If there’s one factor that makes sure firms stand out, it’s a aggressive moat.
A well known and widespread model, a patented drug, a preferred drink, software program functions utilized in workplaces, or a service that’s so broadly embedded the variety of customers retains rising — no matter it’s, benefits like these maintain large attraction for buyers. They assist deter the competitors they usually typically imply sturdy pricing energy, each of which safeguard the businesses’ revenues. Prospects can pay up fairly than do with out, and shall be reluctant to face the associated fee, upheaval and threat of switching to a brand new supplier.
The London Inventory Alternate is an instance of an organization with excessive obstacles 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 energy into the enterprise. So highly effective is the information aspect that the revenue it derives from transactions barely registers.
However even moat-protected firms face tough 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 compounds market.
Its moat is constructed of high-grade polymers utilized in manufacturing throughout the vitality, 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 robust buyer relationships. And what’s extra, analysts see scope for development, notably in medical functions, the place it’s diversifying into knee implants, and in vitality, the place it has a thermoplastic different to metal pipes for subsea use.
BUY: Victrex (VCT)
A bumpy trip would possibly lie forward, however the polymer firm appears to be like 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 world economic system. Nevertheless, the corporate, having skilled tariff issues throughout the first Donald Trump presidency, has ready itself higher than others for a risky trip.
Traders 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 latest 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 signifies 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 circulation 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 development, up 41 per cent to 359 tonnes, with Asia-Pacific up 15 per cent at 582 tonnes.
Victrex’s share worth was swept up within the turmoil following Trump’s “liberation day”. That stated, with money flows resuming after heavy outgoings, the steadiness sheet appears to be like more and more strong. At a FactSet consensus worth/earnings ratio of 14 for 2025, in contrast with a worth/earnings five-year common of 21, the shares look good worth.
BUY: On The Seaside (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 way in which of their summer season plans. On-line journey agent On The Beach is on observe to guide yet one more file 12 months, having outpaced the broader packaged vacation market within the first half.
The whole transaction worth of bookings rose 13 per cent, whereas adjusted income grew by 12 per cent to £64.1mn. Momentum is powerful 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 development. Advertising prices have been broadly flat, and truly fell as a share of adjusted revenues by 4.4 share factors to 44 per cent. That helped raise 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 additional advertising price. Round 60 per cent of metropolis break bookings are from current prospects.
Wholesome money era 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 worth/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, shall be changed by present chief monetary officer Lukas Paravicini on October 1.
Traders ought to count on continuity in technique in addition to in personnel, given chief technique and growth officer Murray McGowan will step as much as the finance position 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 steering for low single-digit internet income development and mid single-digit adjusted working revenue development.
The development of upper cigarette costs offsetting decrease volumes continued, as tobacco costs rose 6 per cent whereas volumes fell 3 per cent. Market share beneficial properties within the US, Germany and Australia supported the tobacco efficiency.
In the meantime, internet income on the firm’s “subsequent era merchandise” enterprise, which sells heated tobacco, vapes and oral nicotine pouches, rose 15 per cent on a continuing 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.