Top UK Stocks to Watch: Boohoo sales grow faster than expected

Boohoo continues to deliver strong double-digit topline growth, Bellway sees demand and prices for homes continue to increase, Ashtead returns to growth after a tough year, AstraZeneca remains hopeful on its coronavirus treatment, and Avast to help small businesses with cybersecurity.

UK

Top News: Boohoo sales grow in the UK and US but lag elsewhere

Boohoo reported strong sales growth in the first quarter of its financial year thanks to a surge in demand in the UK and the US, keeping the online fashion retailer on course to deliver another year of progress.

Revenue in the three months to the end of May rose 32% to £486.1 million from £367.8 million. That came in ahead of the £461.7 million forecast by analysts. Notably, the growth was driven by its two biggest markets in the UK and the US, which offset a fall in sales in Europe and elsewhere.

That is ahead of the 25% annual sales growth that Boohoo is targeting over the full year, alongside an adjusted Ebitda margin of 9.5% to 10%.

Boohoo said it has now successfully integrated its new brands - Dorothy Perkins, Wallis and Burton – onto its platform. Meanwhile, the new Debenhams digital department store has been launched.

It has also opened its new distribution centre in Wellingborough, which should be operational on schedule in the second quarter of the financial year.

‘I am delighted with our performance in the first quarter, particularly as it was always going to be challenging to produce strong growth rates on last year, when lockdowns around the globe drove such high traffic to online retailers. The two year CAGR of 38% highlights the group’s continued phenomenal growth, with revenues having increased 91% over the last two years, with particularly strong performance in key markets such as the UK and US, where sales have more than doubled,’ said CEO John Lyttle.

Where next for the Boohoo share price?

Boohoo share price has been range bound since early May, capped on the upside by the 50 sma around 331p and on the downside by 300p. Boohoo trades at the upper end of the range.  

Whilst the price is edging lower, the up-trending MACD keeps buyers hopeful. However, any recovery would need to break above the 50 sma, a level which the share price has failed repeatedly to meaningfully break above last week and this week. 

A break above the 50 sma could bring the 100 sma at 335p into play before buyers look towards 347p high April 22. 

A move below 320p could see sellers gain traction and head towards 300p and 295p. 

Bellway capitalises on rising demand and higher prices for homes

Housebuilder Bellway said demand for homes is continuing to recover to pre-pandemic levels while prices keep heading higher.

Average reservations between the start of February and June 6 came in at 239 per week. That is up over 51% from the 158 reservations being made per week last year, when it was negatively hit by the pandemic. However, it remains slightly below the 244 reservations per week being made in the same period in 2019, before the pandemic erupted.

Still, demand remains strong. Its forward order book has jumped in value to £1.89 billion from just £1.56 billion at the end of May 2020 and £1.64 billion at the end of June 2019.

Bellway reaffirmed its ambitions to build 10,000 homes in the current financial year as a whole, up from 7,522 homes in the last financial year but below the 10,892 homes delivered the year before.

However, lower completions should be offset by higher prices. Average selling prices are expected to exceed £300,000 this financial year compared to £293,054 the year before.

Bellway said it has also made a ‘record investment’ in land to ensure it has the platform it needs to continue growing over the coming years and to improve its margin. It said it has 15,982 plots of land contracted compared to just over 10,000 a year ago.

Bellway ended the period with net cash of £408 million, having turned from net debt of £157 million at the end of May 2020.

‘We have continued our front-footed approach to land acquisition, making a record investment in new sites, thereby enabling us to grow sales outlets and meet the ongoing demand for new homes in the years ahead.  This disciplined investment approach, together with our strong balance sheet, ensures that Bellway is in a good position to continue its long-term growth strategy,’ said chief executive Jason Honeyman.

Bellway shares were trading 0.1% lower in early trade this morning at 3482.5p.

Ashtead returns to growth following a tough year

Ashtead said it returned to growth in the final three months of its financial year, helping cushion the initial blow caused by the pandemic, and is on course to deliver further topline growth going forward.

The equipment rental firm said rental revenue was up 15% in the final three months of its financial year to the end of April to £1.09 billion. Overall revenue was up 23% to £1.27 billion. Ebitda grew by 30% to £552 million. Rental revenue missed the £1.18 billion forecast by analysts, but earnings came in markedly higher than the £499 million expected.

‘We returned to growth in the fourth quarter with rental revenue up 15% over last year and up 14% when compared with the fourth quarter of 2018/19, both at constant exchange rates.  This completes a year of market outperformance across the business with full year rental revenue up 1% at constant exchange rates,’ said chief executive Brendan Horgan.

That represented a significant improvement compared to the rest of the year, which saw Ashtead suffer as the pandemic weighed on demand. Annual rental revenue edged up just 1% to £4.60 billion with Ebitda inching up 1% to £2.37 billion. Once again, rental revenue missed expectations, but earnings were slightly better than anticipated.

Annual adjusted pretax profit was down 2% to £998 million, with reported pretax profit down 1% to £936 million.

Ashtead said it will pay a final dividend of 35.0 pence after reporting record free cashflow of £1.38 billion, which was impressive compared to the £792 million delivered the year before. That takes the payout for the full-year to 42.15p, up from 40.65p last year.

‘We have shown that our business can perform in both good times and more challenging ones.  We enter the new financial year with clear momentum, strong positions in all our markets, supported by high quality fleet, a strong financial position and our exciting new Sunbelt 3.0 strategic plan, positioning us well to respond to market conditions and capitalise on opportunities,’ said Horgan.

Ashtead said it is aiming to deliver 6% to 9% rental revenue growth in the new financial year and deliver free cashflow in the region of £600 million to £800 million.

Ashtead shares were trading 0.7% lower in ealy trade this morning at 5056.0p.

AstraZeneca remains hopeful on coronavirus treatment

AstraZeneca said the latest results from a trial testing the effectiveness of its antibody combination designed to prevent people exposed to the virus from experiencing symptoms showed it failed to meet its primary endpoint.

The trial assessed the safety and efficacy of AZD7442, a long-acting antibody combination, in preventing coronavirus symptoms in people recently exposed to the virus. The trial involved over 1,100 volunteers.

Although it did not prove effective in protecting people already exposed to the virus, the results suggest it could protect people who have not yet been infected. Other trials are ongoing to explore this possibility further.

‘While this trial did not meet the primary endpoint against symptomatic illness, we are encouraged by the protection seen in the PCR negative participants following treatment with AZD7442. We await results from PROVENT, our pre-exposure prevention trial and TACKLE, our treatment trial in preventing more severe disease, to understand the potential role of AZD7442 in protecting against COVID-19,’ said Mene Pangalos, the executive vice president of biopharma R&D.

Notably, AstraZeneca has already signed a $205 million deal to supply up to 500,000 doses of AZD7442 to the US government once it has been approved by the Food & Drug Administration. The company said it is now in talks about the ‘next steps’.

AstraZeneca shares were trading 0.6% higher in early trade this morning at 8391.5p, edging close toward its highest level since November.

Avast to help UK small businesses bolster their cyber security skills

Avast has struck a new strategic partnership to become the exclusive provider of cybersecurity tools for the national network of the UK’s largest networking group for small businesses, Enterprise Nation.

The cybersecurity firm said the partnership will see more than 500,000 small businesses across the UK have access to its services to ensure they can operate safely in a digital world. Avast claims that four in ten businesses and one in four charities have reported being hit by a cyber-attack in the last year alone, with the pandemic thought to have led to an increase in attacks.

‘SMBs are the lifeblood of the UK economy, and they have faced unprecedented challenges in recent times, including temporary closures of their businesses, implementing remote working, and scaling e-commerce for sales and customer communication. For many, they have had to do this without dedicated, or at best minimal, IT support in the face of increased cyberattacks,’ said Marc Botham, the vice president of Avast’s Worldwide Channel and Alliances.

‘The focus now must be on post-Covid business recovery and growth. We are committed to working with Enterprise Nation to support SMBs by providing them with the tools, resources, and insights they need to optimise their digital possibilities securely and effectively.

Enterprise Nation engages with around 60,000 founders of small businesses each month and Avast is keen to tap into that pool.

Avast shares were trading 0.3% higher in early trade this morning at 489.2p.

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