MARKET REPORT: Higher fuel costs spark turbulence at Wizz Air

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A turbulent day of trading for budget airline Wizz Air saw it swing from an 8 per cent loss to a rise of more than 8 per cent in the course of just a few hours.

In early trading, shares plummeted after it lowered profit guidance from between £270million and £296million to between £235million and £261million.

Traders baulked as it blamed higher fuel costs and summer strike action for creating a challenging environment, even though its profit for the six months ending in September hit a record £254.7million.

But as the day progressed, the share price began to soar and ended the day 8.4 per cent, or 223p, higher at 2890p.

Bumpy ride: In early trading, Wizz Air shares plummeted after it lowered profit guidance. But as the day progressed, the shares began to soar and ended 8.4 per cent higher at 2890p

Bumpy ride: In early trading, Wizz Air shares plummeted after it lowered profit guidance. But as the day progressed, the shares began to soar and ended 8.4 per cent higher at 2890p

Bumpy ride: In early trading, Wizz Air shares plummeted after it lowered profit guidance. But as the day progressed, the shares began to soar and ended 8.4 per cent higher at 2890p

Part of this may have been due to investors reading further down Wizz Air’s announcement.

The airline said that it was confident that profits would grow further in 2020, as it runs new aeroplanes which burn 16 per cent less fuel than its current fleet. 

Chief executive Jozsef Varadi added that Wizz’s ‘ultra-low cost business model provides a significant competitive advantage in an environment of higher fuel prices’, since customers will flock to find cheaper flights.

US investors may also have contributed to the share price turnaround as they began trading later in the day.

Market players across the pond have been watching European budget airlines intently.

Stock Watch – Innovaderma 

Shares in fake tan and hair products maker Innovaderma sank despite a promising update. 

The Skinny Tan and Roots maker had previously only been able to sell its products in Superdrug due to an exclusivity agreement.

But this is coming to an end, and from March they will be sold in Tesco and around 1,250 Boots stores, boosting its network from 800 to 2,400.

This should lift revenue for the full year ending June 2019 by 31 per cent to £14million, Still, shares sank 17.3 per cent, or 21p, to 100.5p.

The sector has found favour in the US, where the low-cost flight concept began, and investors are keen to take advantage of any dips in share price. 

But the cybersecurity company Sophos Group had less luck, and paid the price yesterday for over-promising to investors as it saw £634million wiped off its market value.

Shareholders had high hopes for the tech firm at the beginning of the year.

When it released its 2018 results back in May, Sophos said that it was expecting billings growth of around 15 per cent in the next financial year.

But so far, billings have increased just 3 per cent to £269million.

There were warning signs when Sophos released a first-quarter update in July.

The company revealed then that billings performance was disappointingly low, saying that the WannaCry cyber attack the year before had boosted demand for its products in 2017 and made it a particularly tough period to compare with.

Even so, major firms such as British Airways and Facebook have struggled with data breaches this year and Sophos does not appear to have reaped the benefits as a result over the six months to September.

Its shares plummeted by 29 per cent, or 132.6p, to 324p, which is its biggest one-day fall in the three years it has been listed on the London Stock Exchange.

The firm is now trading 44.3 per cent lower than it was in January this year.

The FTSE 100 climbed as gains for the Democrats in this week’s US mid-term elections helped to lift the blue-chip index’s miners, as commodities, which are usually priced in dollars, became cheaper for other countries to buy.

Metals miner Fresnillo edged up 3.6 per cent, or 31p, to 902p.

In turn, that helped the FTSE 100 rise 1.1 per cent, or 76.6 points, to 7117.28 points.

NMC Health, a private hospital firm based in the United Arab Emirates, was the biggest riser on the blue-chip index as it revealed it was planning to issue a bond.

The company’s share price perked up as a result, rising 4.3 per cent, or 144p, to 3500p.

 

 



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