FTSE 250 movers: Challenger banks up on CML mortgage data, silver hits Vedanta

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The FTSE 250 extended its winning streak to four days on Thursday, led by retailers and mortgage lenders.

Sports Direct reported a 59% collapse in underlying profit before tax for the year to 30 April, but the share price surged following a better than expected outlook and the appointment of a new finance director. Profit margins were hit by the weaker pound, as was widely expected and already baked into the share price, but the market was pleasantly surprised by management’s forecast for 5-15% earnings growth for the coming year.

Analyst Laith Khalaf at Hargreaves Lansdown cautioned that Sports Direct still faces challenging times as it tries to reinvent itself into the “Selfridges of sports”, launch in the US, and fight off concerns from shareholders and MPs about corporate governance and working conditions in the UK.

“All this while the weak pound is increasing costs, and the British consumer is facing rising inflation and weak wage growth, not a pretty combination for the price-sensitive shoppers who turn to Sports Direct for a bargain.”

Elsewhere in retail, Dixons Carphone was higher amid an encouraging update on the wider retail sales from the Office for National Statistics, which showed strong household goods volumes were behind a rise in UK retail sales in June. Household goods includes Dixons hot spots of electrical household appliances and audio and video equipment.

Mid-cap lenders OneSavings Bank and Virgin Money were higher, in line with some of their larger peers, on the back of strong UK mortgage lending figures. However, other challenger banks such as Shawbrook and CYBG were only slightly better than flat.

Gross mortgage lending reached £22.1bn in June, the Council of Mortgage Lenders revealed, which was up 9% on May’s lending and 3% higher than in June last year. Gross mortgage lending for the second quarter of 2017 was estimated at £60.3bn, which is up 3% on the first quarter of this year, up 6% on the second quarter of 2016 and the best Q2 for nine years.

“We just love these numbers,” said Investec analyst Ian Gordon, “so much for ‘election wobbles’. At the risk of restating the obvious, we see this as overtly positive for Virgin Money – which is growing the fastest – and for Lloyds – which is the biggest. Taken together, with Bank of England data showing improved pricing in May/June, this is simply wonderful.”

Security software group Sophos was higher as Morgan Stanley issued a bullish note where it lifted its target price to 550p from 450p. The company’s numbers were run through the bank’s new ‘X-ray’ global framework for evaluating subscription software business models and did “very well”, leading analysts to increase their operating margin assumptions.

Fallers included Euromoney Institutional Investor, ahead of a quarterly update from the business events and publishing company on Friday. We last heard from management at the time of interims, where sales declined 5% underlying in Q1 and Q2 grew 1%.

“Outlook comments noted that whilst the outlook for the commodities and banking markets were improving, the asset management sector was starting to experience headwinds,” recalled analysts at Numis, who also was mindful of a tougher prior year comparative in Q3 than Q2.

Miner Vedanta was down after an update that revealed the highest ever volumes for the first quarter. Mined metal production up 84% at 233kt, integrated silver production up 30% and zinc-lead metal production up 81%, leading to EBITDA more than doubling to INR2,404 crore.

On the outlook the company maintained its volume guidance and said dollar cost of production excluding royalties would be “slightly higher than previous year”, while remaining on track to reach mined metal capacity of 1.2m tpa by the 2020 financial year.

Qinetiq shares were down as analysts provided updates on the prior day’s update where, even though the outlook was reaffirmed, the shares reacted negatively to comments around slower than anticipated order activity in EMEA Services in the first part of the year. Goldman Sachs, for example, retained its ‘sell’ rating and reduce its 12-month price target to 253p from 255p, reflecting lower EPS estimates.

Moneysupermarket.com was not strutting its stuff despite reporting a 3% rise in adjusted operating profit for six months to the end of June. The price comparison site warned that operating profit will be at the lower end of the consensus range for the full year.

FTSE 250 – Risers

Sports Direct International (SPD) 334.60p 11.27%
Sophos Group (SOPH) 469.30p 3.23%
OneSavings Bank (OSB) 395.40p 3.02%
Virgin Money Holdings (UK) (VM.) 312.10p 2.60%
Dixons Carphone (DC.) 269.90p 2.43%
Pagegroup (PAGE) 490.40p 2.42%
Capita (CPI) 680.00p 2.33%
Ashmore Group (ASHM) 362.40p 2.17%
Bodycote (BOY) 835.50p 2.08%
Pennon Group (PNN) 826.00p 1.98%

FTSE 250 – Fallers

Carillion (CLLN) 64.55p -5.07%
Softcat (SCT) 381.30p -3.37%
Sirius Minerals (SXX) 30.60p -2.89%
Redefine International (RDI) 38.64p -2.72%
Moneysupermarket.com Group (MONY) 349.80p -2.67%
Drax Group (DRX) 324.50p -2.61%
QinetiQ Group (QQ.) 242.20p -2.42%
CLS Holdings (CLI) 205.00p -2.38%
Euromoney Institutional Investor (ERM) 1,093.00p -1.97%

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