It’s that time of year again when The Yorkshire Post Business team put their heads on the block and reveal their share tips for the coming year.
Who will be the winners and losers in what promises to be a tumultuous year for the economy?
Mark Casci - Business Editor
“Events dear boy, events,” is the memorable quote attributed to former Prime Minister Harold Macmillan when asked about the most troublesome aspect of leadership.
And when it came to my 2018 share tip CYBG, there have certainly been plenty of events to alter the state of play.
In many ways 2018 was one of the biggest year’s in the Yorkshire Bank owner’s history.
Its massive merger deal with Virgin Money will see it become a major player in the nation’s banking sector.
Its avowed intention to be the bank for the North is an admirable one and its dedication to supporting the SME sector is crucial at a time when so many small firms are seeing the political uncertainty knock their confidence levels.
The ongoing crisis surrounding Britain’s exit from the European Union has affected almost every facet of British business and no more so in the housing market which spent much of the year cooling at an alarming rate.
Consumers, rightly concerned about the prospect of a downturn to our already fragile economy, are increasingly reluctant to roll the dice on the property market owing to concerns over valuations and rates of interest.
In turn this has made one key area of the bank’s operations vulnerable with confidence dipping at an alarming rate.
Elsewhere, CYBG announced it had gone into the red after an extra £150m charge for the mis-selling of payment protection insurance (PPI).
Its tie-up with Virgin Money is expected to result in annual cost savings of around £120m by the end of September 2021 and in the long term, provided we do not crash out of the EU with a disastrous job-shredding no deal scenario, the firm’s fortunes look brighter. However, anyone who purchased shares with CYBG at the start of 2018 will have seen a loss on their investment.
When it comes to where to plant my flag for 2019 I have one clear choice.
Sheffield’s Sumo Group has been one of the region’s stellar performers in recent years. The video game developer is loving life as a listed business and operating in a global market worth more than that of the motion picture industry.
Last year saw it cash in on increasing demand for video games among older players with the average player age now resting with individuals in their thirties. It works with some of planet’s biggest players including Microsoft, Sega and Sony.
2018 saw Sumo acquire award-winning game development studio The Chinese Room for £2.2m, a deal that will provide new intellectual property, creative talent and the opportunity to develop a new studio location in the south of England.
It substantially grew its profits in 2018 with adjusted earnings of £8.4m up from £6m it reported in 2016. It has a strong leadership team led by chief executive Carl Cavers and is constantly hiring new staff.
This modern, growing and innovative company is exactly the sort of firm we need in Yorkshire and it is with great confidence that I back them for a strong 2019.
When it comes to this year I must confess that the extreme dangers we face both in the run-up to and aftermath of March 29 play heavily on my mind.
But aside from nonsense espoused by our dire political leaders, I am confident our businesses can provide the bright future our children deserve.
Ros Snowdon - City Editor
My 2018 share tip, urban regeneration housebuilder MJ Gleeson, enjoyed a stellar year results-wise. The firm can do no wrong, yet housebuilders have suffered a dismal year of sinking share prices on the back of Brexit worries.
Last month Gleeson reported strong demand for its homes and said reservations were up more than 40 per cent over the last six months. The Sheffield-based firm said it has seen “very strong” customer demand in all regions.
Gleeson Homes now has a pipeline of 12,490 plots with a gross development value of £1.5bn, of which 7,253 plots are owned and 5,237 are conditionally purchased.
The board expects Gleeson Homes to record an increase in completions for the second half of 2018 of around 10 per cent and an increase in completions for the year to June 2019 of more than 15 per cent.
Analyst Charli Campbell at Liberum said: “We believe that Gleeson Homes is a rare Aldi in a Waitrose world. Gleeson Homes sells homes at around £125,000 to the lowest 10 per cent of earners in its geographical areas with very limited competition.”
Yet the group’s shares have fallen 14 per cent this year. However, anyone cashing in in July would have seen a 5 per cent increase on their holding.
Despite good news for the housebuilder, valuations across the sector remain very depressed.
Liberum said the uncertainty over Brexit is the dominant factor. At the moment, we have no idea what the Brexit outcome will be and until that is cleared up, housebuilders will continue to suffer.
This year I’m plumping for FTSE 100 chemicals giant Croda International as a defensive play as I think the stock market could be in for another pounding this year.
Croda is now Yorkshire’s biggest PLC thanks to strong growth in 2018. The Snaith-based firm recently announced plans to buy a Danish pharmaceutical business, Biosector, for £65m, as it continues to expand.
Croda has reported growth across all of its regions and a strong performance in its consumer businesses this year.
The firm is working closely with a number of ‘indie’ cosmetic firms to produce best selling shampoos, conditioners, lip glosses and other beauty products.
Previously, Croda has made ingredients for skin, hair and cosmetic products for multinational giants such as L’Oreal, Estee Lauder and Boots, but now it is turning its attention to the indie sector.
The group said the sales momentum seen in the first half of the year continued in its third quarter to September 30.
Croda said constant currency sales rose by 3.4 per cent, with the core business up 4.5 per cent, driven by the strong performance in its consumer businesses.
Core business year to date growth was 4.7 per cent and sales of New and Protected Products (NPP) reached 28.4 per cent of total sales.
The firm has expanded wisely and understands its markets.
Greg Wright - Deputy Business Editor
DARK clouds are gathering on the economic horizon, threatening storms that could rattle companies across all sectors.
US stocks, which were powering ahead until the summer, have posted their worst December performance since the Great Depression. The global economic outlook is certainly bleaker than it was at the start of 2018.
Brexit uncertainty and a trade war between China and the US has created turbulence in world financial markets. It seems inevitable that 2019 will also be a year of extremes, with market rallies followed swiftly by spectacular falls.
So how did my share tip perform amid the hurly burly of 2018? Last year, I placed my faith in Sheffield-based ITM Power, the energy storage and clean fuel company, which had just established a subsidiary in Australia.
Over the course of the year, ITM’s management continued to display ambition and vision. In the summer, ITM reported a year of significant progress, in which revenue increased by 53 per cent. The current financial year has started well and it recently announced the expansion of its presence in the German market.
However, in a topsy turvy year for the financial markets, the company’s share price movements never reflected this inherent strength.
ITM Power PLC’s share price closed at 38.92p in 2017. In 2018, it closed at..I still believe that ITM will be a force to be reckoned with in 2019 and beyond.
So which company will become my share tip for 2019? Amid the sound and fury of Brexit, I believe it will pay to listen to the voice of calm.
The equipment rental specialist VP is a company that quietly closes in on its ambitions, as bigger rivals lurch and stumble.
Whenever I speak to the management team at VP, I am struck by their energy and common sense. The company recently delivered record half year results. The management team reported that Brexit was having little or no impact on the business.
In the six months ended September 30, the company’s profit before tax and amortisation increased by 22 per cent to £25.9 million. Revenues also rose by an impressive 42 per cent to £193.2 million.
VP said its results were driven by a “very strong” UK division, and the international division is making good progress.
A note from analysts at N+1 Singer, said that VP’s results provided a reminder about the firm’s qualities and growth trajectory.
The analysts said that VP is a high quality business with an excellent long term track record and a very impressive recent growth rate.
The note added: “Expectations have consistently been met or exceeded for several years.”
I’ve chosen VP because it seems well-placed to withstand the inevitable disruption caused by Brexit. Investors will regard it as offering a safe haven, especially if we crash out of the EU without a deal.
VP is a great Yorkshire business, which understands its market and isn’t afraid to make strategic acquisitions when the need arises. The bold decision to snap up Brandon Hire has paid off handsomely.
In a corporate world which seems in danger of losing its sanity, VP is the epitome of stability. I believe it will continue to make headlines for all the right reasons in 2019.
Lizzie Murphu - Business Reporter
The explosive growth in online shopping is creating huge opportunities for logistics firms.
Leeds-based Clipper Logistics – my share tip for 2019 – has found a rich seam by distributing goods for retailers such as John Lewis, Marks & Spencer and Morrisons.
The company, together with its subsidiaries, provides logistics services to the retail sector in the UK, Germany, and rest of Europe. It operates through two streams, value-added logistics services and commercial vehicles.
The business offers e-fulfilment, returns manage-ment, port deconsolidation logistics, retail consolidation, multichannel, warehousing, secure logistics, transportation, and contract packaging services.
The company believes it is “exceptionally well placed” to benefit from the migration to online retailing and its recent half-year results showed record volumes over the Black Friday-Cyber Monday weekend for a number of key customers.
In July, the company announced another stellar year after it saw revenue increase to £400.1m, with profits soaring to £17.9m.
Earlier this year, executive chairman Steve Parkin said the company was “conscious of the wider forces affecting the UK retail sector” but added that the group was well positioned to achieve further growth both in the UK and internationally.
Backing a company with European operations could be seen as a huge risk but the company appears to be well placed to cope with any Brexit fall out after seeing growing demand in that market.
The group has built two buildings in Poland and it has six sites in Germany. Its customers are also expanding into Europe. “If you trade with Clipper in the UK, it’s very easy to trade in Europe.
“We are well positioned to deal with whatever happens with Brexit. We have a very solid business in Europe,” chief executive Tony Mannix said last month.
Over the last year, the firm has signed significant new contracts with high profile retailers including Edinburgh Woollen Mill, River Island, Marks & Spencer and ASOS.
The group also acquired RepairTech, a move that it said was “immediately earnings-enhancing”.
The company’s strategy is to expand its customer base, develop complementary services for customers, continue to expand in Europe and seek complementary acquisitions. So far it appears to be working. Let’s hope it continues.
Ismail Mulla - Business Reporter
Over the past couple of years my average for picking shares has mirrored that of England’s top order batting line-up. Poor.
It seems as if after topping the charts with the safe pick of Sirius Minerals in 2017, I have been delivered two consecutive jaffas leaving me trudging off back to the pavilion with a golden duck next to my name.
This year was particularly testing as I plumped for IT services firm Redcentric. The innings got off to a pretty good start but then in February cloud cover rolled in and the wicket became sticky.
The share price lifted like a Ben Stokes bouncer in April after Redcentric was confirmed as a preferred supplier for a framework agreement covering local authorities, emergency services, transport and health sectors in the region.
But shares came crashing down in June.
From there on in it laboured around the 80p mark until November when it took another smack to the helmet, after the Harrogate-based firm’s chief executive quit, with the share price dropping to 65.25.
My pick was based on the new management’s potential to turn the business around.
CEO Chris Jagusz has a wealth of sector and managerial experience but disappointing sales ensured his stay was short with the group reporting a £122,000 pre-tax loss in the six months to September 30.
Give the prospects of a potentially turbulent year ahead, I’m going to go for a pick that is hopefully insulated from external factors.
Drax Group has taken huge strides in recent years with the power producer having converted four of its six generating units to biomass.
In 2018, it secured a deal for a portfolio of ScottishPower’s assets, providing the Selby-based business with further flexible sources of energy. It was pleasing to see Drax commit itself to growing these new assets.
After agreeing the deal with Scottish Power owner Iberdrola, Drax also managed to revise the terms of its deal, ensuring it gets a rebate on lost capacity payments.
Drax is seeking to diversify beyond coal ahead of the 2025 national deadline to phase out the most carbon-intensive form of power generation.
Andy Koss, chief executive of Drax Power, told me they are “hopeful” of being off coal ahead of the Government deadline.
I’m hoping, because of these factors, Drax will power me to the top spot.
John Grainger - Business Reporter
I’ve finished the year in profit again and I’ll admit I’m feeling slightly giddy about it. I had two bad years on the bounce – one of them dire – and now I’ve had two good years.
A half-and-half good/bad record may not seem like much to shout about, but when the reputation of The Yorkshire Post business desk is at stake, I’ll yell all I like.
After all, before this year I had a 67 per cent failure record; now it’s just 50 per cent. I call that progress.
What’s more, the company that did me proud is based on my North Yorkshire patch. Vp plc is an equipment hire specialist headquartered in Harrogate and started the year at 894p.
In 2017 completed a series of acquisitions, snapping up rivals with abandon. In November 2017 it purchased Brandon Hire for £41.6m, which was a deal big enough to attract the attention of the Competition and Markets Authority (CMA).
I gambled that the deal would be cleared, and in April it was, meaning that the share price, which had dropped to 820p, jumped to 872p within a day and carried on heading north, hitting 1230p three separate times over the summer.
Thereafter, it throttled back, but still ended the year at 964p – an overall increase in value of 7.8 per cent.
This time I’m choosing Renew Holdings plc, an AIM-listed company based at Aberford near Leeds. It provides engineering services for critical infrastructure networks and it’s the kind of company that might well not suffer too much in straightened times. At least, that’s what I’m hoping.
My theory is that Brexit – assuming it goes ahead, with or without a deal – will cause problems for many companies, especially those that rely on trade with the Continent.
By contrast, any government dealing with the fallout may feel bound to continue investing dwindling tax returns in the kind of big infrastructure projects that help to keep the country afloat – and which firms like Renew thrive on.
Renew’s share price rose steadily over the last five years, but has fallen by about a quarter over the last year, suggesting – albeit crudely – that now might be the time to buy.
I’m not alone. At least one Wall Street adviser thinks it’s undervalued – by as much as 47 per cent. Do the maths and that would give you a share price of about 650p instead of the 330p currently quoted.
Even if that’s only halfway correct, and if Renew attains its true value over 2019, I could be sitting on a pretty attractive profit.
And with a 60 per cent win ratio I might be forgiven for feeling giddy all over again.