
No. of shares floating549m
No. of common shareholdersnot stated
No. of employees10315
Trading volume (10 day avg.)1m
Profit before tax£131m
Earnings per share-20.14p
Cashflow per share-13.33p
Cash per share21.76p

Shore Capital: SIG whistleblowing will have limited impact

Whistleblowing over historic overstatement of profits at insulation group SIG (SHI) has impacted shares but Shore Capital says current management should be applauded for unearthing and dealing with the issues.

Analyst Graeme Kyle retained his ‘buy’ recommendation on the shares, which fell 4.2% to 155.8p yesterday.

‘SIG [has] announced that following a whistleblowing has discovered that recoveries from suppliers, such as supplier rebates, were overstates, some deliberately, at end full-year 2016 and end of half-year 2017,’ he said.

‘This comes hot on the heels and is, we believe, related to the revelation earlier this month that SIG supplier payments had been window dressed in full-year 2016.’

The effect of the latest discovery is that profits were overstated by around £2.5 million in half-year 2017 and by £3.7 million in full-year 2016, he added.

However, Kyle added that the problem was contained to one division and ‘is due to malpractice by a few individuals...who have now been dealt with’, that the impact on shares should be contained as guidance for full-year 2017 had been maintained, and ‘credit should be given to the current management team for unearthing these issues’.

Key stats
Market capitalisation£113,032m
No. of shares out2,795m
No. of shares floating1,160m
No. of common shareholdersnot stated
No. of employees168832
Trading volume (10 day avg.)3m
Turnover46,138m EUR
Profit before tax7,895m EUR
Earnings per share1.59 EUR
Cashflow per share2.15 EUR
Cash per share1.13 EUR

Good progress at Unilever, says Hargreaves

A year on since Unilever (ULVR) spurned Kraft Heinz’s advances and management has made ‘good early progress’, says Hargreaves Lansdown.

Charlie Huggins, manager of the HL Select UK Growth fund said full-year results from the group showed growth in sales, higher margins, and an ‘impressive’ rise in free cashflow that will see UK investors receive a 14% increase in the fourth quarter payout.

‘While the initial signs are encouraging, Unilever still has much to do if it is to sustain this momentum over the coming years,’ he said. ‘The world for all consumer goods is becoming tougher, with the internet having opened the way for smaller brands to reach a larger audience.’

He said Unilever was in the ‘fortunate position’ of transitioning to a new shopping landscape with well-known brands and a ‘formidable geographic footprint’.

‘Providing Unilever continues to become even more efficient and even more agile we see no reason why it can’t continue to thrive,’ said Huggins.

Key stats
Market capitalisation£6,628m
No. of shares out421m
No. of shares floating389m
No. of common shareholdersnot stated
No. of employees9828
Trading volume (10 day avg.)3m
Profit before tax£637m
Earnings per share64.86p
Cashflow per share99.32p
Cash per share189.48p

Jefferies initiates coverage on Burberry

Jefferies has initiated coverage of Burberry (BRBY) which it said may be ‘unique’ but has been a ‘prolonged’ underperformer that will take time to turn around.

Analyst Flavio Cereda initiated coverage with a ‘hold’ recommendation and target price of £16.50 on the shares, which were trading at £15.67 yesterday.

‘While we recognise Burberry’s unique standing as the sole British luxury brand of size, we also acknowledge its prolonged underperformance and that its current ‘rebranding’ phase will take time to finalise with important risk elements attached to it,’ he said.

‘As a result, we see limited upside in the stock at this time and initiate with a “hold” rating.’

Key stats
Market capitalisation£2,253m
No. of shares out370m
No. of shares floating237m
No. of common shareholdersnot stated
No. of employees2130
Trading volume (10 day avg.)1m
Profit before tax£324m
Earnings per share69.70p
Cashflow per share70.25p
Cash per share16.77p

Buy Redrow after share price fall, says Liberum

The fall in Redrow (RDW) shares seen since the beginning of the year has created a buying opportunity at the housebuilder, says Liberum.

Analyst Thomas Buisson reiterated his ‘buy’ recommendation and target price of 730p on the stock, which rose 1.5% to 608p yesterday.

‘Redrow’s shares have fallen more than 8% since the beginning of the year due to investor fear around earnings momentum,’ he said.

‘Recent updates from peers indicate that the sales market has returned to a more normal pace, which we believe continues to be supportive of volume growth at the smaller builders.’

Buisson predicted profit before tax of £163 million for the second half of 2017, up 16% on the first half.

‘Shares trade on 2018 price/earnings of 7.2x, a 20% discount to sector on 9.1x,’ he said.

Key stats
Market capitalisation£318m
No. of shares out149m
No. of shares floating138m
No. of common shareholdersnot stated
No. of employees247
Trading volume (10 day avg.)m
Profit before tax£-7m
Earnings per share-12.09p
Cashflow per share-7.87p
Cash per share5.85p

Numis: Horizon trading at discount despite strong growth

Gene-editing company Horizon Discovery (HZD) is trading at a ‘significant’ discount to peers despite matching their growth, says Numis.

Analyst Paul Cuddon retained his ‘buy’ recommendation and target price of 300p on the shares, which fell 8.2% to 212p yesterday.

The company expects to report 51% sales growth for full-year 2017 to £36.4 million, driven by higher margin diagnostic and biomanufacturing products and the acquisition of Dharmacon.

‘Having delivered savings throughout the year, Horizon achieved profitability in the fourth quarter and with the integration of Dharmacon ongoing is well placed heading into 2018 where the outlook for growth remains strong,’ he said.

‘The shares trade on 5x enterprise value/2018 sales, which is a significant discount to the wider tools peer group at 7x, delivering similar underlying growth and gross margins.’

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  • Unilever PLC (ULVR.L)
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  • Burberry Group PLC (BRBY.L)
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  • Redrow PLC (RDW.L)
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  • Horizon Discovery Group PLC (HZDH.L)
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