There was mild optimism in equities on Thursday after several days of soggy trade dragged on the FTSE 100 and major US equity indices as corporate updates took centre stage.

Getting the European session off to a good start, Tesla shares surged in the US premarket on strong growth in key lines that was felt in US futures overnight. This was built on Thursday morning by a string of upbeat releases from London-listed companies.

Strong earnings releases by the London Stock Exchange Group, Barclays, and Unilever and firmer oil prices helped London’s leading index increase 0.5% to 8,299.

“Higher oil prices and some good corporate results helped UK stocks to strong gains on Thursday morning,” said AJ Bell investment director Russ Mould.

“Oil was higher amid continuing tensions in the Middle East with observers wary of an impact on supply. This lifted heavyweight energy stocks BP and Shell and their significant weighting in the FTSE 100 meant the index slightly outperformed other European indices.”

Barclays

Barclays was among the top risers with a gain of 3% after following Lloyds in releasing better-than-expected earnings largely driven by lower provisions for bad debts.

Investors were rightly concerned going into the banking earnings season with lower interest rates threatening to erode profits. While lower interest rate have softened the top line, analysts seem to have overegged the negative impact of impairment charges, which has led to banks beating on earnings.

“Barclays has squeezed out a profit beat after better-than-expected impairments and a good grip on costs,” said HL’s Matt Britzman.

“We’re always treated to a different perspective when Barclays reports, with US credit card and investment banking performance differentiating it from more UK-focused peers. On the US card front, after a period of edging higher, default rates look to have stabilised at relatively low levels. 

“The slight disappointment comes from investment banking, where Barclays didn’t quite deliver the knockout performance that some might have hoped for in its trading division, especially after its US peers saw booming activity over the same period. The positive news is that investment banking profits were in line with expectations, and there was strong growth in fees & underwriting from the lulls of last year.”

“This should be taken as a decent set of results, but Barclays has had a material re-rating over the year so far. Much of that’s been justified, and the stock still looks to be trading at a discount to where it should be. However, the lack of visibility over the large investment banking division and how it meets medium-term growth targets is an anchor keeping things down”

Unilever shares enjoyed stronger-than-expected Q3 results, rising a little over 3%. Unilever announced a 4.5% increase in sales for its power brands, which account for more than 75% of group sales.

“A little over a year into the job and CEO Hein Schumacher has made genuine progress with the business. This is reflected in today’s slightly better-than-expected third-quarter sales,” Russ Mould said.

“This performance has been built on improved product innovation but also slowing down price increases. This helps explain why the company expects margin progression to slow overall in the second half of the year.

“Unilever faces a tricky balancing act between protecting its profitability and not alienating shoppers. This is a particular risk in developed markets where customers have the option of trading down to generic alternatives but less of an issue in emerging economies where these kinds of options are not readily available.”

Investors will hope the worst of Unilever’s troubles are behind them.

To buyers of inexpensive wines, the name of Virgin Wines UK (LON:VINO) will be well known, probably from the group’s continual advertising programme. 

To be fair, it is not just inexpensive, but also of higher quality bottles in which the company specialises. 

Its marketing really appears to be building up its active customer numbers, especially through its subscription schemes, which help to drive repeat purchases. 

The company’s customer acquisition model uses both physical and digital marketing to recruit new customers and then to convert them into active customers.  

The Business 

Virgin Wines was established in 2000 by the Virgin Group and was subsequently acquired by Direct Wines in 2005.  

In November 2013, the Virgin Wines management team, led by CEO Jay Wright and CFO Graeme Weir, successfully completed a buyout of the business. 

The business is headquartered in Norwich, with two fully bonded, national distribution centres in Preston and Bolton.  

Virgin Wines was established in 2000 by the Virgin Group and was subsequently acquired by Direct Wines in 2005.  

In November 2013, the Virgin Wines management team, led by CEO Jay Wright and CFO Graeme Weir, successfully completed a buyout of the business. 

It joined AIM in 2021. 

Over recent years the group has expanded its offering to include a high-quality craft beer and spirit collection, as well as corporate and consumer gift propositions, such as its highly popular Wine Advent Calendar. 

Since it started over two decades ago, the company has sold more than 100m bottles of wine to its customers and it has won multiple independent awards. 

Impressively, Virgin Wines today accounts for nearly 10% of the UK’s growing £850m online direct-to-customer wine market.  

The company stocks over 650 wines, sourced from more than 40 trusted winemaking partners and suppliers around the world, which it then sells to its large active customer base, the majority of whom are on one of the group’s subscription schemes.   

It has an active customer base totalling more than 150,000, most of whom are subscribed to one of the two subscription schemes, WineBank and WinePlan. 

The company drives the majority of its revenue through its fast-growing WineBank subscription scheme, using a variety of marketing channels, as well as through its Wine Advisor team, Wine Plan channel and Pay As You Go service. 

Earlier this month the company announced that it had agreed a strategic partnership with Ocado.com, the world’s largest dedicated online supermarket. 

Ocado customers will have access to an exclusive selection of 50 wines from the Virgin Wines portfolio, carefully curated by both the Virgin Wines and Ocado buying teams.  

Previously available only to Virgin Wines customers and sold as part of multi-bottle cases, this marks the first time these wines will be offered as individual bottles. 

Latest Results 

On Tuesday of this week, the company reported its Final Results for the year to 28^th June. 

On revenues of £59.0m (£59.0m), the group showed a £2.4m swing into a profit of £1.7m (£0.7m loss), with its earnings coming out at 2.4p (1.1p loss) per share. 

Cash and cash equivalents were up at the year-end to £18.4m (£13.5m), which is a very strong feature of the group’s operating model, built up through monthly subscriptions by its customers, with cash deposits by WineBank clients of some £8.1m. 

Management Comment 

CEO Jay Wright stated that: 

“In July 2024 we announced our FY24 Trading Update with both EBITDA and PBT ahead of expectations.  

Today we are delighted to reiterate a positive full year performance, with strong profitability.  

Despite a tough consumer backdrop, we are pleased to have increased new customer conversion rates, lowered cancellation rates and delivered a competitive cost per acquisition.  

We have also introduced several strategic initiatives to enhance our growth and are particularly encouraged by the initial results of our Warehouse Wines offering as well as the Vineyard Collection and Five O’clock Somewhere Wine Club. 

While the sector remains challenging, demand remains strong for our different subscription schemes and award-winning range of wines.  

This differentiated offering, underpinned by our unique open-source buying model and loyal customer base, positions us well to continue delivering growth. 

Looking ahead, and with Q1 trading being in line with our expectations, we remain confident of delivering a strong outturn in 2025 and beyond.” 

Analyst’s Views 

Analysts Wayne Brown and Anubhav Malhotra at Panmure Liberum rate the group’s shares as a Buy, with a Price Objective of 85p. 

For the year now underway to end-June 2025, they estimate £63.0m sales and pre-tax profits of £2.3m, generating 2.9p per share in earnings. 

For 2026, they foresee £66.0m sales, £2.6m profits and 3.3p earnings. 

In My View 

This group’s Management has disciplined its cost savings and built up its operating profile admirably. 

I love the market cap value of £22m compared to the group’s own cash of £10m, the group’s shares, at just 38p, could easily lift 50% and still offer Upside Value. 

Travis Perkins shares were deep in the red on Thursday after the building merchants released another downbeat assessment of their business and the wider environment.

Falling revenue and another reduction in their profit forecast were too much for some investors who offloaded the stock on Thursday and sent the shares down 6%.

Travis Perkins’ 5.9% revenue drop, driven by slow merchant trade, is at odds with the Labour government’s plans to fire up the economy with a wave of construction. The company’s Q3 update released today was devoid of any positives related to the promised recovery in housebuilding.

Indeed, Travis Perkins is so concerned about the near-term future that it reduced its 2024 operating profit guidance to £135m from the £150m guidance issued just a few months ago.

There were some bright spots in the group’s retail Toolstation unit, which enjoyed a 2.9% increase in sales in the UK and 9.6% in Benelux.

“It felt like only yesterday that Labour’s housing policy pledges were going to rejuvenate the UK property market and fire the sector back into favour,” said Mark Crouch, market analyst at investment platform eToro.

“However, Travis Perkins’ latest trading update does not offer any support to that narrative, in fact by the looks of these numbers, quite the opposite.

“Travis Perkins, the UK’s largest supplier of building materials, has slashed profit guidance for the second time in three months as revenues continue to fall. Weaker demand has been driven by a consumer that is still reluctant, and despite initial interest rate cuts, a feeling of uneasiness still lingers over the market.

“Along with battling the challenging market conditions, Travis Perkins, according to their new CEO, has become distracted and overly internally focused, which has further impeded the company’s overall performance, and is something they will need to put right fast if they are to reverse what is a worrying trend. While further rate cuts could be on the cards in November, for Travis Perkins, November can’t come soon enough.”

Nerves were still evident in London-listed stocks on Wednesday, as an early gain for the FTSE 100 was quickly sold into by traders as macroeconomic considerations dented risk sentiment.

There’s no one factor driving markets on Wednesday, but rather a combination of the upcoming UK budget, geopolitical tensions, and steadily increasing uncertainty around the US election.

Donald Trump has gotten his nose in front of the polls, and investors are becoming increasingly concerned about what a second term for Trump may do to the global economy.

The IMF recently downgraded its global growth target for 2025, citing concerns about potential trade wars and their impact on growth. Donald Trump’s recent suggestions he’s going to try his hardest to ignite an outright trade war with China will have contributed to the downgrade. 

“Caution is reigning on financial markets amid growing expectations that borrowing costs might come down slower in the US, the world’s largest economy, while political uncertainty and the threat of conflict spreading in the Middle East is also keeping investors a little more wary,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

After starting the session positively on Wednesday amid upbeat reports from Lloyds and Barratt Redrow, London’s leading index slipped back to trade down 0.2% at the time of writing.

Although the FTSE 100 was down as an index, there were some positive updates on the corporate front.

WPP shares rose 4% as revenue increased 1.4% in the third quarter, driven by robust demand in North America and Europe. The marketing giant also noted strength in its top ten clients, from which it earns a large proportion of its revenue.

Lloyds also had a positive session after reporting better-than-expected underlying profits, although provisions for bad debt were less than expected.

“There has been concern about the impact on consumer confidence from speculation ahead of the Budget but Lloyds paints a picture of improvement as its third quarter pre-tax profit beat expectations,” said Russ Mould, investment director at AJ Bell.

“The beat was driven by lower-than-expected impairments. The amount of bad debt being chalked up is still low and the bank and its customers will hope we’re now through the worst of the cost-of-living crisis.

“The other big positive surprise for investors was the quarter-on-quarter increase in the net interest margin – measuring the difference between what the bank pays out to depositors and charges those to whom it is lending money.”

Newly-merged Barratt Redrow shares ticked higher after giving investors reason to be hopeful with a decent forecast of completions for the year ahead.

Lloyds shares rose on Wednesday as investors digested the bank’s third-quarter earnings.

The backdrop of low UK economic growth and falling interest rates could have materially affected Lloyds’ earnings during the period, and investors would have been pleased to see Lloyds beat profit expectations amid lower-than-expected impairment charges.

Lloyds shares rose 1% despite third-quarter underlying profit slipping 8% to £1.9bn. This, however, was much better than the £1.7bn forecast by analysts.

Softer economic conditions had meant analysts had pencilled in a level of impairment charges which ultimately weren’t as bad as first thought, helping boost the bottom line.

Another major positive for investors was Lloyds’s income. There was a risk this would fall amid falling interest rates—which it did—but only marginally, from £4.5bn last year to £4.3bn this year.

The era of higher interest rates is over buu investors seem to be prepared to look through the fall profits and focus on stability.

“Lloyds is the first major UK bank to report third-quarter earnings, and it hasn’t disappointed. In tune with recent trends, impairment charges were better than expected and drove a good chunk of the pre-tax profit beat, as borrowers continue to stand firm. Loan and deposit numbers also looked encouraging, with new mortgages driving a big chunk of the loan book growth, a good sign that activity in the housing market is picking back up,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.

“Net interest margin was a touch better than expected, with deposit migration not quite as much of a headwind as some had feared. There is still an ongoing shift toward higher-rate accounts, but as rates come down that should ease.

“The decent margin performance and lower impairments should be a good read-across for names like NatWest and Barclays.”