FTSE 250 hits new all-time high, Clipper rides the e-commerce wave, and renovation boom helps Grafton post record numbers

“The FTSE 100 continues to see out a fairly docile week so far, marking time until the start of tomorrow’s Jackson Hole summit of key economic decision makers,” says AJ Bell Financial Analyst Danni Hewson.

“The travel sector continues to enjoy some strength amid hopes for the easing of restrictions with a dip in the pound also helping to lift the UK’s flagship index.

“Weaker sterling boosts the relative value of the overseas earnings which dominate the FTSE, though the more domestic FTSE 250 was also moving higher too, reaching a new record level early on.

“The feeding frenzy on the UK market showed no sign of letting up as waste management firm Augean agreed to an offer from London-based investment manager.

“This continuing global corporate raid suggests bidders still see a lot of untapped value in the UK market. The danger is that if it doesn’t let up soon London will be left looking like a bit of wasteland for stocks.”

Clipper Logistics

“The accelerated shift to buying goods and services online is music to the ears of Clipper Logistics. It has experienced a sharp increase in sales and profit thanks to doing more work for existing customers, winning new clients and gaining scale in areas beyond its historical focus on the retail sector.

“Clipper was smart to recognise years ago the importance of handling returns from online orders. We may all be buying more goods via our mobile phones or laptops, but the volume of goods sent back to retailers has also been creeping up.

“During the height of the pandemic, there was a dip in returns activities among the likes of the major fashion retailers as consumers were reluctant to keep going to the Post Office to send back items, but this will no doubt revert to the previous trend as life gets back to normal.

“A smart business won’t limit itself to a finite pool of clients, hence why Clipper has been pushing hard to expand beyond retail. The latest financial results show good progress in the heathcare industry. Equally, they also show geographical expansion beyond the UK with progress in mainland Europe.

“Costs have understandably gone up. A growing business must spend money to make money, and the logistics sector has seen considerable wage inflation due to fierce competition for drivers.

“There are a lot of moving parts to Clipper as its operations are not simply about putting stuff on a truck to deliver to the customer, and then taking items back that aren’t wanted. The hallmarks of a strong business include the ability to run an efficient business, capture opportunities to make more money from clients, and keep moving forward with new initiatives. Clipper seems to have all these traits.

“Shareholders have been richly rewarded with the share price having doubled in the past 12 months and there is news of a 14.4% increase in the total full year dividend.”

Grafton

“If record results from DIY retailer and construction materials group Grafton are anything to go by then the home renovation boom which started in the pandemic has further to run.

“With impressive cash flow underpinning the resumption of dividends, the company is clearly looking forward with some confidence.

“The strength of demand from UK homeowners for expanding and improving indoor and outdoor space to live and work remotely in more comfort has led to issues with availability and been affected by rising raw material prices.

“This could well result in a steady stream of projects coming through as these pressures start to ease.

“For its part Grafton has streamlined its operations with the sale of its lower margin UK builders’ merchant arm.

“The main remaining parts of the business including its Selco distribution arm and Woodies DIY chain in Ireland are in excellent shape, with the company scoring highly in areas like accessibility and flexibility of service.

“Selco’s self-select operating model and good management of stock levels has left it well placed to capitalise on the strong demand and across the board Grafton’s businesses are generating strong returns thanks to their leading market positions and focused offerings.”

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