FTSE 350 Look Ahead: B&M, Dr Martens, Pennon, And More

The FTSE All Share Index Review is based on market capitalisations at the close on 30 May and announced on 31 May.

Susannah Streeter, head of money and markets, Hargreaves Lansdown:

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''Shopping basket sizes have been shrinking at Ocado and the retail side of the business can't benefit from the surge in demand to shop in bricks and mortar stores once more. But the falling share price also demonstrates that investors are losing patience with Ocado Solutions, which is mean to be the long-term powerhouse of the company, but demand for robotic technology for warehouses remains weaker than hoped, with fewer deals than expected coming through.

Although the joint venture with Ocado is struggling, M&S has staged a slick recovery and still spies further potential with this partnership. It is planning to deepen its collaboration with an Ocado Retail reset underway.

This will include leveraging the potential of its vast treasure trove of M&S customers. This announcement initially gave Ocado's share price a little bit more wind in its sails, helping it speed upwards briefly. But it's still expected to drop out of the FTSE 100 at the next reshuffle.

Other movers this quarter include IMI , formerly Imperial Metal Industries, based in Birmingham, which looks set to be promoted to the FTSE 100, from the FTSE 250. The engineering company has seen its share price surge by more than 20% year-to-date and it's lifted its full year earnings guidance following a strong performance in the first quarter.

It said the integration of recent acquisitions, including Heatmiser, purchased at the end of 2022, were progressing well and unlocking new opportunities for growth.

Capita , once a giant in the outsourcing industry, is among the companies which is in the promotion zone from the FTSE Small Cap into the FTSE 250. Its share price rose sharply in March after its turnaround strategy appeared to be bearing fruit.

Chief Executive Jon Lewis has been attempting to refocus the business, control costs and reduce debts, and a programme of disposals has been underway. The company is cash generative after years of outflows and revenues grew 2.4% on an adjusted basis last year.

The data breach at the company following a cyber-attack, which is still being investigated, has knocked some confidence. But shares have still risen by almost a quarter since the start of the year, easing its passage back into the FTSE 250 which it was relegated from in March 2022.''

Derren Nathan, head of equity research, Hargreaves Lansdown:

“The strong momentum seen in B&M's 'Golden' third quarter prompted the Company to narrow its guidance range for the full year results to be reported next week.
Underlying cash profits are now expected to land somewhere between £560m to £580m.

With inflation continuing to bite, investors aren't surprised to see B&Ms value focussed stores doing well. B&M stores in the UK make up the majority of Group revenues, and these have seen solid trading of late, but the Heron Foods convenience stores, and B&M France have been enjoying even greater growth.

It's a fine balance between keeping prices competitive and leaving a reasonable slice of revenues for the bottom line. Analysts are expecting some operating margin pressure, with forecasts suggesting a fall from 12.9% to 11.0%. At the half year point, debt levels didn't look too worrying, but investors would like to see continued strength in cash generation so as to support ongoing dividend payments and store openings.”

Susannah Streeter, head of money and markets, Hargreaves Lansdown:

''Dr Martens has stomped on investors' expectations, downgrading profit forecasts twice in three months. Operational problems at its Los Angeles distribution centre booted away hopes that the brand could kick off a rebound in sales after unseasonal weather put off shoppers in the Autumn.

The bottlenecks in the supply chain have disrupted operations in the US, which is its largest market, and investors will want to see more signs that these issues have finally been ironed out. Shares have fallen by 56% compared to the IPO price when it launched onto the London market in January 2021.

There were already concerns about the long-term growth for the brand, given the fashion world's fickle tastes and these operational difficulties have booted in fresh problems for the company.''

Aarin Chiekrie, equity analyst, Hargreaves Lansdown:

“Pennon's on track to deliver full-year results in line with management's expectations, guiding for lower revenues and higher costs across the second half. Analysts expect full-year revenues of around £806m and operating profit of around £157m.

It's worth remembering that water utility companies have recently been in the news for the wrong reasons. Consistently pumping untreated sewage back into rivers has stoked anger among the public. That's not gone unnoticed by regulators, who have already issued fines of over £2m to South West Water, which Pennon owns.

If the group doesn't clean up its act, the regulator could come down even more harshly on them, potentially imposing unlimited fines. Analysts will keep an eye out for any steer on how the group intends to improve its pollution performance and help avoid future run-ins with the regulator.”

Matt Britzman, equity analyst, Hargreaves Lansdown:

“The consensus amongst analysts is for second-half performance to be broadly in line with the first, with revenue at or around £500m and operating profit of £275m. This would mark continued strong performance, which is a function of Auto Trader's enviable recurring revenue, strong pricing power, and highly profitable model.

The Autorama acquisition is a drag on Group performance for now, but operating margin in the core business remains strong – expected to be north of 70%. Expanding a foothold in the online leasing market looks like a decent play, supply challenges have held back performance this year – but it's a market with scope to grow. Expansion is a trend investors expect to see more of, as Auto Trader looks for growth levers and ways to further digitise the car buying journey.”

Among those currently scheduled to release results next week:

29-May

No FTSE 350 Reporters

30-May

No FTSE 350 Reporters

31-May