7th Nov 2014 09:38
LONDON (Alliance News) - Jefferies jumped to the defence of Brammer PLC on Friday after the company saw its shares plunge on the back of a profit warning, suggesting there remain a number of positives in play for the company despite the gloomy trading update.
Brammer slashed its pretax profit guidance for the year to GBP35-36 million, hit by weaker UK trading and deteriorating market conditions in Europe. The new guidance is materially below the market consensus of GBP39 million, the broker said, and it expects double-digit percentage downgrades from the company in its 2014, 2015 and 2016 full years.
But though Jefferies acknowledged a profit guidance downgrade is "unhelpful and seldom taken well", there are a number of positive developments which should be noted, though they are likely to be overshadowed.
Jefferies said it was expecting a challenging update from Brammer, but said what it got was "softer than we were fearing". Brammer continues to outperform the underlying market, the broker said, adding that acquisitions and investment in growth are the right thing to do, though it said what it needed in its view is the establishment of "a number of core, underlying markets".
It also noted the company has won a further nine key account contracts since its half-year at the end of June, making that thirteen in the year to date with a growing pipeline. Growth in its Tools & General Maintenance business is also a brightspot, with growth in Europe accelerating aggressively.
Jefferies has a Hold recommendation on the stock with a 370 pence price target.
Brammer was the worst performer in the FTSE All Share index on Friday, dropping 11.8% to 297.28 pence.
By Sam Unsted; [email protected]; @SamUAtAlliance
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