UP Global Sourcing reveals “resilient performance”
UP Global Sourcing shares (LON: UPGS) fell over 10% on Tuesday as the group reported lower-than-expected full-year profits.
The household brands group, which owns brands including Russell Hobbs, reported a 2.7% decline in pre-tax profits and a 6.1% fall in revenue to £115.7m.
Online revenue grew from £11.4m to £16.7m, online revenue accounts for 14.5% of overall revenue.
Despite strong online sales and demand during the pandemic, UP Global Sourcing said supply chain disruption when the pandemic hit China at the start of the year.
The group has reduced its full-year dividend by 3.2% to 3.955p per share.
Commenting on the results, Simon Showman, Chief Executive of Ultimate Products, said:”We are pleased to have delivered such a resilient performance amidst the unprecedented challenges brought about by COVID-19. Through a relentless focus on our strategy and the extraordinary commitment, professionalism and adaptability of our colleagues, our performance has substantially exceeded the expectations that we had at the beginning of the pandemic.
“These results are another clear illustration of the strength of our business model and the importance of having a diversified customer base. Time and time again, we have also found that in difficult trading conditions, retailers require suppliers that can provide them with certainty through compelling value, quality and supply, which plays squarely to our strengths.”
Looking forward, UP Global Sourcing said that despite the disruption, performance exceeded expectations and they reported relatively modest reductions in revenue and profitability.
UP Global Sourcing shares (LON: UPGS) are currently trading -10.27% at 90,85 (1545GMT). Shares this year have remained strong, with a year high of 119.00p.
Hello Fresh posts 120% jump in Q3 revenue
Hello Fresh has seen a surge in demand amid the pandemic and plans to expand services.
The company delivered 162 million meals in the third quarter, which is a 135.1% increase on the same period in 2019.
The number of active customers almost doubled from 2.61 million to 5 million in 2020, whilst revenue jumped 120% to €970m.
Hello Fresh has raised expected revenue growth from 75-95% to 95-105%.
Laurent Guillemain, the UK chief executive, said: “We have come a long way since the beginning of the pandemic and I couldn’t be more proud of what the team has accomplished.
“Despite a challenging operating environment we have succeeded to further innovate and grow our product range and improve our service levels, all while continuously delivering fresh, high-quality food to our customers’ doorsteps.”
In August, Hello Fresh revealed plans to open a new production facility in Nuneaton, UK, and another in the US. Both will create approximately 1,400 jobs.
Nigel Dolan, Development Director at Goodman where the site will be located, said at the time: “We’re proud to welcome HelloFresh to our Nuneaton 230 development. Its innovative business model leads the way in both the healthy home cooking and subscription service revolution and we’re pleased to be able support the growth of its UK production and fulfilment network.”
Rainbow Rare Earths agrees to co-develop project with 210,000 tonne potential yield
Rainbow Rare Earths Limited (AIM:RBW) watched its shares surge on Tuesday, following the announcement that it had signed an agreement for co-development of the Phalaborwa Rare Earths Project in South Africa, with Bosveld Phosphates Limited.
The company said the project comprises around 35 million tonnes of gypsum, with rare earth earth elements in situ grade of 0.6% Total Rare Earth Oxides – based on previous sampling campaigns. At this grade and project size, the company said this indicates the presence of around 210,000 tonnes of contained rare earths oxides, with Neodymium and Praseodymium – vital components in renewable power and electric vehicle batteries – expected to make up around 30% of the total basket.
The company added that the ‘unique’ nature of the gypsum stacks results from the historic concentration of rare earths during Foskor’s flotation process and further upgrading in Sasol’s PhosAcid Plant, leading to rare earths being concentrated in chemical – rather than mineral – form, which ‘enables simpler onward processing’.
It continued, saying that initial reports suggest low levels of radioactive elements, similar to those seen at its Gakara Project in Burundi. Further, the Group stated that the re-processing of gypsum stacks comes with environmental benefits. Namely, that it will redeposit ‘clean benign gypsum’, which it says has the potential to be used in building and fertiliser industries.Rainbow Rare Earths added that the Phalaborwa project is now fully permitted, with an Environmental Impact Assessment completed. It will pay US$750,000 in cash and shares to Bosveld over the course of a year, following a 35-day due diligence process. And, on completion of the pre-feasibility study, Rainbow Rare Earths will hold 70% of the project versus Bosveld’s 30%, with a mechanism in the company’s JV ownership allowing it to vary its ownership form 60% to 85%.
Commenting on the significant joint venture agreement, company CEO, George Bennett, said:“This Joint Venture represents an important and exciting step in Rainbow’s strategy to benefit from the expected growth in global demand for rare earth metals. The considerable amounts of historical test work carried out to date, together with positive initial assays and successful pilot plant operations, indicate that this opportunity, in conjunction with the Company’s high-grade Gakara Project, will enable Rainbow to become a very significant producer of NdPr, to power the green revolution.”
“This Joint Venture positions Rainbow as the only REE producer with both country and project diversification.”
Following the news, the company’s shares rallied by between 20-25%, up to 6.20p around lunchtime on Tuesday 03/11/20. This price is the company’s year-to-date high, but short of its all-time-high of 23.10p in April 2018.
Inspirit Energy shares spike 140% as Volvo backs its Waste Heat Recovery tech
Energy efficiency innovator, Inspirit Energy Holdings plc (AIM:INSP), saw its shares soar on Tuesday, as it announced it had agreed a letter of support for the development of a Waste Heat Recovery system with Volvo Penta (STO:VOL-B).
The news followed a successful model design and application demo with the Swedish supplier of marine and industrial power solutions. And speaking on the support for the Inspirit Energy WHR system, Volvo’s SVP of Product Dev. Planning and Purchasing, Peter Granqvist, commented:
“Inspirit has an interesting proposition with the development of its Waste Heat Recovery technology which aligns with our own aims of increasing the efficiency of the engines we manufacture in support of Volvo’s Agenda 2030 sustainability objectives. On success of the application, we believe this proposal will enhance the development of innovative solutions that will unlock new market opportunities for us particularly for generator sets and marine engines.”
Inspirit says its WHR system utilises the company’s proprietary Sterling engine technology. Its compact nature allows it to be placed after catalytic converters in an exhaust system, with the energy being directly transferred as an electrical output.
The company added that during the demonstration, the heat recycling process increased engine efficiency by around 20%, driven by waste heat engine from an model such as the Volvo Penta D13 series. The Group adds that in addition to heat reduction, it expects the WHR system to significantly reduce noise.Inspirit Energy stated that the letter of support validates its technology and underlines its ability to capitalise on the demand for environmentally-friendly and cost-saving products. It concluded its statement, saying that should the product continue to prove successful, it may lead to a test of the system in a Volvo engine, to confirm its efficiency and output.
Responding to the positive update, John Gunn, Chairman of Inspirit Group PLC commented:
“We are delighted to have the opportunity to work with the team at Volvo Penta on the development of a waste heat recover system utilizing the Inspirit Sterling engine technology and the knowledge and technical expertise of our teams. We believe the technology will have applications in a wide range of other sectors including commercial and performance automotive, marine and solar and we are hopeful that this project will provide a gateway to working on future projects with the Volvo Group”.
Following the news, Inspirit Energy shares rallied around 140%, to 0.12p on Tuesday 03/11/20. This is the company’s highest level since November 2019, though notably short of its historical high of 2.83p in September 2013.Crest Nicholson upgrades expectations, shares surge
Crest Nicholson shares (LON: CRST) surged over 16% on Tuesday morning as the group released a full-year trading statement.
The results were ahead of expectations and the company has upgraded profit expectations.
Pre-tax profit for the full year was ahead of previous guidance and totalled £37.9m and the group boasted a strong sales performance over summer.
“Due to a positive trading environment since the Spring lockdown, and strong progress implementing our updated strategy, the Group is pleased to report that it expects Adjusted Profit Before Tax for FY20 to be significantly ahead of consensus of £37.9m and at the upper end of the previously guided range of £35m – £45m,” said Crest Nicholson in a statement.
“During the summer we have seen good trading across all of our divisions. Reservation rates are now slightly ahead of the pre-Spring lockdown level. The release of pent-up demand, whether due to customers putting off moving because of Brexit uncertainty or subsequent COVID-19 disruption, and the benefits of the Stamp Duty holiday, have supported near-term confidence levels in the housing market.”
Peter Truscott, Chief Executive, commented: ‘This has been a challenging year for everyone involved with housebuilding. For Crest Nicholson, in the early stages of implementing an updated strategy, the arrival of COVID-19 could not have come at a worse time.
“Despite the disruption caused by COVID-19 the Group has maintained a rigorous focus on delivering the plan we laid out in January 2020. We are pleased to report that we are now seeing this take effect. We are also appreciative of the Government moving quickly to reopen the sector and taking the decision to temporarily suspend Stamp Duty. Confidence in moving home and stability of house prices will be a critical part of a successful economic recovery from this pandemic.
“Since the Spring lockdown we have traded well and as a result are pleased to announce an upgrade to earnings for the year. We also enter next year with a strong forward order book. Our disciplined focus on cash generation and capital allocation has ensured we close the year with an excellent cash position and a robust balance sheet. Accordingly, we are pleased to be reinstating our dividend in the next financial year.”
Crest Nicholson shares (LON: CRST) are trading +17.27% at 255,18 (1149GMT).
BNP Paribas beats Q3 expectations thanks to surge in trading
BNP Paribas has reported a surge in trading revenues, helping France’s biggest bank to beat Q3 expectations.
For the three months to September, the lender revealed a 2.3% drop in net income to €1.9bn (£1.7bn), which beat expectations of €1.5bn.
Pretax profit from the global markets unit surged 67% to €648m whilst overall revenues at the group remained relatively flat at €10.89bn.
Chief Executive Officer Jean-Laurent Bonnafé commented: “In an economic context featuring different dynamics across regions and sectors, BNP Paribas demonstrates its high resilience thanks to its financial solidity, its diversification, and the power of execution of its platforms.
“I would like to salute the tireless efforts of all our teams who have supported our clients since the beginning of the crisis, while helping the economy and the acceleration of its ecological transition.
“The Group continues to pursue its actions, commitments to solidarity and its contribution to mitigating the impact of this crisis as much as possible. In these extraordinary times, as an essential service, BNP Paribas continues to adapt to its environment and organises its activities to support clients whilst protecting its employees and remains focused on the success of a solid and sustainable economy, across all geographies.”
BNP Paribas shares (FRA: BNP) climbed 5.35% in morning trading.
Wizz Air: passenger numbers plunge 69% in October
Wizz Air (LON: WIZZ) reported a 69% fall in passengers over October compared to the year previously.
The low-budget carrier reported a dramatic fall in passenger numbers, which is expected to fall further as the UK prepares for a second lockdown.
Wizz Air flew 1.15 million passengers in October this year, compared to the 3.7 million in October 2019.
On Tuesday morning, the airline reported three new bases in Italy and Norway.
Owain Jones, Managing Director, Wizz Air UK: ‘Wizz Air UK continues to lead the way in getting the UK flying again, safely We are delighted to be announcing yet more new routes for our UK customers, who we know want to travel, especially with the winter months looming. That’s why we are wasting no time by introducing exciting holiday destinations to our UK network, with genuinely affordable fares.”
Airlines have been among the hardest hit amid the pandemic. Yesterday, Ryanair reported a €200m loss and EasyJet warned it is on track to its first-ever full-year loss.
Ryanair’s chief executive Michael O’Leary told the BBC: “We’ve already stripped out the schedule for most of November and the December, we have really just a skeleton schedule for the services between UK airports and continental European destinations.”
Wizz Air shares (LON: WIZZ) have climbed 3.7% this morning.
FTSE 100 jumps ahead of US election
The FTSE 100 has rallied ahead of the US election up 79 points or 1.4% at 5735.
Almost every stock on the FTSE 100 opened higher on Tuesday morning, recovering from the 7-month lows.
The FTSE 250 rose 1.35% to 17,412.93.
It wasn’t just London that opened higher. Stocks across Europe climbed on Tuesday with Germany’s DAX index and France’s CAC both climbing around 0.6% on opening representing a one-week high.
Connor Campbell from Spreadex commented on the markets ‘blue wave’ on Tuesday: “The markets tempted fate on Tuesday morning, forgetting the lessons of 2016 as they pre-emptively celebrated a Joe Biden victory.
“The Democrat is the clear favourite – though Trump, that unkillable movie monster, can never be counted out, especially since Biden’s chances tightened over the weekend according to SpreadEX’s prices.
“Since last Friday, the Democrat has moved from a fixed odds price of 4/11 to 1/2, with Trump going in the other direction, from 15/8 to 7/5.
“Choosing to ignore the slim – but not slim enough – likelihood of Trump winning a 2nd term, the markets continued to aggressively rebound on Tuesday. This also meant they were fairly sanguine in the face of the idea that Trump may not react well to defeat, and the myriad horrible ways that could play out.
“The main reason why a Biden win is so sought after from a market-perspective, is that a ‘blue wave’ – i.e., the Democrats crucially taking the Senate – would see a stimulus plan far greater than anything Republicans would be willing to go for.
“That’s why you have the FTSE up 1.2%, and the DAX and CAC up 1.5% apiece – investors have gotten a sniff of stimulus, overriding any fears over uncertain results, recounts or a refusal to move out of the White House by the incumbent,” he added.
In Asia, stocks were also strong. China’s CSI 300 index climbed 1.2%, and Hong Kong’s Hang Seng increased by almost 2%Primark profits plunge 60% to £362m
Primark owner Associated British Foods (LON: ABF) has posted a 60% drop in profits to £362m.
The retailer saw a 24% fall in revenue in the year ended September 12, which was driven by store closures in the third quarter during the lockdown.
Since reopening sales have recovered but are still down 12% in the UK and 17% lower across European stores.
Thanks to the government’s furlough scheme and reducing expenditures, Primark cut costs of 50% during the lockdown.
The group warned yesterday that a second lockdown would hit sales by £375m.
“As of today, all Primark stores in the Republic of Ireland, France, Belgium, Wales, Catalonia in Spain and Slovenia are temporarily closed, which represent 19% of our total retail selling space,” said the group.
“The announced period of closure varies by market. The UK Government announced its intention to close non-essential shops in England for one month from 5 November to 2 December. Assuming that this will be passed by the UK Parliament on 4 November, 57% of our total selling space will be temporarily closed from 5 November.”
“Our estimated loss of sales for these stores, including the stores in England, for the announced periods of closure is £375m.”
Chief executive of ABF, Geroge Weston, commented on the latest trading update:
“I am proud of how our people have responded to the many challenges presented by Covid-19.
“Throughout, we have provided safe, nutritious food under the most extraordinary conditions, proving the value and resilience of our supply chains. Our food businesses delivered an adjusted operating profit increase of 26 per cent, driven by high demand and improved productivity.
“Following a three-month closure, Primark delivered a robust performance, receiving an overwhelmingly positive response when it safely welcomed customers back to its stores. Uncertainty about temporary store closures in the short-term remains, but sales since reopening to the year end of £2bn demonstrate the relevance and appeal of our value-for-money offering.
“We have the people and the cash resources to meet the challenges ahead and we are investing for the future.”
ABF shares (LON: ABF) are trading -1% at 1.704,00 (0942GMT).
With business borrowing up over 500%, is extending loan schemes the right move?
On Monday the Treasury announced that it would be extending its emergency business loan schemes to enable SMEs to ‘top up’ their borrowing, in an effort to help companies survive the new English (and perhaps soon UK-wide) COVID lockdown.
As per the new amendments announced by the Chancellor, businesses will have until the end of January to apply for loan schemes, including bounce back loans (BBLS) and the COVID business interruption loans (CBILS and CLBILS). These two month extensions knock the date back from the end of November and also apply to the start-up-oriented Future Fund. On Twitter, Rishi Sunak stated:
The top up will mean that businesses who have already claimed some of the low-interest loans will be able to borrow more money, and is designed to help firms who previously borrowed less than the maximum sum – up to 25% of their turnover up to the £50,000 cap – to avoid adding to their debt. Thus far, the bounce back loan scheme has allocated £40.2 billion to 1.3 million UK businesses, with new research from EY ITEM Club highlighting that business borrowing in 2020 will be more than five times the level of the previous year. This underlines the first problem, which, according to Conister Director, Douglas Grant, is that: “The latest lockdown measures in England will sadly be the last nail in the coffin for many companies which simply cannot receive capital quickly enough. We are therefore determined and absolutely focussed on protecting those robust businesses operating in sectors that are resilient and ultimately will grow stronger with the necessary capital in the long term.”To help more businesses access additional support, deadlines for applications to our government-backed loan schemes and the Future Fund have been further extended until 31 January 2021. pic.twitter.com/UhrZZtQKxQ
— Rishi Sunak (@RishiSunak) November 2, 2020
“Conister received an initial allocation limit of £10m for the BBLS scheme and so far, we have received 4,607 applications with a total amount of £162,739,000. Without doubt, the scale of applications is enormous and while SMEs are the lifeblood of the economy and where innovation and creativity happens, it is crucial that priority is given to resilient businesses to allow them to pivot their business models for the new normal.”
So, in the view of Conister, the key issue is that loans need to be focused on the most viable businesses. The issue many would take with that approach is politically intuitive: support loans can’t be viewed as a hand-out, they’re a pre-requisite for lockdown. As we saw in Northern England, when not offered what might be deemed sufficient support, lockdown policies will be resisted and down the line, perhaps even broadly ignored. In this sense, extending the loan schemes makes sense, as it provides businesses with the bare minimum needed for them to shut their doors. The second, and perhaps more pressing issue, is the one raised by analysts from non-profit research group, Positive Money. The organisation states that between lenders making up to £26 billion during the lifespan of the bounce back loan scheme, and SMEs being forced to take on more debt in order to survive, the entire exercise of locking down boils down to a cynical transfer of wealth away from small businesses. Positive Money’s executive director, Fran Boait, comments on the extension of the bounce back loan scheme, saying that: “We should be wary of banks’ sudden keenness to pile on more debt to small businesses, especially after figures revealed that lenders are set to rake in more than £1bn from the government in the first year of interest payments on Bounce Back loans issued so far.”“Yet more debt, which many will struggle to repay, is not the right way to help struggling businesses at this time. Debt should be for investment, while emergency support should take the form of grants and other direct assistance.”
The alternative, Boait might argue, would be for the UK to adopt the Swiss model that the UK’s bounce back loan scheme is based on, with the key difference being that banks are not allowed to charge SMEs interest on fully-government-backed loans. The fact that small businesses won’t be charged a rate of 2.5% interest in Switzerland, could see a faster recovery in the balance sheets of smaller enterprises post-COVID.