Dairy Crest (LSE: DCG), Marks and Spencer (LSE: MKS) and Experian (LSE: EXPN) are all rising today, although each company is heading higher for a different reason. Here’s what you need to know.
Profit slumps, shares jump
Dairy Crest jumped this morning after the company revealed a 95% slump in first half profit. However, the company also revealed that it had inked an agreement to sell its dairy assets.
Dairy Crest’s profit before tax fell to £0.9m during the six months ended 30 September, down from £19.7m as reported in the year-ago period. Profit slumped after the company was hurt by a loss in its dairies business, which accounts for 70% of revenue. Total group revenue only expanded by 1% to £682m.
Nevertheless, Dairy Crest has now decided that it will sell the assets of its dairies operations to Müller UK & Ireland Group for £80m. Management has stated that this deal should boost long-term profitability, reduce costs and increase efficiency. After today’s announcement and loss at the dairies business, it’s easy to see how disposing of the dairies business will benefit the company.
Indeed, excluding the dairies arm, Dairy Crest’s main business is the production of consumer goods such as Cathedral City cheese and Country Life butter, giving the company many similar qualities to consumer goods giant Unilever.
Pushing higher
Marks and Spencer is pushing higher once again today, after the company reported quarterly results on Wednesday. Despite the fact that the company reported its 13th quarter of declining sales, the group impressed the market with news that, for the first time in four years, half-year profits had increased. Profits rose 3.2% during the first half, driven by widening margins. During the first half the group’s gross profit margin increased by 1.2 percentage points.
Further, it was management’s outlook really got investors excited about Marks’ prospects. Management believes that for the full-year the group’s gross margin would escalate by between 1.5 and 2 percentage points.
This margin growth comes as Marks’ infrastructure investments, made over the past few years, really start to pay off and yield results. Additionally, Marks has promised further margin growth over the next few years as it bypasses third parties in its supply chain and reduces inventory levels. With these initiatives taking place, investors are rushing to get their hands on Marks’ shares ahead of rapid growth.
Steady growth
Experian is rising today after the company reported its first half results. For the period, the company reported revenue growth of 5% and earnings per share growth of 6%. Moreover, during the first half operating cash flow expanded by 17% year on year and the company hiked its dividend payout by 7%.
Today’s news is yet another remained that Experian’s growth rate is not planning to slow any time soon. Indeed, over the past five years the group has managed to more than double earnings per share. City analysts expected high single-digit earnings growth for the next two years.
However, with earnings growing rapidly investors are willing to pay a premium to get their hands on Experian’s shares. The company currently trades at a forward P/E of 16.1.
