Daily market update: Hornby, DFS, C&C, Trainline, Deliveroo

“Investors remain on the edge of their seat as they weigh up the impact of tariffs and whether ceasefire talks will yield an agreement between Russia and Ukraine. Despite a small bounce-back last night on Wall Street, nervousness prevailed across Asia and Europe on Thursday,” says Russ Mould, Investment Director at AJ Bell.

“The FTSE 100 was the outlier, moving 0.1% higher in early trading as investors bid up shares in the pharmaceutical, utility, banking and telecom sectors. NatWest was the FTSE’s biggest loser as it traded without the right to its next dividend.”

Hornby

“Hornby’s decision to delist from AIM is not a damning criticism of the UK stock market. When two shareholders — Phoenix Asset Management and Frasers — own 91% of the company, it doesn’t make sense to be a listed entity.

“Companies admit their shares for public trading to obtain a diverse shareholder base and access capital markets. In Hornby’s case, its shareholder base has become incredibly concentrated.

“Hornby has had a tough ride over the years and Phoenix has been an incredibly supportive and patient shareholder. Sometimes a business is better off away from the public markets and that looks to be the case with Hornby.”

DFS

“In a fragile market for retailers, it’s a pleasant surprise to see trading hold up so well at DFS. Big ticket items like sofas should, in theory, not be strong sellers when consumers are being cautious with spending. DFS must be doing something right to deliver such a resilient performance.

“Product innovation, such as sofas with wireless charging points and wine coolers, might help pique some shoppers’ curiosity, yet most people are looking for comfort first and foremost. Clever marketing has certainly helped, from data analysis to catchy adverts and partnering with influencers.

“With more people preferring to chill out at home rather than go to the cinema, DFS is capitalising on the structural shift in the market with sofas that contain speakers.

“Sofa, so good. The challenge is sustaining momentum and a lot of that is out of DFS’s hands. It will depend on the strength of the consumer and the UK economy avoiding a big wobble.”

C&C

“Magners owner C&C crashed after saying it wouldn’t hit earnings targets, blaming a tough economic environment and a cautious consumer.

“Activist investor Engine Capital won’t be happy as it has spent the past year pushing for change in the business.

“Having made progress with reshaping the board, including the appointment of former AG Barr boss Roger White to lead the company, all the ducks were in a row to drive a turnaround of the business. To now disappoint on trading is a massive blow to shareholders.”

Trainline

“Trainline needed a bumper trading update to help reassure investors worried about the threat posed by the impending arrival of Great British Rail.

“Instead, like passengers facing the prospect of a rail replacement coach service, they had to swallow growth in ticket sales at the bottom end of guidance. A buyback has done little to assuage market concerns.

“It is all well and good for the company to point out that the GBR ticketing app won’t appear until 2027 at the earliest and that the government has committed to a ‘fair, open and competitive’ market. However, a big selling point for Trainline is it enables people to navigate what is a complex ticketing set-up in the UK with several different operators.

“If GBR works as intended, the system should be simplified and it is unlikely that a state-backed platform would charge commission in the same way that Trainline does, leaving the business reliant on its brand recognition.

“Even if this competitive threat is some way down the track, the fact it is coming at some point means there is a measure of uncertainty about Trainline’s future prospects.”

Deliveroo

“Deliveroo’s results are like receiving a takeaway order with free prawn crackers but missing the fried rice. The company reporting its full year of profit along with positive free cash flow is a big milestone, but it is spoilt by a bleak assessment of the outlook.

“Deliveroo references an uncertain consumer environment — for people to splash out regularly on takeaways, they need to have a decent amount of disposable income and feel confident about their finances.

“Moving into groceries may help at the margin but it is unlikely to be enough to mitigate a major decline in takeaway volumes.

“These results come hot on the heels of Deliveroo announcing its exit from the Hong Kong market. The takeaways space is cutthroat and if you are sub-scale, it is hard to make it pay, so ultimately this was probably the right decision.

“However, it doesn’t exactly present a picture of a business which is on the front foot and the recent bid for Just Eat Takeaway by well-resourced tech investor Prosus means an already competitive landscape arguably just got even trickier.”

These articles are for information purposes only and are not a personal recommendation or advice.