Asos says surge in demand to continue beyond lockdown restrictions

Liam Roche
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Asos says surge in demand to continue beyond lockdown restrictions

Asos gains 1.5m extra active customers

ASOS (LON:ASC), the online clothes seller, announced a 275% jump in its profit halfway through the financial year as it has reaped the benefits from lockdown restrictions.

The AIM-listed company, which recently acquired Topshop among other brands, revealed a 24% increase in its revenue for the six months up to 28 February.

The group’s revenue came in at just under £2bn, with the UK seeing a 39% increase, followed by the EU at 18% and the US with a 16% rise.

The company said the pandemic led to 1.5m extra active customers over the six month period, which means the total is now just under 25m.

“In the coming months we expect a portion of consumer demand will move back to stores as restrictions are eased throughout our markets, but we expect online penetration to remain structurally higher than pre Covid-19 levels,” the company said in a statement.

Asos is expecting to gain higher returns moving forward as customers will increasingly buy clothes for special occasions.

“As a result, our expectations for the full year have increased in line with our outperformance in the first half, and our outlook for the second half is unchanged,” Asos said.

Nick Beighton, CEO of Asos, says the integration of Topshop was going smoothly while praising the overall performance of the company:

“We are delighted with our exceptional first-half performance and proud of the work our teams have put in to achieve this. These record results, which include robust growth in sales, customer numbers and profitability, demonstrate the significant progress we have made against all of our strategic priorities and the strength of our execution capability. The swift integration of the Topshop brands and the impressive early customer engagement is also especially pleasing,” said Beighton.

“Looking ahead, while we are mindful of the short-term uncertainty and potential economic consequences of the continuing pandemic, we are confident in the momentum we have built, and excited about delivering on our ambition of being the number one destination for fashion-loving 20-somethings.”

Winkworth records profit as home buyers seek more space

Liam Roche
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Winkworth records profit as home buyers seek more space

Winkworth performed valuations remotely during lockdown

Winkworth (LON:WINK) said on Thursday that it has seen a surge in house buying as people aim to ensure they have appropriate space to work from home.

However, the estate agent confirmed its profit before tax fell by 6% over the course of last year to £1.53m.

The company’s revenue was down to £6.41m, although it still declared a dividend of 6.68p per share.

The house seller’s profit fell lower than initially anticipated, while its revenue was in line with its forecast.

Simon Agace, chairman of Winkworth, praised the company’s efforts to operate when lockdowns came into effect.

“During both the first and second lockdowns, the benefit of our outlets being in key locations was once again proven. Our local experience meant that we were able to perform valuations remotely and it was noticeable that, on the lifting of lockdown, our clients were delighted to meet us in a controlled environment,” said Agace.

“We believe that this relationship helped to power our recovery, which confirms our confidence in Winkworth’s high street presence. It is not our intention to develop remote working – this pandemic has demonstrated that our business is reliant on teamwork and good communications.”

Agace also commented on changing market trends during the pandemic:

“In recent months we have seen some reduction in interest in lettings and, in particular, there has been lower demand in central London, especially in the foreign student market. As families re-plan their lives, however, the market has swung back towards sales,” Agace said.

“This has been driven by buyers seeking extra room for workspace and gardens, while still maintaining access to central London. Our country offices have experienced an influx of new buyers, while in the suburbs we have been inundated with buyers seeking additional or outside space. We expect this trend to continue.”

Winkworth is a London franchisor of residential real estate agencies positioned in the mid to upper segments of the sales and lettings markets. Winkworth is admitted to trading on the AIM Market of the London Stock Exchange.

Director dealings: Purplebricks

Andrew Hore
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Director dealings: Purplebricks

Simon Downing has invested more than £250,000 in Purplebricks (LON: PURP) just before the end of the financial year in April. He acquired 257,884 shares at 97.3p each. Downing has spent nearly £740,000 on the 891,384 shares he owns in Purplebricks.
In March 2018, Downing was appointed as an independent non-executive director of Purplebricks when Axel Springer invested £125m at 360p a share. Axel Springer still has a 26.5% stake. At the end of 2018, he bought 133,500 shares at 148p each.
At the end of 2019, Downing became senior independent non-executive director. Last August, he acquired 500,0...

New AIM admission: Cornerstone FS

Andrew Hore
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0
New AIM admission: Cornerstone FS

Cornerstone FS has a buy and build strategy in the international payments sector. It has invested in cloud-based technology that can handle a significant multiple of current levels of business with little additional cost. Cornerstone FS does not take on any risk with its foreign exchange trades.
There was £876,000 raised from 229 investors via Crowdcube in the original business owned by the holding company which was used as a shell to acquire the current business. They invested in a shaving products company and are not necessarily interested in the current business.
The original shareholders a...

Barclays Share Price: back above its pre-pandemic high

Liam Roche
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Barclays Share Price: back above its pre-pandemic high

Barclays Share Price

Having surged since the beginning of February, the Barclays share price (LON:BARC) has now fully recovered to its pre-pandemic level. Since the turn of the year, Barclays stock is up by 30% to 187.76p per share. The question now is how much further the share price can go after an impressive recovery.

Good Value?

Going by the price-to-earnings ratio, Barclays, at 19.5, is cheaper than its main competitors, HSBC and Lloyds, at 30.9 and 26.8 respectively. With a relatively low price-to-earnings ratio compared to their peers, investors could consider Barclays if they are looking for the lowest valued bank based on earnings.

UK Recovery

Barclays announced a 68% loss in Q4 in February in net profit following the company’s decision to set aside funds as an insurance for bad loans which came about as a result of the pandemic. Barclays also announced a 30% dip in pre-tax profits to £3.1bn for the year, down from £4.3bn in 2019.

However, like the bank took a beating from the pandemic, it will stand to benefit from a recovery in the UK economy. Only yesterday the IMF upgraded its forecast for the UK economy, predicting a return to a pre-pandemic level of activity in 2022. The new UK forecast is for growth of 5.3% this year and 5.1% in 2022.

Dividend

Despite the fall in profits in 2020, Barclays confirmed it would be resuming dividend payments. The bank’s previous dividend payments were 3p, 2.5p and 1p in December of 2019, 2018 and 2017 respectively. With the recent growth of its share price, as well as its historically generous dividend, Barclays could prove to be a shrewd buy for income investors in 2021.

Risks

While the bank’s recovery has been so far so good, and the UK looks set to continue its roadmap out of lockdowns, there are risks to buying Barclays shares.

The damage of the pandemic on the bank was somewhat offset by strong results from its investment banking arm. However, there is no guarantees that the tables will not not turn in the coming year. If its investment banking arm is unable to maintain its performance then other major banks which are not diversified in the same way could prove a better option.

The Bank of England (BoE) urged banks to be ready in the event of negative interest rates later in the year. While it is not certain that the BoE will implement such a policy, it does however pose an ongoing threat to the Barclays share price going forward.

UK service sector PMI returns to growth ‘quicker than expected’

Liam Roche
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UK service sector PMI returns to growth ‘quicker than expected’

IHS Market PMI for services at 56.3

The UK services sector made a return to growth last month as unemployment, business activities and new orders returned to growth from February.

Data that emerged on Wednesday shows that the UK’s so far successful roll-out of vaccines has led the economy to bounce back quicker than first expected.

The IHS Market purchasing managers index (PMI) for services came in at 56.3 for March, which indicates growth as it is above 50, the marker for stagnation.

In February the service sector contracted slightly, scoring 49.5 on the PMI.

The 56.3 score in March is the first time PMI has been above 50 since October 2020.

In a positive sign for employment figures, the number of staff hires increased overall for the first time since the pandemic started.

Tim Moore, Economics Director at IHS Markit, which compiles the survey, provided further context to the positive service sector news:

“UK service providers were back in expansion mode in March as confidence in the roadmap for easing lockdown restrictions provided a strong uplift to new orders. Total business activity increased at the fastest rate since August 2020 and this return to growth ended a four-month sequence of decline,” Moore said.

“Forward bookings for consumer services and rising optimism about recovery prospects resulted in extra staff hiring across the service economy for the first time since the start of the pandemic. Business optimism improved for the fifth month running in March and was the highest since December 2006.”

“Around two-thirds of the survey panel forecast an increase in output during the year ahead, which reflected signs of pent up demand and a boost to growth projections from the successful UK vaccine rollout. Of the small minority citing downbeat expectations in March, this was often linked to uncertainty about international travel restrictions.”

“There were further signs that strong cost pressures have spilled over from manufacturers to the service economy, especially for imported items. Higher prices paid for raw materials, alongside rising transport costs and utility bills, meant that operating expenses across the service sector increased at the strongest rate since June 2018.”

Cash conserved as CyanConnode growth accelerates

Andrew Hore
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Cash conserved as CyanConnode growth accelerates

Good news from narrowband radio frequency communications networks developer CyanConnode (LON: CYAN) where full year revenues have soared in the past year. More importantly, the cash position is positive.
Revenues are better than expected. In the year to March 2021, revenues will be more than double the £2.5m achieved in the 15 months to March 2020. Arden had forecast a figure of £5.8m for 2020-21, but it will be around £6.2m. That is an impressive second half performance considering that interim revenues were £1.5m.
Management has been promising growth in demand and contracts have been won, bu...

Jamie Dimon predicts post-pandemic boom for US economy

Liam Roche
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Jamie Dimon predicts post-pandemic boom for US economy

Jamie Dimon’s letter showed support for high government spending

The chief of JP Morgan, Jamie Dimon, has said a vast increase in US government spending will boost the US economy over the next 24 months.

Dimon provided a positive outlook in his yearly letter to his company’s shareholders. He noted that high savings rates, stimulus programmes, a potential infrastructure package and the mood around the pandemic coming to an end would combine to get the US economy moving.

“It is possible that we will have a Goldilocks moment — fast growth, inflation that moves up gently (but not too much) and interest rates that rise (but not too much),” said the banker, who believes a sustained spending could to lead to an extended period of growth.

Dimon said that both companies and consumers were in good shape as the US begins to emerge from the coronavirus crisis.

Prior to the President’s $1.9trn stimulus package passing in March, the investment bank suggested that retail customers were storing around $2trn in extra savings.

Dimon also stated that the expansionary policies carried out by central banks across the globe will have a “compounding global affect”.

If Dimon’s prediction of a boom does come to fruition then high valuations equity markets could be justified, though it would be difficult to support the price of Treasury bonds due to an oversupply of US debt, he said.

A key theme within Dimon’s letter was his support for high government spending as a means to addressing some of the country’s issues, including ageing infrastructure, expensive healthcare and economic inequality.

“Spent wisely, it will create more economic opportunity for everyone,” he said, while including that there are risks it can be ineffective when tied up in bureaucracy.

Dimon’s points come as Joe Biden is seeking to pass a $2trn infrastructure plan following his $5.8trn stimulus outlet designed to stimulate the economy during the pandemic.

UK retail investors could be shunning domestic equities at their peril

UK Investor Magazine
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UK retail investors could be shunning domestic equities at their peril

Recent data from the The Investment Association revealed UK retail investors took a further £1 billion out of UK Equity Funds in February. This means retail investors have removed a total of £18 billion from UK Equity Fund since 2016 and the decision to leave the EU.

We question whether Retail investor are simply driven more by sentiment around the UK or misunderstand the composition of UK markets given the significant level of revenue earned outside of the UK by FTSE 100 companies. 

Whilst investors took cash out of UK Funds they added to Global Funds meaning UK Retail investors may be under exposed to rerating in UK Equity as its lags other major indices that have enjoyed recent rallies.

We discuss Ananda Developments (LON:ANA), Kavango Resources (LON:KAV) and Mosman Oil and Gas (LON:MSMN).

Register for the upcoming UK Investor Magazine Virtual Conference here.

FTSE 100 closes in on 13-month high

Liam Roche
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FTSE 100 closes in on 13-month high

As it did on Tuesday, the FTSE 100 led the way after the bell, adding another 0.8%. Touching 6,875, the index is at a near 3-month high. If it can add another 40 or so points in the coming days, it will hit its best levels in over 13 months.

“Despite the third wave in Europe, concerns over the AstraZeneca vaccine, and reported worries about an incoming slowdown in the UK’s vaccination programme, yesterday’s IMF growth upgrades have helped keep the markets feeling fresh,” said Connor Campbell, financial analyst at Spreadex.

While its gains were half of that of its blue-chip big brother, the FTSE 250’s 0.4% rise put it above 22,000 for the first time in history.

“That, more so than the gains made by the multinational-focused FTSE 100, is a sign of investor optimism over a post-covid recovery in the UK,” Campbell added.

FTSE 100 Top Movers

Land Securities (3.47%), British Land (2.49%) and Taylor Wimpey headed up the FTSE 100 early on Tuesday.

Avast (-1.76%), Flutter Entertainment (-1.56%) and Evraz (-1.00%) are the day’s biggest fallers so far.

Shell

Royal Dutch Shell today confirmed that the impact of the Texas winter storm will see the company lose out on $200m in the first quarter of 2021. This is despite the crude oil price rising over the same period.

The FTSE 100 company’s production of oil was reduced by between 10,000 to 20,000 barrels per day, however the company is still anticipating average output to come in between 2,400,000 and 2,475,000 barrels per day. This would result in a swing to a profit following a prior Q4 loss.

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