Ryanair and McColl's Retail

‘The UK stock market follows Asia lower on Monday with a 0.7% drop in the FTSE 100 to 7,629 as trade war concerns continue to trouble investors. The blue chip index saw notable weakness in travel stocks, tobacco companies and housebuilders,” says Russ Mould, investment director at AJ Bell.

Ryanair

“Michael O’Leary may have to dust off some of his wacky cost saving ideas in order to deal with current financial pressures on the business.

“In the past the airline has suggested having passengers load their own luggage and that some planes should remove one of the toilets to accommodate extra seats, among many others ideas to boost revenue and profit.

“Ryanair has also previously talked about potentially offering event tickets, restaurant bookings and other travel-related services.

“The airline has certainly done a very good job so far at sweating its assets and making money from passengers beyond the price of an airline ticket. Yet first quarter results would suggest it needs to do more to cope with higher oil prices, higher pilot costs and yet another bout of strikes.

“Steps are already being taken by ordering new aircraft which have more seats and lower fuel costs, although they aren’t due for delivery for another few years.

“EasyJet recently made plans to bulk up its package holidays business in order to capitalise on its strong brand and squeeze more money out of its customers. Ryanair also has a holiday business albeit not one it talks about much – perhaps this situation may change if EasyJet makes progress with its proposition.”

McColl's Retail

“The convenience store operator has suffered a disappointing first half period with supply chain disruptions and unfavourable weather conditions.

“While those issues will hopefully sort themselves out, more worrying is a drop in margins due to cutting prices in order to stay competitive.

“Local shops are meant to have an advantage in that they can normally charge more for items than a supermarket as you’re paying for the convenience of being able to pick up a few items without having to travel too far.

“The timing of margin weakness isn’t ideal. McColl’s is currently in the process of sprucing up some of its stores and so is spending money on refurbishment. It really needs to keep driving up like-for-likes sales in its stores in order to support the business.

“Fortunately it isn’t under financial pressure at the moment as net cash flow from operating activities rose by 10.8% to £37.7m in the half year period, plus it is pursuing the sale and leaseback of many stores with the proceeds to be reinvested back in the business.

“Investors will want reassurance that it is only experiencing short term pains and that the strategic developments in the business will result in longer term gains.”

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