Today I’m running the rule over three Footsie newsmakers.
Powering down
Another financial release from the one of UK ‘Big Six’ energy providers. Another chance to reflect on the surging progress of the independent suppliers.
This time it was the turn of SSE (LSE: SSE), the firm advising that it shed 370,000 retail customers during the year to March 2016, despite the company introducing fresh rounds of tariff cuts during the period
Chief executive Alistair Phillips-Davies commented that “the operating environment presented a number of complex issues, including the impact of prevailing commodity prices and intense retail market competition.”
Still, the City expects SSE’s earnings to tick 2% higher in fiscal 2017, resulting in a conventionally-attractive earnings multiple of 13.3 times. What’s more, a 5.9% dividend yield smashes the FTSE 100 average by some distance.
But with weak wholesale gas prices and rampant competition in the retail market persisting — and SSE also battling colossal capex costs — I reckon the firm remains a risk too far for cautious investors.
In rude health
Things are much more promising for healthcare property specialist Assura (LSE: AGR), in my opinion, as illustrated by Wednesday’s full-year results.
Assura saw pre-tax profit slip 21% to £28.8m in the period to March, although this reflected the impact of a £34.1m early debt repayment. On an underlying basis profits actually surged 78%, to £28.3m.
Assura saw its investment property rise 19.9% last year, to £1.1bn, it added, while rental takings grew 14.7% to £63.8m.
The company noted “[a] growing consensus that primary care must play a bigger role in health provision,” and that recent government studies “further emphasises need for appropriate primary care infrastructure and premises.”
Against this backcloth the City expects earnings to rise 11% in 2017, producing a heady P/E rating of 23.9 times. Still, a dividend yield of 3.9% helps take the sting out of this elevated reading. And I expect NHS investment in the primary care sector to keep driving solid earnings growth at Assura looking further ahead.
Fashion star
Fashion house Burberry (LSE: BRBY) once again disappointed the market mid-week, its latest trading update sending its share price 5% lower from Tuesday’s close.
The high-end fashion brand saw revenues dip 1% in the year to March 2016, to £2.5bn, forcing pre-tax profits almost 7% lower to £415.6m.
Once again Burberry was dragged down by enduring difficulties in Asia — like-for-like sales would have risen 3% last year excluding Hong Kong and Macau. But weakness in these territories actually forced underlying sales 1% lower.
And chief executive Christopher Bailey warned that “we expect the challenging environment for the luxury sector to continue in the near term.” Consequently Burberry expects profits for 2017 to register at the bottom end of current forecasts.
The City expects earnings to flatline this year, resulting in a reasonable-if-unspectacular P/E rating of 16.4 times. And a dividend yield of 3.2% lags the British big-cap average, too.
Still, I believe Burberry remains a strong stock bet for the long-term. Few fashion houses carry the formidable brand power of the London label. And with the company steadily ramping up its global presence, I reckon sales should shoot higher again once economic bumpiness in core territories improves.
