Wednesday tips round-up: Chemring, Alcatel-Lucent, Majestic

19th Jun 2013 06:03

Chemring Group, which supplies military munitions and counter-measures, has been affected by falling defence spending as the West gradually withdraws from Afghanistan, according to The Times' Tempus column. The group has had a difficult few months which saw the departure of its Chief Executive, David Price, and several profit warnings due to various operational issues. However, the positive side is that various programmes Chemring is working on, including the F-35 Joint Strike Fighter, are being supported by the existing budget plans. Chemring has also renegotiated its borrowing covenants and has taken swift action to cut costs which will help mitigate poor defence markets. "Chemring is probably at the nadir of its fortunes, but until there is more clarity over US defence spending, the shares will struggle to make much headway," the column said.Alcatel-Lucent's new boss Michel Combes is set to reveal his strategic overhaul of the French telecoms equipment group on Wednesday. The Financial Times' Lex column said while there is value in the long-troubled company, it has struggled with cost reductions in the past and it is a very big ask. "The SG&A+R&D to sales ratio was over 31% in 2012, for example. So the details and implementation will be crucial. Restructuring costs, meanwhile, are to be covered by proceeds from asset sales. Since Alcatel had already talked of raising €1.0bn-plus over 18 months or so, that does look do-able," the newspaper reported. A more focused product strategy, centred on internet access and ultra-fast connectivity will also help revive the firm, it said.Majestic Wines has thrived despite the credit crisis tearing through the high street "like a twister", The Telegraph's Questor reported. The fine wines company has been helped by the fact its shoppers are the older, wealthier sort who have gone largely untouched by the squeeze hitting so many younger people. Monday's results revealed how Majestic's strategy continued to deliver with profits rising £500,000 to £23.7m in the face of a another tough year for retailers. Internet sales climbed 14.7% while business to business sales grew 13.6%. The company also has plans to add 140 more stores. "In our view, there is still too much uncertainty to make Majestic an unrivalled buying opportunity. But the chain remains a solid hold," the column said.Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information. RD