House prices to dip as stamp-duty holiday ends

Safiya Bashir
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House prices to dip as stamp-duty holiday ends

House prices will likely fall early next year when the stamp duty holiday ends and the furlough scheme winds down.

The Office for Budget Responsibility has said the current boom since the first lockdown will come to a close as the UK will see a spike in unemployment.

“House prices fell briefly as the pandemic struck, but recent indicators suggest they have subsequently recovered quite strongly,” said the Office for Budget Responsibility.

“This follows the easing of public health restrictions and the stamp duty holiday for residential property transactions that took effect on 8 July 2020. House prices are expected to fall back in 2021, driven by end of the stamp duty holiday and the hit to household incomes from the labour market adjustment that we assume will follow the end of the Coronavirus Job Retention Scheme.

“Despite a steady recovery from 2022 onwards, the level of house prices remains around 17 per cent lower at the forecast horizon compared to our March forecast,” it added.

However, the housing boom is expected to continue into the first three months of 2021 before the stamp duty holiday and furlough scheme ends.

The property website Zoopla has estimated a further 100,000 houses to be sold in the first three months of next year. The number of new sales is currently 38% higher than it was a year ago.

Richard Donnell, director of research and insight at Zoopla, explained: “It has been a rollercoaster year for the housing market which is ending on a strong note with demand and sales agreed still more than 30% higher than this time last year.”

Calnex Solutions shares surge amid “favourable” telecoms market

Safiya Bashir
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Calnex Solutions shares surge amid “favourable” telecoms market

Calnex Solutions shares (LON: CLX) surged over 20% on Wednesday after the group revealed results for the six months ended 30 September 2020.

The group reported strong demand over the period and saw revenue grow 37% whilst pre-tax profit increased by almost 69%.

Due to the reduced travel and events costs amid the pandemic, Calnex Solutions was able to see increased profitability and cash generation from from the higher revenue.

Due to the “favourable” telecoms market conditions, the group is expecting continued growth into the second half of the year. Calnex Solutions said in a trading update that it will be ahead of current market expectations and revenue and adjusted profit will be broadly in line with the H1 update.

Tommy Cook, the chief executive and founder of Calnex, said: “We are delighted to report on another strong period of trading, delivered in the lead up to our IPO on AIM, in which we experienced continued strong demand across all our product offerings. Our successful IPO, completed in early October, has provided us with the springboard to execute on our growth strategy.

“The strength of our relationships within the telecoms sector, breadth of customer base and established market position, provide us with a strong platform for future growth. We will continue to invest in business development and R&D to capitalise on the opportunities arising from the evolution of the telecoms market and look to the future with confidence. “

Calnex Solutions shares (LON: CLX) are trading +26.43% at 91,03 (1400GMT).

United Utilities shares rally despite profits falling over 16%

Jamie Gordon
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United Utilities shares rally despite profits falling over 16%

FTSE 100 listed water management company, United Utilities (LON:UU), published its half-year results on Wednesday, illustrating a challenging period of pandemic trading.

While reported profit after tax rose from £158.6 million to £162 million, the company’s reported operating profit fell 16.84% to £318.5 million, while its underlying profit after tax dropped 16.02%, from £207.2 million to £174.0 million.

These profit figures were led by a 4.59% decrease in the company’s revenues, down from £935.5 million, to £894.4 million, and an increase in its net regulatory capital spend, up from £255 million to £276.4 million.

It wasn’t all doom and gloom, though. United Utilities enjoyed a 1.47% dividend increase, up to 14.41p. Similarly, the company helped 142,000 customers through support schemes during the period, and reduced users’ average household bills by 7% for the 2020/21 year.

Speaking on the results, United Utilities CEO, Steve Mogford, commented: “Despite the pandemic, our operational performance in this first year of the new regulatory period is on track. We are accelerating our capital expenditure to bring forward benefits and help support 17,700 jobs in the supply chain. We recognise the role that we can play in a successful society, economy and a thriving natural environment and are confident in our ability to deliver our AMP7 plans to achieve this.”

“We now have a clearer understanding of the impact of COVID-19 on our business which remains robust and supported by a strong balance sheet. This, together with a stabilised inflation outlook supported by central bank policy and government actions, gives us the confidence to reaffirm our responsible AMP7 dividend policy of growth in line with CPIH inflation.”

Following the announcement, United Utilities shares rallied by 3.33%, to 926.00p a share. This price is short of its post-pandemic high of 978p seen in June, and analysts’ consensus target price of 1,005p a share. Analysts have a consensus ‘Buy’ rating on the stock; it has a p/e ratio of 57.45; and the Marketbeat community has a 54.34% “underperform” stance on the company.

Foreign investors bulk-buying UK properties to capitalise on stamp duty savings

Bronte Carvalho
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Foreign investors bulk-buying UK properties to capitalise on stamp duty savings

Research by Astons – a leading international real estate expert on residency and citizenship through investment, offering bespoke residence and citizenship solutions in the UK, EU and Caribbean through property investment – has found evidence of a growing trend amongst foreign investors bulk-buying properties across the UK in order to capitalise on the current stamp duty holiday before foreign surcharges are introduced in April next year.

At the moment, foreign buyers benefit from the same stamp duty holiday reductions as domestic UK buyers, which has seen a surge in activity across the housing market in recent months. However, with the 2% surcharge for foreign buyers sitting ominously on the horizon in the spring, those that complete their transactions now can essentially escape the additional charge.

And, with a weak pound and strong signs of an imminent market recovery, many foreign buyers are looking to bulk-buy UK real estate while profit potential is at its highest. By purchasing six or more residential units in one transaction, foreign buyers are able to secure non-residential stamp duty rates starting at just 2% between £150,001 and £250,000, and 5% above the £250,000 threshold.

One such transaction which Astons recently oversaw was a six-unit purchase in London acting as staff accommodation from a Hong Kong-based buyer which sold for £6.988m. Due to “regional instabilities” and the option to apply for British citizenship from January, the buyer opted to invest in the London market “due to the liquidity and growth the capital presents”.

With the traditional residential path to purchase, the buyer would have paid £946,991 in stamp duty according to current regulations, making a considerable saving of £338,914 compared to purchasing post-April 2021 when the foreign buyer surcharge is due to be implemented.

However, as the buyer purchased these same six units as a non-residential investment, the stamp duty tax bill actually totalled at just £338,914 – a whopping £608,077 less than the current residential rate, and £762,842 lower than the residential rate with the incoming additional 2%.

Managing Director at Astons, Arthur Sarkisian, commented on the emerging trend:

“A whole host of global influences are spurring foreign interest in the UK property market at present. While the residential stamp duty holiday has helped boost this interest, we’re now seeing many invest above and beyond a family home to lay far stronger foundations for their personal and professional future in the UK. 

“By ‘bulk buying’ in the residential market, they are able to secure a far lower rate of stamp duty and with the weaker pound, investing now is making very good business sense. While the residential rush from foreign buyers will no doubt dissipate come April, we expect this higher level of investment will continue as many lay future foundations in anticipation for life after Covid”.

Dow Jones hits new all-time high and breaks the 30k mark

Jamie Gordon
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Dow Jones hits new all-time high and breaks the 30k mark

US blue chip equities index, the Dow Jones, set a fresh all-time record, as it bounced over 440 points and hit 30,034 points.

Beating its previous record of 29,989 points booked at the end of 2019, the US index was buoyed by rallies posted by COVID-suffering equities in finance, commodities, air travel and film.

Chevron took the top spot, up 4.75%, followed closely by JP Morgan Chase and American Express up 3.74% and 3.69% apiece. Similarly, Boeing rose by 3.72%, while Disney boasted a 3.51% hike.

Unsurprisingly, tech stocks also contributed to the Dow Jones 1.5% jump. Intel rallied by 2.15%, Microsoft increased by 1.85%, and Apple enjoyed a 1.38% bounce. These big tech rises also contributed to healthy growth in the tech-laden Nasdaq, up 1.38% on Tuesday.

Speaking on US equities success and the knock-on effect on European stocks, Spreadex Financial Analyst, Connor Campbell, said on the day’s political developments: “It took the US open for the markets to really display their delight at the start of the formal transition process to the Joe Biden administration this Tuesday.”

“Relief that the Democrats can hopefully hit the ground running when it comes to tackling covid-19 in January, as well as the positive impact the pro-spending former Fed chair Janet Yellen is expected to make as Treasury Secretary, drove the Dow Jones to record highs.”

“With American investors driving stocks higher, the European markets didn’t want to be left out, doubling the gains seen earlier in the session.”

Still feeding off of vaccine update optimism, Western equities as a whole were boosted by the Dow Jones rally and the presidential transition news. Up by 1.55%, the FTSE hit 6,432, while the CAC and DAX both rallied by over 1.2% apiece.

Looking ahead, the outlook for the coming weeks looks bright, according to IG Chief Market Analyst, Chris Beauchamp: “Signs of movement in the US political deadlock have combined with the steady drip of vaccine news to underpin a market that has yet to breach the highs seen earlier in the month.”

“But the trickle of good news stories has helped to hold markets near to those highs, leaving them well-placed to push higher into December.”

Record Plc posts growth in revenue despite “extreme volatility”

Safiya Bashir
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Record Plc posts growth in revenue despite “extreme volatility”
Record Plc shares (LON: REC) were down over 2% on Tuesday after the group shared results for the six months ended 30 September 2020. The company posted a 4% growth in revenue to £11.8m – up from £11.4m in the same period a year earlier. In addition, the group posted growth in clients and a strong financial position with shareholders’ equity of £25.7m. Pre-tax profits at Record Plc fell from £3.2m to £2.6m and the group has revealed an interim dividend of 1.15 pence. Commenting on the results chief executive, Leslie Hill, said: “We have made tangible progress in our first half against our strategic growth initiatives; pleasing in light of the challenging backdrop presented by the global pandemic. Our business continues to show its resilience both in operational and financial terms and we have grown our customer base, including the acquisition of a new $8 billion US-based Dynamic Hedging mandate. “Diversification through product innovation is central to our growth plan, and we’re excited about our collaboration with a European wealth manager to build and manage a Currency Impact Fund which we expect to be seeded with several hundred million in the first calendar quarter of 2021. We view this highly innovative offering as a market-first, enabling us to tap into this fast-expanding market and take the lead in our sector. “Our reinvigorated growth strategy necessitates investment in sales capabilities, technology and infrastructure; we are investing both to add more functionality as well as to bring efficiencies. “The extreme volatility we witnessed earlier in the year has served to underline to all market participants the benefits of a specialist risk management offering. Our new business pipeline reflects the growth opportunity and I feel confident the business will build on the positive momentum and growth investment as we progress into 2021.” Record Plc shares (LON: REC) are trading -2.42% at 39,96 (1655MGT).

FTSE 100 opens higher on vaccine news & Biden transition

Safiya Bashir
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FTSE 100 opens higher on vaccine news & Biden transition
The FTSE 100 opened higher on Tuesday as markets continued to react well to the ongoing vaccine news. The FTSE 100 opened 55 points higher or 0.87% to 6389 in early trading, which was boosted by growth in travel stocks, energy companies and hospitality firms. In Europe, markets also opened higher. Germany’s DAX increased by 0.85% and France’s CAC was up 1%. Fiona Cincotta at Gain Capital said: “The dominant driving force behind the market has been progress in vaccine development.” Top risers on Tuesday morning included Rolls-Royce (+6.3%), airline group IAG (+4.5%), and oil giant BP (+3.6%). The FTSE 250 also saw gains at the opening bell. Shares in TUI gained almost 10%. Markets were also cheered by signs that US President Donald Trump is accepting that he will be replaced by Joe Biden in January.

“After much delay the General Services Administration has signalled that Joe Biden and his team can begin the formal transition process ahead of January’s inauguration, a move that Donald Trump gave his approval despite insisting he will continue with his unfounded claims of voter fraud in order to overturn the result,” said Connor Campbell from Spreadex.

“The key thing for the markets is that the smoother the transition, the easier it will be in theory for the new administration to hit the ground running in January – vitally needed given the out-of-control American covid-19 situation, and the planning needed for a nationwide vaccine rollout.”

Compass Group returns to Q4 profit, shares rise

Safiya Bashir
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0
Compass Group returns to Q4 profit, shares rise
Compass Group shares (LON: CPG) were up almost 5% on Tuesday morning after the group shares full-year results ending 30 September. After a “challenging” year for the group, the FTSE 100 firm returned to profit in Q4 thanks to mitigating costs, increasing liquidity, and strengthening the balance sheet. Revenue fell 18.8% from £24.8bn in 2019 to £20.2bn, whilst operating profit plunged 69.7% to £561m. The group started the year with strong performance, however, once the pandemic hit had to close half of its business. In the fourth-quarter, Compass was able to return to profitability and is now cash neutral. “2020 was a challenging year for Compass. I am extremely proud of how the organisation responded to the pandemic,” said chief executive, Dominic Blakemore. “We began the year on track to deliver our strongest performance ever, and over the course of a fortnight in March, we saw the containment measures to stop the spread of COVID-19 close half of the business. We rapidly enhanced our health and safety protocols, mitigated our costs, increased our liquidity and strengthened our balance sheet. “Through the summer, our performance began to improve slowly as we helped clients in Education and Business & Industry return to schools and offices safely. Importantly, in the fourth quarter we returned the business to profitability and are now cash neutral. This was achieved mainly through contract renegotiations to reflect the difficult trading environment, continued discipline in terms of costs and some improvement in volumes. We are executing at pace and expect the underlying operating margin in the first quarter of 2021 will be around 2.5%.” Looking forward, the group is preparing for a challenging trading environment and is adapting operations to improve the offer, increase flexibility and manage costs. Compass Group shares (LON: CPG) are trading +4.39% at 1.402,50 (0903GMT).

Pets at Home reveals “exceptional” demand over lockdown

Safiya Bashir
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0
Pets at Home reveals “exceptional” demand over lockdown
Pets at Home (LON: PETS) has reported a total group revenue growth of 5.1% to £574.4m in the six months to October. Thanks to an “exceptional period of demand”, the group revealed a 4.2% jump in sales compared to the same period a year earlier. The FTSE 250 firm said in a trading update that it has adapted operations well to be able to continue providing pet care to customers with minimal disruption. The group has maintained an interim dividend per share of 2.5p. Looking forward, Pets at Home anticipates full-year underlying pre-tax profit to be in line with the prior year. Peter Pritchard, the chief executive of the group, said: “In spite of the ongoing and wide-ranging impact of COVID-19, there is much to be optimistic about. The market in which we operate remains resilient, with recent changes to our work and leisure patterns supporting rising levels of pet ownership, a good proxy for future growth in both the underlying market and our business. “We adapted our operations rapidly post the onset of the pandemic, and our focus on customer acquisition is underpinning market share gains across all channels and strong growth in our VIP and Puppy and Kitten clubs, thereby increasing the long-term opportunity of using data-driven, joined-up solutions across our range of products and services to drive customer share of wallet and lifetime value. “We are introducing new ways to meet our customers’ needs across all channels, making pet care as affordable, convenient, engaging and flexible as possible, and our customer-centric pet care platform, underpinned by the most extensive and unique proprietary pet dataset in the UK and a true omnichannel backbone, provides us with significant competitive advantages. “While we will continue to remain focused and agile in our execution, we are, more than ever, confident in the resilience and longevity of our pet care platform,” he added. Pets at Home shares (LON: PETS) are trading -7.35% at 388,20 (0840GMT).

Aviva shares optimistic on sale of shareholding in Italian business

Bronte Carvalho
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Aviva shares optimistic on sale of shareholding in Italian business
Shares at British multinational insurance agency Aviva plc (LON:AV) bounced more than 2% on Monday evening following the news that the firm is set to sell its entire 80% shareholding in Italian life insurance venture Aviva Vita to its partner UBI Banca for €400 million in cash. The move is part of the firm’s new CEO – Amanda Blanc’s – broader plans to refocus its portfolio on more profitable divisions and shore up its finances since she took over in July. It comes just two months after Aviva sold its Singapore arm to a consortium of buyers for £1.6 billion in September. Although still subject to customary closing conditions, including regulatory approval, the move is expected to be completed in the first half of 2021 and should see the company’s net asset value increase by £100 billion. As part of the deal, Aviva also said that a €40 million loan provided by Aviva Italia Holding to Aviva Vita would be repaid in full at completion. It also represents a multiple of 8.4 times Aviva Vita’s 2019 IFRS profit, the firm said, and would increase the company’s capital surplus by 200 million pounds. CEO Amanda Blanc hailed the company’s news as an important step forward in the restructuring process: “The sale of Aviva Vita is another important step forward as we reshape our portfolio and follows the recent announcement of the majority sale of our Singaporean business. We will continue to be decisive as we seek to transform Aviva for the benefit of our shareholders”. Aviva Vita’s post-tax profit was £523 million in 2019, and it did not pay a dividend. The gross assets of Aviva Vita were £16.3 billion as of June 2020.

UBI Banca was already Aviva’s business partner, but the money it is now ploughing into the acquisition could help the firm pay off some of its outstanding debt and shore up liquidity.

Analysts have also speculated that the sale might help avert a widely-expected trimming of Aviva’s high dividend, which currently sits at 2.93%.

Alan Devlin, from Shore Capital Markets, said that analysts are expecting the dividend to be cut by about 30% – potentially by this Thursday – when Aviva is set to hold an investor day event.

But he added: “If the company can deploy the proceeds from the asset sales then the company can partially or indeed fully protect the dividend”.

A further update is expected from the firm on Thursday this week, when Blanc is expected to elaborate on her strategic plan for the group.

Aviva’s share price jumped 2.08% to 324.60p on market close on Monday 23/11/2020, edging closer to its annual high of 326.20p. The firm has enjoyed a rather smooth year despite widespread market turbulence due to the Covid-19 pandemic, with shares up 34.18% over the past 6 months. Its P/E ratio stands at 4.98 and its market capitalisation is a healthy £12.75 billion.
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