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Spirax-Sarco lower after Sartorius warning
Shares in Spirax-Sarco are down 3.3% at 8,598p after a warning by German lab equipment maker Sartorius after the European market close Thursday.
It's a negative read across for Spirax-Sarco given its exposure to the life sciences industry.
The Gottingen, Germany-based pharmaceutical and laboratory equipment supplier reported that its revenue in the first nine months of 2023 fell 18% to €2.55 billion, from €3.11 billion the year before.
It also said its preliminary underlying Ebitda margin was 29%, down from 34%.
The firm now expects revenue to fall 17% for the full-year.
Sartorius shares are down 10% in Frankfurt.
BoE Governor says more to do to bring inflation down
The governor of the Bank of England said things in the UK look better than they did a year ago in a nod to the mini-budget chaos of last autumn.
Andrew Bailey also said he expects decisions on interest rates to continue being close calls.
Speaking at the International Monetary Fund's annual meeting in Marrakech, Morocco, Bailey said there are signs inflation is coming down but there is much left to do.
He said the bank's policy will continue to be "restrictive".
Unusual introduction for Andrew Bailey at the IMF - he is compared to George Bailey, the protagonist "banker" (incorrect) of 'It's a Wonderful Life' ????— Andy Bruce (@BruceReuters) October 13, 2023
Bailey added: "We have made, I think, particularly in the last few months, solid progress in terms of showing signs that inflation is being tackled. But let's not get carried away because there's an awful lot still to do.
"I think many of us now see policy operating in a restrictive fashion and I'm obviously going to have to say that I think that's what it needs to do."
Bailey said this will have an impact on the UK's economy and is contributing to a "subdued outlook" for the country.
But without getting inflation back to target, that outlook would be even more subdued, he said.
Could undervalued Loungers attract a bidder?
The City gave the thumbs up to Loungers PLC (LON:LGRS)’s trading update which saw the shares rise 3.3% to 193.25p – with one analyst suggesting the share price could double while another felt it could attract bid interest.
The firm itself was extremely upbeat with Nick Collins, CEO saying: “I have never felt more optimistic about our prospects.”
The operator of all-day café/bar/restaurants across the UK under the Lounge, Cosy Club and Brightside brands, said like-for-like sales grew 7.7% over the 24 weeks to October 1, an acceleration from the growth of 5.7% reported for the 12 weeks to July 9.
AJ Bell’s Russ Mould noted the “model of offering mid-market prices and opening up in different guises as cafés, restaurants and bars throughout the day is a successful one, with the company able to squeeze the most out of all of its sites.”
Liberum’s Anna Barnfather was impressed saying the firm “continues to outclass the competition and accelerate both like-for-like sales growth and expansion.”
Shore Capital’s Bradley Hughes also flagged the strong LFL sales growth which “is currently tracking ahead of our expectations for the full year.”
“We currently have 5% baked in for the full year and so current trading (7.7%) is supportive of upside risk,” he said.
He estimated that each 1 percentage point of LFL upside is equal to c.£1 million of Ebitda which he forecasts at £39.2 million for financial 2024.
Peel Hunt’s Douglas Jack was also upbeat.
“Not only are sales running ahead of our/consensus expectations, but inflationary pressures are diminishing,” he noted, which combined, “should lead to improving margins.”
He hasn’t factored this into forecasts, adding to the upside potential.
All analyst were agreed the shares are worth more.
ShoreCap’s Hughes said Loungers has made material progress since its IPO yet it’s share price remain broadly unchanged.
Indeed, the share price has fallen 5.3% in the last 12 months although it is up 6.8% in the year to date.
He suggested if the market does not respond, a bid could be on the cards.
“We sense other pools of capital will continue take advantage of record low valuations in the sector,” he said.
He sees fair value at 325p and has a buy rating on the stock.
Peel Hunt’s Jack has a 375p price target and believes the 5.9x EV/Ebitda and 14% equity free cash flow yield “represent extraordinary value.”
Liberum’s Barnfather was even more bullish with a 400p price target and a buy rating.
She pointed out the stock currently trades on 6.1x 2023 estimated EV/Ebitda (pre-leases) vs 8.6x implied by Apollo’s recent offer for Restaurant Group.