Three to buy
DX
(Shares) Logistics, freight and courier group DX is a key player in the business-to-business and business-to-consumer delivery markets in the UK. The British parcel market is worth around £7bn per year and is expanding by 10% a year; DX accounts for around 1.5% of deliveries. Competition is fierce but DX has concentrated on small and medium-sized businesses and good customer service. “Curiously”, its shares are trading at a quarter of their 2017 level, so this is a good time to buy in. 30p
Learning Technologies Group
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(The Sunday Times) E-learning and software company Learning Technologies Group (LTG) has acquired America’s GP Strategies, which has four times as many staff and generates twice the revenue; it has a strong global presence and good connections with the likes of HSBC and Microsoft. LTG now boasts a range of software and services used by companies worldwide to train, manage and hire staff, and could do very well from the move to online training alternatives as hybrid working becomes the norm. 178p
Escape Hunt
(The Mail on Sunday) Escape rooms – venues with themed rooms where groups of people try to get out by solving puzzles within an hour or so – “have earned fans from Bangkok to Birmingham”. Escape Hunt, “a pioneer in the field”, manages 15 venues in the UK. Lockdowns have hurt the shares, but the company has launched virtual games that can be played at home and is profiting from landlords’ rush to let out locations at lower prices post-pandemic. 33p
Three to sell
AO World
(The Sunday Telegraph) AO World is a “friendly and efficient” deliverer of household appliances. It benefited from the virus as people stuck at home shopped online, “but that... spree won’t be repeated every year”. AO World has issued a second profit warning in two months after poor recent sales growth. It is also struggling to “crack the German market” owing to fierce competition. The firm faces “an uphill battle” against established rivals. Avoid. 132p
Avon Protection
(Shares) Protective-equipment firm Avon Protection delivered its first profit warning in August, and produced a second this month. Now it has revealed delays on orders for its body-armour business and announced a review of the division. The company “hinted at big impairments to results for the 12 months to 30 September”; revenue for its body-armour sector is expected to be “well below” the previously estimated $40m. This is the “latest in a series of setbacks” that have wiped 75% off the shares since their October 2020 record high. The board has lost credibility and the prospect of expensive acquisitions to revive growth is unappealing. Sell. 1,115p
Ted Baker
(Investors’ Chronicle) Losses at “beleaguered” retailer Ted Baker have narrowed recently. The group is expecting to be net cash positive by the end of its financial year at the end of January. But its long-term performance “does not inspire great optimism”. Revenue is down by over a third compared with the first half of 2019 and online sales have fallen by 14.2% year-on-year. “There is only so much that can be attributed to the pandemic.” Sell. 140p
...and the rest
Investors’ Chronicle
Luxury-clothing brand Burberry’s results for the six months to the end of September revealed that revenue was back to pre-pandemic levels. The group reinstated its half-year dividend and will resume a share-buyback programme; it has struggled with store closures throughout the pandemic, however, and could continue to do so if lockdowns resume worldwide. Hold (1,846p). Pub operator Young’s says sales in the half-year from 12 April were just 1% below 2019 levels despite ongoing Covid-19 restrictions. Hold (1,467p).
The Mail on Sunday
Warehouse specialist Urban Logistics is growing as companies seek warehouses to stock goods amid the online-shopping boom. It lets its locations to the likes of Amazon. It has a history of generous dividends, and is moving to the main market from Aim in December, which should boost the shares further. Buy (170p).
The Daily Telegraph
City of London Investment Trust has a “venerable portfolio” dating back to the 19th century. It extended its run of annual dividend increases to 55 years this year “thanks to its savvy use of dividend reserves”, which allowed it to continue payouts throughout the pandemic. Hold (388p).
Shares
BlackRock Smaller Companies is on an unusually wide discount of 6.5% to its net asset value (NAV) – so this is a good time to buy and tap into “the strength of the UK smaller-company universe”. The trust returned 156.7% over the last five years, compared with 98% for the UK Smaller Companies sector (2,010p).
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