5 stocks to watch in December

Life hasn’t exactly been a beach for the travel sector or its investors over the past few years but is it finally time for the likes of TUI and On the Beach to pack their troubles away and head for sunnier climes in 2024? And what does the prevailing uncertain economic climate have in store for housebuilder Berkeley Group, greetings card company Moonpig and retail stalwart Currys? 

Here is a round-up of a handful of stocks to keep an eye on in December as these companies issue their latest results or trading updates.   

This is not a recommendation to buy or sell these investments and is purely insight into some of the companies that will be announcing results in the weeks ahead.   

Read on or jump to the relevant company below. 

• Moonpig 
• On the Beach
• TUI 
• Berkeley Group 
• Currys 

Moonpig 

For Moonpig, the personalised greetings card company, high days and holidays have always been its cash cow. Launched in April 2000, it was the UK’s first online card retailer and its first mover advantage saw its shares soar on its April 2021 stock market debut. Up 17%, it hit the ground running and ended its first day as a traded company valued at £1.4bn. 

Founded two decades ago by Nick Jenkins, a former commodities trader and Dragon’s Den contestant, Moonpig Group’s flotation followed a record Christmas, after it found itself perfectly placed to cash in on the closure of high street card shops during the pandemic and restrictions on travel that prompted people to send gifts and greeting cards bought online instead.  

It appeared to be on a roll, turning in over £156m in sales in the six months to the end of October, up from £173m for the entire previous year. Since then it has bought Red Letter Days and Buyagift, expanding its range into experience days and other gifts.  

But it hasn’t been all plain sailing. That was evident in the second half of 2022, when Royal Mail launched 18 days of strikes, hampering Moonpig’s ability to fulfil orders for last-minute greetings on special occasions. 

Then, Moonpig was left with no choice but to pull the plug on a range of its cards and products after pressure from the British Veterinary Association over the over-promotion of brachycephalic, or flat-faced dogs. So out went the best-sellers featuring pugs and French bulldogs in a move that Moonpig cannot have anticipated.  

Add in the pressures brought by inflation and the cost-of-living crisis and you can see how, around this time last year its shares suffered their biggest one day fall. That came after a £30m hit to sales expectations for the year to the end of April. 

The question for investors is whether there’s another shift in consumer buying underway. While the high street may have been in danger of being side-lined by online retailers a few years ago, with shoppers now able to get out and shop with ease, possibly tiring of waiting in for deliveries from online retailers and are also heavily influenced by pricing, the appeal of online shopping could waiver. If that’s the case for Moonpig, then could the likes of Card Factory, which has far lower prices than Moonpig, have the last laugh?   

Moonpig will be aware of its vulnerabilities. There may have been no profit warnings this time around, but earlier this year the company dropped out of the FTSE 250 index, as investors took fright. Now all eyes will be on the forthcoming festive season to see whether Moonpig still has what it takes to get shoppers spending at Christmas, New Year and all the other events and occasions at which it needs to be front of shoppers’ minds. 

Moonpig’s half-year results are due out on 5 December. 

More on Moonpig
 

On the Beach

It’s fair to say that life hasn’t exactly been a beach for the travel sector in recent years. First an unprecedented global travel ban and since then heatwaves and wildfires, strikes, wars, technical failures and staff shortages have all played a part. And that’s even before we get to the economic problems. All of which have put one dampener after another on the travel industry’s attempts to take off. 

On the Beach, which started life from a terraced house in Macclesfield in 2004 before going on to join the stock market in 2015, is now a household name and sends almost a million UK holidaymakers abroad every year.  What it, and its fellow travel operators will be counting on, is that holidaymakers’ desire to take their holidays will far outweigh any worry about costs. These companies will be hoping that “revenge travel” (i.e. doing your darndest to get out and see the world, whatever the cost, having faced restrictions during the pandemic) remains a priority well into 2024. 

In a cost-conscious economic environment, On the Beach’s emphasis on low-cost and flexible booking should help. For the half-year to the end of March, revenue rose by 38% to £73.2m leading pre-tax losses to narrow by £1m to £6m. And, as the second-half of the year tends to be the one in which it does the bulk of its business, there is reason for cautious optimism here as it continues its push into the “premium” end of the low-cost market.  

Budget holidays have not quite recovered to their pre-pandemic levels, but people do seem prepared to pay a little more to enhance their holidays when they take them. And On the Beach has seen the value of what it calls premium holidays rise by 17%.  

While we have yet to see the full state of play over Summer 2023, former chief executive Simon Cooper’s vote of confidence in On the Beach didn’t go unnoticed. The travel company’s founder bought £2.5m of shares in the company in August, a move which pushed the share price up by more than 10%. It also took his stake to 7.5%, making him the second-largest single shareholder. 

That will have pleased his fellow shareholders. Their holdings prior to seeing that boost will have fallen in value by more than a third this year, as worries about the industry and economic issues already mentioned above, have taken their toll on investor confidence. 

On The Beach’s full-year results are due out on 5 December. 

More on On the Beach 

TUI 

When travel group TUI said, back in September, that its full-year earnings were on track to “increase substantially” it was enough to prompt a 6% jump in its share price. Reporting an increase in summer sales and a 15% rise in early winter bookings, it was the news investors wanted to hear from Europe’s largest tour operator.  

TUI shares had been one of the worst performers in the FTSE 250 since the pandemic. Back then, there was an incredible amount of uncertainty surrounding the future of the entire travel sector and the huge amount of debt TUI took on, just to get through that uncertainty, was telling. 

So could things finally be looking up for TUI? In the three months to June earnings came in at €169.4m from a loss of €27m in the same period a year earlier. But the cost of the summer wildfires and customer repatriations have added €25m to the full year total. 

On the positive side, summer bookings came in at 13.7m, 5% higher than last year and are now close to 96% of pre-pandemic levels. That may be 1% lower than TUI had forecast, but it said it had taken 1.1 million extra bookings since its last update in early August alone, with demand in the final month of the season “well ahead” of last summer, up 8%. 

We will see on 6 December whether TUI has delivered on target. Look out for full-year underlying earnings “significantly” higher in the fourth quarter and the full year to the end of September.  

TUI is due to post its full-year results on 6 December. 

More on TUI
 

Berkeley Group

For one of the UK’s largest housebuilders, the fact that interest and mortgage rates have rocketed to levels not seen since the early 2000s, was never going to be good for business. Stubbornly high inflation has led to a series of sharp rises in mortgage rates, forcing many would-be buyers to sit and wait. Rob Perrins, chief executive of Berkeley said cash buyers and those who had to move because of life events were really the only active buyers. The rest, he claimed, were largely “delaying” their purchases. 

At the end of the last full year, Berkeley posted pre-tax profits up 9.5% to £604m but stuck to its forecasts, which had been trimmed after the fallout from the mini Budget hit the property sector hard. Berkeley said sales of new properties had fallen by 15% on a like-for-like basis in the year to the end of April and said a further slowdown was likely, as long as the current market conditions persisted.  

With the consensus seeming to be that the Bank of England base rate will remain above 5% until the summer of 2024 and we could eventually see a cut to around 3% by late 2025, that estimation is unlikely to have altered much, if at all, in the intervening period. What Berkeley has to say about that will be closely watched on 8 December, when the housebuilder gives its update on the six months to the end of October. 

October also saw the transfer of responsibility for building control sign-off to the new Building Safety Regulator. How that has impacted the group remains to be seen, but Berkeley said it would be “working closely to minimise any potential disruption” from this transition.  

Aside from reluctant buyers scared off by high mortgage rates, a lack of clarity around certain regulatory changes in the housebuilding sector is proving a deterrent for investment into brownfield regeneration and the wider housebuilding sector, the group has already said. Berkeley itself has not acquired any land recently and said it intends to only invest “very selectively” in new opportunities. 

Berkeley Group’s half-year results are due out on 8 December. 

More on Berkeley Group 

Currys 

Could the cost-of-living crisis spell permanent decline for Currys, the electrical retail chain, which is losing ever-increasing ground to online-only rivals selling at rockbottom prices?  For Currys, with its large estate of physical stores, the question is whether the current focus on pricing is a trend that’s unlikely to be reversed. The overarching worry being that even when the cost of living subsides, and people’s appetite for a new home appliance and their spending power once again align, Currys may not be the place buyers look. 

The impact could be seen when full-year group sales fell 6%. The adjusted profit of £119m before tax may have been better than analysts had expected, but it was still down 38% on the year before. 

And that substantial shop estate could start to feel even more of a financial burden when the new business rate measures announced in the latest Autumn Statement kick in. Alex Baldock, chief executive of Currys, called the decision “unfair”. Real estate intelligence firm Altus group said the hike will see the collective annual business rates bill for the country’s largest retailers, offices and factories rise by around £1.6bn. 

Currys’ half-year results are due out on 14 December. 

More on Currys 

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Source: FE, as at 30.11.23 Basis: Total returns in GBP. Excludes initial charge.

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