FTSE 250 movers: Domino's leads index after upgrade

The FTSE 250 made some ground on Wednesday, with the second tier index up 252.74 points (1.65%) to 15,569.67 by mid-afternoon.

Domino’s Pizza Group led the risers after Credit Suisse upgraded the stock from ‘neutral’ to ‘outperform’ and added it to its Europe Small and Mid-Cap Focus List.

The investment bank said it had raised its 2016 and 2017 earnings per share forecasts by 15% to 19%. “These changes are underpinned by 1) Domino's US guidance of 3-6% International LFLs (UK LFL has exceeded DPZ's Int'l by 360bps p.a. since 1999); 2) further scope to optimise the online channel (now 75-80% of orders but with scope for improved CRM, loyalty, increased basket size) and 3) our assessment of management remuneration – consensus implies c40% LTIP pay-outs vs 100% on our forecasts.”

It also said while annual store growth is expected to be unchanged at 50% per year, franchisee profits are up around 60% over the last two years. “The payback has never been more compelling and implies forecast upside.” Credit Suisse also said there is scope for capital returns with the German joint venture reducing cash flow risks. Its target price was raised from 770p to 1,100p.

Homewares retailer Dunelm Group saw its shares rise as well after it declared a special dividend payment following a solid first half of the year. It was boosted by strong sales post-Christmas, and is now looking to greatly increase its store presence in London as part of new chief executive John Browett's strategy.

For the 26 weeks to 2 January, the FTSE 250 curtains to cushions to kitchen appliances seller lifted sales 10.3% to £448.1m, with store like-for-like (LFL) sales up 3.4%, though numbers were boosted by an extra six days of winter sale in the recent calendar. LFL sales growth was driven by a strong performance from curtains and bedding, particularly the new Kids range.

With gross margins improving slightly, profits before tax rose 10.7% to £75.5m, while earnings per share grew 11% to 29.3p. Cash generation continued to be strong and as well as the interim dividend being increased by 9.1% to 6.0p per share, a special distribution of 31.5p per share was announced, which will cost £64m and be payable to shareholders on 4 March.

Meanwhile Tullow Oil shares plunged after it posted falling revenues and a $1bn loss for the year.

In the oil and gas exploration and production group’s results for the year to 31 December 2015, revenues had fallen 27% for the year from $2.21bn (£1.52bn) in 2014 to $1.61bn, due to the fall in oil prices. Its pre-tax operating cash flow also fell 38% from $1.55bn to $967m while gross profit fell 46% from $1.10bn to $591m. However the company had pegged back its full-year loss from $1.97bn to $1.09bn in 2015. It said Tullow has focused on cost savings, improved efficiencies, and a lower capital expenditure, for which it is aiming to cut another $1.1bn of capex in 2016.

Drax was also hit after the UK High Court has ruled against the power generation company and renewable energy firm Infinis Energy, after they urged a review of the government’s decision to remove the climate change levy exemption. The companies said the decisions had been made without a “reasonable and proportionate” notice period.

The High Court said that while it recognised in the judgment the merits of bringing the case, it has ruled against Drax and Infinis. Drax said on Wednesday that it will now consider the judgment in detail. Chief executive Dorothy Thompson said: “Since their introduction in 2001, CCL exemptions such as Levy Exemption Certificates (LECs) have played a critical role supporting investment in a wide range of renewable technologies.

“In recognising our right to bring this case, the Court acknowledged that the removal of LECs was sudden and unheralded. However, it concluded that the government had not provided any specific and clear assurances on the continuation of exemptions and accordingly ruled in their favour.”

FTSE 250 - Risers

Domino's Pizza Group (DOM) 936.00p 9.28%
Dunelm Group (DNLM) 898.50p 8.91%
IP Group (IPO) 168.00p 8.25%
OneSavings Bank (OSB) 287.20p 7.97%
Marshalls (MSLH) 284.10p 7.37%
Redrow (RDW) 430.80p 6.63%
Indivior (INDV) 139.40p 6.57%
Virgin Money Holdings (UK) (VM.) 291.20p 6.43%
Pendragon (PDG) 35.23p 6.08%
Ocado Group (OCDO) 246.30p 5.94%

FTSE 250 - Fallers

Tullow Oil (TLW) 142.00p -12.07%
Nostrum Oil & Gas (NOG) 258.00p -6.22%
Telecom Plus (TEP) 855.00p -5.00%
Vedanta Resources (VED) 206.70p -4.97%
Ophir Energy (OPHR) 75.65p -3.94%
Drax Group (DRX) 220.20p -3.67%
PayPoint (PAY) 743.00p -2.69%
Elementis (ELM) 205.40p -2.24%
Ashmore Group (ASHM) 213.20p -2.20%
TalkTalk Telecom Group (TALK) 197.30p -2.04%