FTSE in recovery mode, Glaxo cleans up, Ferguson beats expectations and AG Barr fizzes higher ahead of sugar tax

“Big gains on Wall Street as easing trade tensions set the scene for the FTSE 100 to move sharply back towards the 7,000 mark on Tuesday morning,” says AJ Bell Investment Director Russ Mould.

GlaxoSmithKline

“GlaxoSmithKline appears to be cleaning up its act and gaining a tighter focus on what it does best.

“We now know why it pulled out of the $20bn bidding for Pfizer’s consumer healthcare assets last week – it is now going to buy out the partner in its own consumer healthcare joint venture, Novartis.

“It says this will strengthen operational cash flows, something that should help to pacify critics who have been concerned about Glaxo’s ability to grow its dividend in the future.

“The deal is also important as it will enable the business to better plan for capital allocation in the future, namely money to be used for pharmaceutical research and development among other activities.

“Such a strategic move isn’t really a surprise given that chief executive Emma Walmsley said at the company’s financial results in February that improving the pharmaceuticals business was Glaxo’s main priority.”

Ferguson

“The plumbing supplies business previously known as Wolseley has reported better than expected half year results and confirmed plans to pay a $4 per share special dividend following the sale of its Nordic division.

“Although it flags challenging UK markets, that country has minimal contribution to group earnings. Ferguson is predominantly a US business and that market is looking healthy, according to the company’s outlook statement.

“Perhaps one of the key points to consider is the first line in its ‘principal risks and uncertainties’ section of the half year results. It flags new competitors and technology disrupting its market. Principally that is Amazon which is extending its reach to supply materials to plumbers.

“Half of Ferguson’s sales in the US are for bid work where tradesmen work hand-in-hand with the business before submitting a bid for a project. Ferguson will no doubt hope this close relationship gives it an edge over Amazon; however it clearly isn’t sitting on its hands.

“Ferguson last year appointed Nadia Shouraboura to the board as a non-executive director. She spent eight years at Amazon and was responsible for implementing a new retail supply chain. Her skills and contacts are likely to come in handy if Ferguson is to up its game in the world of e-commerce.”

AG Barr

“Full year results from soft drinks manufacturer AG Barr suggest the company is in good shape ahead of the imposition of a sugar tax on the industry next month.

“Management have been able to grow profit by 4.2% despite significant investment in the business and dealing with the impact of cost inflation. The dividend is hiked by 8%, reflecting confidence in the future.

“Barr, whose brands include Scotland’s favourite fizzy drink IRN-BRU, also moved early to get ahead of upcoming regulatory changes, such that 99% of the portfolio is now beyond the scope of the levy.

“Sales of IRN-BRU were up 8%, its biggest ever year of sales, although the period barely includes the shift to a lower sugar version. Investors will be watching closely to see if there is any drop off in demand when the company updates on first half trading in August.”

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