Scottish Mortgage Investment Trust manager to step down

Liam Roche
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Scottish Mortgage Investment Trust manager to step down

Scottish Mortgage Investment Trust (LON:SMT) has confirmed one of its portfolio managers is set to retire.

James Anderson, who manages the trust alongside Tom Slater, will step down in April 2022 after nearly 40 years at Baillie Gifford.

Ryan Hughes, head of active portfolios at AJ Bell, praised Anderson’s handling of the Scottish Mortgage Investment Trust, drawing attention to the manager’s returns.

“Anderson has helped build Scottish Mortgage into a phenomenal investment trust over many years with his clear, high conviction approach being a driving force behind its willingness to invest in early stage companies and hold them while they become global winners with Amazon, Tesla and Alibaba all being great examples,” Hughes said.

“Since being appointed manager on the trust on the 1 April 2000 he has delivered a staggering 1,700% returning, equivalent to turning a £1,000 investment into £18,000 compared to just £4,440 if invested in the FTSE All World benchmark.”

Hughes also discussed investors’ concerns and looked towards the future of the Scottish Mortgage Investment Trust without Anderson.

“News that James Anderson is stepping down as joint portfolio manager on the Scottish Mortgage investment trust will potentially cause some worry to the thousands of investors who have made fantastic returns over many years,” says Hughes.

“However, it’s important to remember how Baillie Gifford work with the investment process being firmly embedded in the team-based approach and experienced investor Tom Slater remaining at the helm. With Anderson not stepping back for over a year, this has been well planned with a clear handover process for Lawrence Burns to become deputy manager on the trust to support Slater.”

Anderson joined Baillie Gifford in 1983 and became a partner four years later. He has been manager of Scottish Mortgage since 2000 and, since 2015, joint manager with Tom Slater.

Natwest buys back £1.1bn worth of shares from UK Treasury

Liam Roche
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Natwest buys back £1.1bn worth of shares from UK Treasury

Sale to Natwest is a loss for UK Government

The UK Treasury has announced it has finalised the sale of £1.1bn worth of shares back to Natwest (LON:NWG).

The Treasury’s stake in the British bank is now down to 59.8% from 61.7% following the third sale of its holding.

In an off-market buy, Natwest purchased 591m shares at a value of 190.5p each, worth £1.1bn in total.

The shares were originally bought at around 500p apiece, so the sale represents a hefty loss.

The UK Government bailed out RBS, now known as Natwest, in 2008 in order to protect the bank against a collapse at the height of the financial crisis.

A statement from the Treasury said that the share sale “represents an important step in the government’s plan to return institutions brought into public ownership as a result of the 2007-2008 financial crisis to private ownership”.

The buyback will also consider a £500m contribution to Natwest’s pension scheme as part of an agreement reached in 2018.

Natwest’s share price is up 1.63% to 193.6p on early Friday morning trading.

Wetherspoons chairman calls for sensible guidelines as pubs set to reopen

Liam Roche
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Wetherspoons chairman calls for sensible guidelines as pubs set to reopen

Wetherspoons swings to loss in H1 of 2021

Wetherspoons (LON:JDW) confirmed on Friday a before tax loss of £46.2m as lockdown measures forced its pubs to close across the country.

The result was a swing from a £57.9m profit for the 26 weeks ended 24 January 2021.

The group‘s revenue dropped by more than 53% to £431.1m, while its operating loss fell to £20.7m compared to a profit of £76.6m the year before.

Sales were down by nearly 54% on the same period of last year as the pub industry felt the impact of the coronavirus pandemic.

Tim Martin, chairman of JD Wetherspoon, was critical of the government’s guidelines and spoke of the need for sensible and consistent policies moving forward.

“Wetherspoon and its employees, along with the hospitality industry, have worked very hard to comply with ever-changing government guidelines. It is disappointing that so many regulations, implemented at tremendous cost to the nation, appear to have had no real basis in common sense or science – for example, curfews, “substantial meals” with drinks and masks for bathroom visits,” said Martin.

“The future of the industry, and of the UK economy, depends on a consistent set of sensible policies, and the ending of lockdowns and tier systems, which have created economic and social mayhem and colossal debts, with no apparent health benefits.”

JD Wetherspoons confirmed yesterday that it would be reopening 60 of its pubs in Scotland as restrictions eased.

In addition to. serving food and non-alcoholic drinks indoors, the pub will serve alcohol without having to buy a meal outside.

Pubs will be allowed to serve customers outdoors in groups of up to six from a max of three households, until 10pm, according to the new guidelines. While indoor service will be allowed for groups of up to four people from two households until 8pm.

Online growth helps Portmeirion revenues

Andrew Hore
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Online growth helps Portmeirion revenues

Previous investment in online sales helped ceramic housewares and giftware supplier Portmeirion Group (LON: PMP) to cope with the problems of Covid-19 and associated lockdowns. Online accounted for 47% of UK and US sales, up from 30% the year before.
Portmeirion’s own ecommerce platforms increased sales by 69%. The plan is to generate one-fifth of sales from this platform. Portmeirion acquired the shares it did not own in the Canadian associate company, which has little in the way of online sales. Bringing it into the group will help to increase online business in Canada.  
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BT Share Price: debt remains an issue

Liam Roche
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BT Share Price: debt remains an issue

BT Share Price

After a sustained period of decline, BT’s share price (LSE:BT.A) has displayed signs of a steady recovery. Over the past five days it has jumped by 12% to 152.15p per share as news emerged that the network secured a bargain deal in the latest auction of 5G airwaves. While over the last 12 months, BT shares are up by 20%.

BT Share Price

BT Performance

There are a number of areas for concern when it comes to the company’s balance sheet. BT has a debt to total equity of 175.40 and a long-term debt to equity of 150.65 which is a cause for concern for the future prospects of the company. The company’s net debt, while still high at £17.3bn, fell by £940m, according to the most recent trading update. BT’s high debt levels could factor in to its decision making over dividend payments in the coming years.

The company’s profit also fell by 17% Q3 up to 31 December 2020, down to £1.591bn. BT put the drop down to reduced EBITDA.

BT also has a questionable track record in terms of paying dividends out to its shareholders. The media company axed its dividend due to the pandemic and has confirmed it does not intend to pay a dividend for the current financial year. Prior to 2020, BT paid three consecutive total dividends of 15.4p.

Outlook

BT announced in its most recent trading update that it will be implanting a modernisation strategy. This includes selling off business units in Italy which has previously been a troublesome asset.

In addition, the company has made efforts to boost its exposure to high-growth sectors. This includes the hire of Bharti Airtel in India to head up its cloud computing, artificial intelligence, and machine learning operations.

“This is more than a leadership announcement, it’s an important statement of intent. 2020 saw a number of major BT innovations enter the marketplace but there’s opportunity to go much further,” said BT’s CEO Philip Jansen at the time.

The BT share price comes across as cheap with a price-to-earnings ratio of 6.5. However, this could also be a reflection of the company’s limited earning potential, and the impact of its high debt on future dividends.

Bank of England keeps interest rate at 0.1%

Liam Roche
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0
Bank of England keeps interest rate at 0.1%

Bank of England maintains bond buying programme at £895bn

On Thursday the Bank of England (BoE) upgraded its outlook for the UK economy, while reaffirming it is in no rush to reduce the levels of support it has been providing to buoy a recovery from the Covid-19 crisis.

The BoE also passed an unanimous 9-0 vote to keep interests rates at 0.1%, as expected, as well as maintaining its bond buying programme at £895bn.

The UK central bank drew attention tp recent bond market selloffs, suggesting that the rise in bond yields largely reflects improved economic prospects.

“[Since the February forecasts] developments in global GDP growth have been a little stronger than anticipated, and the substantial new US fiscal stimulus package should provide significant additional support to the outlook,” the BoE said.

However, the bank did add that the UK’s outlook remained uncertain, and would depend on the evolution of the pandemic and how various segments of the UK economy respond as time progresses.

The BoE said the Monetary Policy Committee (MPC) stands ready to “take whatever additional action is necessary to achieve its remit,” if the outlook for inflation weakens.  

It added that there was no intention to tighten monetary policy until it is clear that progress is being made in “eliminating spare capacity and achieving the 2% inflation target sustainably”.

Laith Khalaf, financial analyst at AJ Bell, retraced the BoE’s steps over recent weeks, drawing the conclusion that things are looking up.

“Since the beginning of last month, markets have gone from worrying about negative interest rates in the UK, to pondering when monetary policy might tighten. The Bank of England provided a pretty bullish assessment of the prospects for economic recovery in its February monetary report and since then the outlook has got even better,” said Khalaf.

“Further support from the Chancellor in the Budget, a roadmap out of lockdown and fiscal stimulus spilling over from the US, all support the case for a robust bounceback, as the UK economy opens up in the coming months.”

Khalaf also drew attention to the risk of rising inflation under the BoE’s current interest rates policy, as well as the central bank’s approach.

“But the message coming through from the Bank of England is that interest rates are going to remain nailed to the floor for the foreseeable future, despite the improving economic picture. The only thing that might prise rates upwards is a bout of inflation, but that would need to be both sustained and structural to compel the Bank of England to tighten policy.”

“The Bank will look through rising inflation caused by temporary factors, such as recovering energy prices and would only deem inflation to be problematic if the UK was near full employment, which isn’t going to happen this year, or probably next.”

The FTSE 100 held steady today in the aftermath of yesterday’s announcement by the US Federal Reserve and the Bank of England’s update.

Bahamas Petroleum outlines opportunities in Trinidad and Suriname update

Liam Roche
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0
Bahamas Petroleum outlines opportunities in Trinidad and Suriname update

BPC core production portfolio at 450 to 500 barrels of oil per day

Bahamas Petroleum Company (LON:BPC) drew attention to a number of value drivers as the company provided an update ahead of its drilling programmes in Trinidad and Suriname.

First on the list is the Saffron #2 appraisal, which will be mobilised in April ahead of an anticipated start-date around the middle of May.

Assuming the appraisal is successful, Saffron #2 will deliver around 200 to 300 barrels of oil a day.

Between five to nine more follow up wells will be readied for drilling in H2 of 2021 to complement a field development which will eventually include approximately 30 wells.

The opening programme of wells is forecasted to produce between 1,000 and 1,500 barrels of oil before the end of 2021, which would generate around $8-12m of cash, at $60 per barrel.

An additional positive note from the company comes from Suriname, within the Weg Naar Zee production sharing contract (PSC) area, where drilling is due to start in July after a minor Covid-19 related delay.

Going back to Trinidad Bahamas Petroleum Company’s core production portfolio has steadied between 450 to 500 barrels of oil per day.

Simon Potter, chief executive of British Petroleum Company commented on the update:

“Since we acquired our Trinidad and Tobago and Suriname licenses, the team have worked tirelessly to fully understand their significant potential. This has progressed such that we are now looking at multiple value drivers via appraisal, infill and well testing campaigns across our portfolio during 2021.”

“Our immediate focus turns to the upcoming drilling of the Saffron #2 appraisal well, which we anticipate beginning 17 May 2021. Saffron #2 will further our understanding of the field and, in a success case, can quickly be put into production at extremely low cost, potentially adding 200-300 bopd.”

“It is our intention that through these actions we can continue to increase production to more than 2,500 bopd across our portfolio which, with a conservative oil price estimate, can generate significant cash flow.”

Kazera Global provides positive update on diamond production

Liam Roche
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0
Kazera Global provides positive update on diamond production

Kazera Global share price jumps by 43%

Kazera Global shares (LON:KZG) soared on Thursday following the company releasing a positive update on its diamond production, as well as a proposed funding package.

The mining company confirmed its final tally of sorted diamonds had risen to 242 from the 220 carats expected the month before.

On the assumption that the price per carat is $200, the company will cover the cost of its South African operation. Kazera Global added that it expects its diamond production to be “materially profitable” in a trading update.

Dennis Edmonds, Kazera Executive Director managing the South African projects, commented:

“The latest diamond results mean that our South African operation is now covering its own overheads. The additional revenues from the gravel stockpile and the two new areas of operation indicate that this project should be a major cash generator for the Company in the near future.”

The company confirmed a €9,130,000 investment package from a Namibian investor is close to completion, with relevant due diligence set to be completed.

Upon the news being release the Kazera Global share price jumped up by 43% to 1.75p per share.

Larry Johnson, Kazera Chief Executive Officer, commented: 

“The proposed investment will be transformational in allowing us to build the water pipeline, construct the tailings dam that will enable us to recover water whilst facilitating waste storage in an environmentally sound manner, and to bring the processing plant back on line. It will also allow us to continue to explore the vast property with a third phase core drilling program, so adding further valuable resource to our world class tantalum and lithium assets. “

“We will also be able to continue exploring other opportunities available to us and to accelerate progress on our recent investments in South Africa.”

“The process has taken longer than anyone expected but reflects the structured and disciplined way in which Namibia approaches foreign investment, ensuring strict global compliance is met through rigorous documentation and KYC.”

Ocado sales up 39% as lockdown boosts demand for home deliveries

Liam Roche
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0
Ocado sales up 39% as lockdown boosts demand for home deliveries

Ocado and Marks and Spencer dispatched 329,000 orders per week in Q4

Ocado (LON:OCDO) confirmed on Thursday that its sales surged by 39% in Q4, as the current lockdown buoyed demand for food at home.

The company anticipates a return to its normal results but offered no profit guidance for the coming year.

The size of an average order was recorded at £147 as families that remained in their homes purchased more goods. As a result, sales went up by two-fifths from the quarter the year before which was unaffected by the pandemic.

The partnership between Ocado and Marks and Spencer dispatched 329,000 orders per week during the 13 weeks to the end of February. The number was a small rise on the year before which displayed the limits of its automated picking capacity.

AJ Bell investment director, Russ Mould, commented on the performance of the group’s partnership with Marks & Spencer, as well as the continued trend of online shopping.

“Ocado’s latest update focuses on its joint venture with Marks & Spencer rather than the whole group, which means we don’t get the news people really want to hear – namely if it has managed to sign up any new grocery customers for its technology platform,” said Mould.

“The venture with Marks & Spencer is doing well, so there is reason to be cheerful when looking at Ocado’s performance. Revenue has been soaring which reflects how the country continues to flock to the online channel to buy food and drink. Ocado is increasing capacity for order volumes via new mini fulfilment centres.”

Melanie Smith, Ocado Retail’s chief executive, also commented on the update:

“Over the past year, large numbers of UK consumers have made a permanent shift to online grocery shopping. Ocado Retail is best placed to serve these customers as we continue to improve the customer experience through the joint venture with M&S, adding new products, offering greater value, and maintaining high customer service levels,” Smith said.

“We opened one mini Customer Fulfilment Centre in Bristol last month, which gives us capacity to serve more customers and with the opening of Purfleet and re-opening of Andover, both later this year, we ultimately expect to ramp our overall capacity by 40% with these sites.”

FTSE 100 steps back to digest news from US

Liam Roche
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0
FTSE 100 steps back to digest news from US

FTSE 100 opened up 10 points, or 0.17% at 6773 points, following yesterday’s announcement by the US Federal Reserve and in anticipation of the latest update by the Bank of England.

“After an early gain the FTSE 100 took a step back on Thursday as investors tried to decipher the latest meeting of the US Federal Reserve,” says AJ Bell investment director Russ Mould.

“In some ways Fed chair Jay Powell and his colleagues delivered what the market wanted which was a commitment to keep interest rates low. However, it is now a question of the credibility of this argument,” Mould added.

Connor Campbell, financial analyst at Spreadex, commented on the FTSE’s move on and looked ahead to the Bank of England’s announcement later in the day.

“Once again the black sheep of the Western markets, the FTSE fell 0.2% in anticipation of the Bank of England’s Thursday get-together,” said Campbell.

“Like the Fed, Andrew Bailey and the MPC will be walking a tightrope, needing to celebrate the vaccine-led economic recovery in the UK, reassure about the impact of rising inflation on interest rates, and soothe concerns that the central bank will be turning off the taps any time soon.”

FTSE 100 Top Movers

Informa (3.22%), Rightmove (2.46%) and Standard Life Aberdeen (2.16%) lead up the index as the day’s top movers so far.

At the other end, the biggest fallers on the FTSE 100 are M&G (-4.62%), Ocado (-2.38%) and Rolls-Royce (-1.87%).

US Federal Reserve

The Federal Reserve is anticipating stronger than previously forecasted growth this year, as the vaccination roll-out continues apace and the government’s stimulus efforts start having an impact. The US central bank has forecasted growth of around 6.5% this year, an increase of its initial expectation of 4.2% in December. 

The Fed also confirmed a brighter outlook for the jobs market on Wednesday. However, the central bank decided against raising interest rates, with most members expecting to keep borrowing costs close to zero until after 2023.

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