FTSE 100 higher as energy stocks advance, UK retail sales disappoint, Games Workshop shares reach new record high as it raises guidance and DFS reports robust trading

“The FTSE 100 enjoyed strong gains on Friday morning after mixed trading in Asia and the US last night,” says AJ Bell Investment Director Russ Mould.

“There were broad-based gains across the UK index with only a handful of constituents trading in negative territory early on. Oil majors BP and Shell continued to gather strength as oil and natural gas prices advanced amid escalating tensions between the West and Russia.

“UK households look set to face increased pressure thanks to higher energy bills in January with an increase in the energy price cap which could be bad news for consumer-facing businesses if it dampens Britons’ appetite to spend.

“Official data shows retailers saw worse than expected sales in October as further evidence emerged of the impact downbeat messaging ahead of the Budget had on consumer confidence. However, a separate piece of data suggested confidence did pick up in November once the Budget was out of the way.”

Games Workshop

“Shares in fantasy miniatures outfit Games Workshop traded at record highs as the company revealed trading is running notably ahead of expectations for the first half of its financial year.

“A key feature of the strong numbers is a big uplift in licensing revenue – driven by sales of the Space Marine 2 video game – and before the company announces its half-year results in full in mid-January there may be news on its tie-up with Amazon. The agreement, to create a Warhammer 40K film and TV series, is close to a self-imposed deadline of 31 December to agree ‘creative guidelines’.

“The beauty of licensing income is it comes with negligible extra cost for the company and therefore is highly profitable.

“Games Workshop looks to have significant untapped potential in its intellectual property and fantasy worlds. Globally, it has only just begun to explore market opportunities.

“Having staff passionate about games, painting and collecting miniatures is a bonus for its store network. Rather than simply being run by people who just show up to work and perform tasks as requested, the stores are manned by individuals as keen about the subject matter as the customers. That enthusiasm can be infectious and keeps customers loyal and the tills ringing.

“Being vertically integrated, Games Workshop controls everything from design to sales, allowing efficient cost optimisation and pricing control. It continues to be a unique business on the UK market and that has helped it attract a premium valuation.”

DFS

“Sofa seller DFS raised hopes it will return to profit in its current financial year as it built on a strong finish to its previous financial period. The company is also continuing to strip out costs and has appointed Marie Wall as interim chief financial officer.

“DFS will hope the reduction in interest rates and tentative recovery in the property market continue as these will be key ingredients for future demand.”

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