JD Sports goes shopping, Restore makes largest ever acquisition and Speedy Hire beats expectations

“After a terrible five days last week, the FTSE 100 is doing its best to claw back some of the lost territory with a 0.2% rise to 6,934 on Monday,” says AJ Bell Investment Director Russ Mould.

JD Sports

“Sports retailer JD Sports Fashion made a splash after announcing the $558m acquisition of US rival The Finish Line – giving it a real footprint across the Atlantic.

“Executive chairman Peter Cowgill described the deal as ‘transformational’, a word the market has rightly learned to dread. Many big strategic deals often end up being transformational in the worst possible sense.

“JD has some credit in the bank though. Despite operating in an extremely competitive and structurally challenged retail sector its operational and financial performance has, for the most part, been hugely impressive.

“Investors will be hoping the complications of this US deal will do nothing to threaten that track record, assuming both sets of shareholders approve the transaction.”

Restore

“Support services group Restore is a perfect example of how boring can sometimes be beautiful. Over the past five years, its revenue has increased by 307% and its adjusted pre-tax profit has increased by 403%.

“Restore has now announced its largest acquisition to date, spending £88m on TNT UK’s records management business.

“The idea of storing boxes in a big room for accountants, lawyers and other organisations may sound perplexing in today’s digital world, yet Restore has shown over the years that paper is not disappearing completely.

“Analysts believe the TNT acquisition could improve group earnings per share by 8% to 9% after the first full year of ownership. That goes some way to explaining why its share price is up by a similar amount today.”

Speedy Hire

“Tools and equipment hire business Speedy Hire says its full year pre-tax profit will be ahead of expectations.

“On one hand, it is impressive considering one of its biggest clients, Carillion, went into liquidation in the period. On the other hand, it shows how its business is very hard to predict.

“Speedy has displayed a tendency over the years to either exceed or miss earnings forecasts.

“Fundamentally, improving asset utilisation and achieving greater operational efficiencies are two of the most important goals for a business like Speedy Hire. It really needs a healthy market backdrop in order to be able to achieve these goals.

“Recent UK construction figures suggest there was a slight pick-up in sector activity earlier this year versus weakness in late 2017. The next test for the industry’s health will come on 4 April with the latest round of monthly construction PMI data.”

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