UK shares: why Purplebricks, Chemring and K3 Capital are rising today

Three popular UK shares saw gains of 10% or more in early trade. Roland Head looks at the latest news from Chemring, K3 Capital and Purplebricks.

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This morning has brought strong results from Purplebricks Group (LSE: PURP), Chemring Group (LSE: CHG) and K3 Capital (LSE: K3C). These UK shares are popular with private investors. All three saw gains of 10% or more in early trading.

Purplebricks returns to profit

Purplebricks’ share price is up by 13% as I write, after the online estate agency reported a return to profit during the first half of the year. Management said the firm has seen “a strong market recovery”.

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Although revenue fell 6% to £44.2m, Purplebricks reported a pre-tax profit for the half year of £4.3m. This compares to a loss of £2.3m for the same period last year. Adjusted profits for the full year are now expected to be ahead of broker forecasts.

Today’s results highlight some encouraging trends. Fee income rose by 6% to £49.1m. This was helped by an increase in the number of new instructions, which rose by 8% to 35,387. Average revenue per instruction rose by 3% to £1,392. This suggests that Purplebricks is not having to discount its services to win new business — good news for profits.

Purplebricks says that it now has 4.8% of the UK market and ended the half-year period with £75.8m of cash on hand. Investors are likely to view today’s results as a sign that this UK share’s growth story is back on track.

Profits flare at Chemring

Chemring’s share price is up by 12% to over 300p this morning, after the defence group reported full-year profits that were ahead of broker forecasts.

Sales rose by 20% to £402.5m during the year to 31 October. This lifted the group’s underlying pre-tax profit by 31% to £51.7m. Adjusted earnings per share climbed 35% to 15.1p, ahead of broker forecasts of 14p.

The company says that its businesses have remained open and fully operational this year, despite the impact of Covid-19. There’s been “good progress” with new orders for countermeasures, such as flares that are used as missile decoys. Recent contracts include a $107m order in Australia to support the F-35 Lightning combat aircraft.

Management said expectations for 2021 are unchanged. Chemring’s current order book covers 78% of 2021 forecast revenue, suggesting a fairly stable outlook for the year.

This UK share is rising fast

The share price of business broker K3 Capital is up by almost 10% as I write, after the firm said that trading was ahead of expectations during the six months to 30 November. As a result, management expects to report half-year revenue of £18m. That’s more than double last year’s half-year revenue of £8m.

K3 Capital’s share price has risen by 40% over the last six months. This AIM-listed company appears to be in a strong growth phase, which management said has been helped by the recent acquisition of insolvency specialist Quantuma. It added that the company has entered the second half of the year with “strong momentum”.

CEO John Rigby owns 11% of this £140m business, giving him plenty of skin in the game. Mr Rigby said that he’s continuing to look for new acquisition opportunities and is confident of further progress.

According to broker forecasts, K3 Capital’s earnings will be largely unchanged this year, before rising by 40% to 16p in the 2021/22 financial year. At current levels, that leaves this growth stock trading on 14 times 2021/22 forecast earnings.

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Roland Head owns shares of K3 Capital. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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