FTSE flat as Darktrace soars, Boohoo wins fashion feud, and Ocado beats expectations

“After a decent showing on Wall Street last night, European markets were less enthusiastic with most of the major indices struggling to find direction,” says Danni Hewson, Head of Financial Analysis at AJ Bell.

“The FTSE 100 could only muster up a nine-point rise to 7,415 with strength in healthcare stocks offset by weakness in financials and real estate.

“After coming under fire from a short seller about the state of its finances, Darktrace called in EY to review its books. Today we’ve had the findings from the report and they’ve essentially proved that the cybersecurity expert doesn’t have any skeletons in the closet, sending its share price soaring. Yes, there is some work to do with improving systems and controls, but nothing that impacts previous financial statements. Investors breathed a huge sigh of relief.

Boohoo

“The final score in the fight between two beauty and fashion sellers is Boohoo 1-0 Revolution Beauty. The latter’s board of directors is being overhauled after pressure from Boohoo and it looks like the two companies are going to work together amicably, rather than fight it out. As 26.6% owner of the beauty business, Boohoo has shown that it is not someone to mess around with.

“However, while it has secured the upper hand in this situation, one mustn’t forget Boohoo’s problems with its own business. The fast-fashion industry is in a fragile state, Boohoo’s margins are below historical levels and both its sales and profits have been falling. Perhaps it needs to sort out its own house before meddling in others’?”

Ocado

“There are two ways of looking at Ocado’s results. The business has generated a small EBITDA profit versus market forecasts of a loss. Sales are up across all of its divisions and clients are busy opening new fulfilment centres or reaping the benefits of Ocado’s system through improved operational performance. Ocado even believes it could win contracts outside of the grocery sector for its technology.

“However, a bear would point to ongoing pre-tax losses for the group, continued slow pace in signing up new partners, and pedestrian gains in the total number of active customers for its UK retail operations.

“That life isn’t getting any worse for the company is enough to satisfy the market. Although what matters to most investors is whether Ocado remains a takeover target. Rumours that Amazon wanted to buy the business breathed new life into the share price in recent weeks but the retail giant has remained quiet on the speculation.

“Amazon is already a master at robotic-led warehouses so one has to wonder why it would need to buy Ocado. Yes, it wants to be bigger in the food sector – but it could just become a technology customer rather than buy Ocado outright if it wanted to take advantage of the systems.”

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