If there’s one factor that makes sure corporations stand out, it’s a aggressive moat.
A widely known and in style model, a patented drug, a preferred drink, software program functions utilized in workplaces, or a service that’s so extensively embedded the variety of customers retains rising — no matter it’s, benefits like these maintain large enchantment for traders. They assist deter the competitors they usually typically imply robust pricing energy, each of which safeguard the businesses’ revenues. Clients pays up fairly than do with out, and might be reluctant to face the price, upheaval and danger of switching to a brand new supplier.
The London Inventory Trade is an instance of an organization with excessive boundaries to entry. Its distinctive and important real-time information and market intelligence guarantee recurring and excessive income streams from subscribers whose numbers proceed to extend. Its transfer away from easy equities buying and selling and IPOs has injected a brand new power into the enterprise. So highly effective is the information facet that the revenue it derives from transactions barely registers.
However even moat-protected corporations face troublesome durations when macro components weigh on efficiency, or they make investments extra closely in capital expenditure. Plastics maker Victrex has grappled with various challenges in latest instances however these haven’t undermined its management within the speciality chemical substances market.
Its moat is constructed of high-grade polymers utilized in manufacturing throughout the power, medical, automotive, electronics and aerospace industries. The standard and properties of its patented plastics, completed and semi-finished merchandise, contribute to its market management and powerful buyer relationships. And what’s extra, analysts see scope for progress, significantly in medical functions, the place it’s diversifying into knee implants, and in power, the place it has a thermoplastic various to metal pipes for subsea use.
BUY: Victrex (VCT)
A bumpy journey would possibly lie forward, however the polymer firm seems to be effectively ready, writes Julian Hofmann.
First-half outcomes for speciality polymer producer Victrex have been operationally sound, however set towards the background of a extremely unsure future for commerce flows in a tariff-dominated international financial system. Nevertheless, the corporate, having skilled tariff issues in the course of the first Donald Trump presidency, has ready itself higher than others for a unstable journey.
Buyers can take consolation from the truth that the corporate’s capital funding prices are tailing off simply in time. The approaching completion and certification of recent crops in China, a part of administration’s technique to strengthen its in-country provide chains, meant capital expenditure prices fell considerably from £21.8mn in 2024 to £8.6mn in these outcomes. Victrex’s curiosity in China is powered by its aerospace division, which is linked to the manufacturing of the C919 short-haul narrow-body jet, produced by Chinese language state-owned aerospace producer Comac.
This additionally implies that capex for the total 12 months will are available on the decrease finish of an 8-10 share factors of income vary. Decrease capex additionally benefited the money movement assertion and meant that working money conversion doubled to 128 per cent.
In tonnage phrases, polymer gross sales in Europe have been up 10 per cent, at 1,077 tonnes, whereas North America noticed probably the most progress, up 41 per cent to 359 tonnes, with Asia-Pacific up 15 per cent at 582 tonnes.
Victrex’s share value was swept up within the turmoil following Trump’s “liberation day”. That mentioned, with money flows resuming after heavy outgoings, the stability sheet seems to be more and more stable. At a FactSet consensus value/earnings ratio of 14 for 2025, in contrast with a value/earnings five-year common of 21, the shares look good worth.
BUY: On The Seashore (OTB)
Tech upgrades are boosting gross sales and serving to to maintain advertising prices in verify, writes Valeria Martinez.
Commerce tensions and recession fears could also be rattling markets, however holidaymakers aren’t letting this get in the best way of their summer season plans. On-line journey agent On The Beach is on observe to guide yet one more report 12 months, having outpaced the broader packaged vacation market within the first half.
The overall transaction worth of bookings rose 13 per cent, whereas adjusted income grew by 12 per cent to £64.1mn. Momentum is robust heading into summer season, with the ahead order guide at the moment 14 per cent forward of final 12 months.
Crucially, the corporate isn’t overspending to drive this progress. Advertising prices have been broadly flat, and really fell as a share of adjusted revenues by 4.4 share factors to 44 per cent. That helped elevate adjusted earnings earlier than curiosity, tax, depreciation and amortisation by practically a fifth and pushed margins up by 3.6 share factors to 21.6 per cent.
Tech investments are additionally bearing fruit. Platform upgrades have improved advertising effectivity and allowed the enterprise to increase into Eire and launch metropolis break packages. The latter generates about half the income of a seaside vacation, however comes at no further advertising value. Round 60 per cent of metropolis break bookings are from current clients.
Wholesome money technology helped decrease internet debt and fund a £30mn return to shareholders by way of dividends and buybacks. The shares have jumped greater than 54 per cent over the previous 12 months, but nonetheless commerce at practically half their five-year common value/earnings a number of of 28 instances.
HOLD: Imperial Manufacturers (IMB)
Imperial Brands shares dropped by 8 per cent after it introduced that chief govt Stefan Bomhard would retire this 12 months, writes Christopher Akers.
Bomhard, who has spent 5 years on the helm of the FTSE 100 tobacco big, might be changed by present chief monetary officer Lukas Paravicini on October 1.
Buyers ought to anticipate continuity in technique in addition to in personnel, given chief technique and growth officer Murray McGowan will step as much as the finance function and chair Thérèse Esperdy will proceed within the place.
The information got here as Imperial reported half-year outcomes consistent with expectations, as reported working revenue fell 3 per cent to £1.46bn, and maintained annual steerage for low single-digit internet income progress and mid single-digit adjusted working revenue progress.
The pattern of upper cigarette costs offsetting decrease volumes continued, as tobacco costs rose 6 per cent whereas volumes fell 3 per cent. Market share good points within the US, Germany and Australia supported the tobacco efficiency.
In the meantime, internet income on the firm’s “subsequent technology merchandise” enterprise, which sells heated tobacco, vapes and oral nicotine pouches, rose 15 per cent on a relentless forex foundation. Divisional losses have been down by 14 per cent to £43mn. But that is nonetheless a small a part of the broader enterprise at 4 per cent of internet income.
Share buybacks stay a key attraction. The corporate has an ongoing £1.25bn programme and is dedicated to a buyback in annually to 2030.
The shares commerce on 9 instances consensus earnings for 2025 and yield 6 per cent.
