Investors got a double helping of good news to start the week as wiring and lighting specialist Luceco (LUCE) and global security firm G4S (GFS) both raised their full year earnings guidance out of the blue.
Companies have a duty to tell the market if their earnings are going to be significantly better or worse than market expectations, and given the gloom over the impact of the pandemic shareholders could be forgiven for expecting bad news rather than good.
However, Luceco reported today that trading for the first six months had continued to improve since its last update on 4 June.
Lower costs and higher gross margins from better product sourcing and manufacturing efficiencies had ‘more than offset Covid-related disruption’, allowing operating profits to rise 25% to £9 million.
Therefore, ‘assuming no widespread COVID-driven lockdown in the UK or supply-side disruption in China in H2,’ the firm now expects full year adjusted operating profit to be ‘materially ahead of current analyst expectations and to at least equal our 2019 performance of £18 million.’
The firm also said it might consider reinstating dividends this year. The update sent shares soaring 19% to 121p and saw brokers Peel Hunt and Liberum raise their price targets to 135p and 200p respectively. Luceco is one of our stock picks for 2020 with an ‘in’ price of 116p.
Manned security firm G4S also said that trading had continued to improve since its update of 17 June and that it now expected adjusted pre-tax and underlying earnings for the first six months of the year to be ‘significantly above market consensus.’
The current market expectation for first half earnings before tax, interest or amortisation is £159 million against a previous year figure of £234 million.
G4S also said that as a consequence of beating forecasts it would bring forward its results announcement to next week. Shares jumped 9% to 130p.