UK inflation picks up amid higher clothing & food prices
UK inflation has edged up to 0.7% in October.
The inflation rose from 0.5% in September and was pushed up by rising clothing prices, food, and second-hand cars.
Clothing prices rose by 2.8%, whilst the price of food increased by 0.1% between September and October.
Jonathan Athow from the Office for National Statistics said: “The rate of inflation increased slightly as clothing prices grew, returning to their normal seasonal pattern after the disruption this year.”
“The cost of food also nudged up, while second-hand cars and computer games also all saw price rises. These were partially offset by falls in the cost of energy and holidays.”
The cost of second-hand cars also edged up as people are avoiding the use of public transport. The ONS said:
“Prices for second-hand cars have risen by 1.4% between September and October 2020, compared with a 0.2% fall between the same two months a year ago.
“This upward movement continues from last month, which is reported to be because of increased demand for used cars as people seek alternatives to public transport.”
Tom Stevenson, investment director for personal investing at Fidelity International, commented on the latest statistics from the ONS and explained the impact that a vaccine would have, saying:
“Inflation crept up to 0.7% in October on the back of slightly higher food. While prices are on an upwards path, rises are likely to be subdued for a while longer. Covid infections are still increasing, large swathes of the UK are under strict lockdown rules, restricting opportunities to spend, and unemployment is climbing. This is not a recipe for inflation reaching its 2% target any time soon.
“Further out, however, there is light at the end of the tunnel in the form of a potential vaccine. Re-opening the economy will rekindle animal spirits. The widely-discussed shift to negative interest rates looks less likely now and this is good news for investors. The Bank of England has increased its quantitative easing programme to encourage consumer spending and investment and it should now keep its powder dry.”
Halfords shares rise as profits double
Halfords shares (LON: HFD) surged on Wednesday’s opening bell after the group released a strong trading update for the 26 weeks to 2 October 2020.
The group posted a 101% rise in pre-tax profit in the first half of the year to £56m, as the group saw strong demand amid the lockdown cycling boom.
like-for-like revenue at the group grew by 6.7% from £582.7m to £638.9m whilst like-for-like sales in the cycling department jumped 54.4%.
As people took up cycling over lockdown, the number of people in cars fell. Halfords reported a 23.7% fall in motoring revenue.
“We are very pleased to have achieved such a strong first half performance against the backdrop of one of the most challenging trading environments in recent history,” said Graham Stapleton, the group’s chief executive.
“We have worked hard to capitalise on the cycling market tailwinds by sourcing more stock from existing and new suppliers, as well as launching new products and brands to serve the high level of demand for our cycling products and services. Despite the headwinds we have seen in motoring, with UK traffic 30% lower than pre-Covid-19 levels and the impact of the MOT deferment, our ‘Road Ready’ campaign and the investments we have made in our motoring services business have enabled us to increase market share and grow the business in Q2.
“As a sign of our confidence in the long-term prospects of our motoring business, and in order to meet the growing demand for our services in this area, we are in the process of recruiting to fill a wide range of service-oriented roles across our stores, Autocentres and fleet of Halfords Mobile Expert vans. We are also making a substantial investment in further training for existing colleagues, including in the rapidly growing area of electric vehicle servicing as we work to fill the skills gap that exists in the UK. We will be training 100 more electric car technicians next year, bringing the total to 470. In addition, we will be growing the number of e-bike and e-scooter servicers in our stores from 400 to over 1,800. This means that, by April, each of Halfords’ garages will have at least one electric car technician, with electric bike and scooter services in every store,” Stapleton added.
The group remains cautious about its outlook amid further lockdowns and a seasonal dip in cycling sales over winter. Given the uncertainty around trading, the FTSE 250 retailer has not given profit guidance for FY21.
Halfords shares (LON: HFD) are +7.40% at 281,92 (0914GMT).
Tesla shares charged up by S&P 500 entry projection
On the announcement that Elon Musk’s electric vehicle and solar power company would enter the S&P 500 next month, Tesla shares rallied over 13% during after-market trading.
The company are set to enter the blue chip index on the quarterly rebalancing on December 21. And, having seen shares spike when they first qualified for S&P 500 entry over a month ago, admission will likely give Mr Musk – and Tesla shareholders – an early Christmas present.
Following the news, the company’s market cap rose by $50 billion, though still over $60 short of its almost $500 per share high seen in August. Tesla has been a boon for speculative growth investors over the last year, and they’ll likely see this development as the company’s long-overdue recognition, following an eventful couple of years.
What will weigh on the minds of investors and referees is the fact that until the second half of 2020, Tesla leaned heavily on the sale of carbon credits to book four quarters of consecutive profits, which is a pre-requisite of S&P 500 admission.
Some pressure will have been allayed by the company’s third quarter profits, which demonstrated a boost in its underlying sales performance. However, the S&P and investors should remain cautious.
In the past, the blue chip index has been tentative when admitting trendy, tech-based and innovation-based phenoms into its ranks. However, with the company now the tenth-highest valued on the US market, it has been hard to ignore – only time will tell whether its bold rise over the last year can be sustained.
For now, its shares have rallied by 9% since markets opened, up to around $440 a share. Analysts currently have a consensus ‘Hold’ stance on the stock, and a target price of under $250 a share. The Marketbeat community give it a 50.46% “outperform” rating – which indicates just how divisive Tesla stock is.
The company’s p/e ratio is 1,168.65, which is just a tad over the auto sector average of 51.42.
Cerberus in talks to rescue Co-Op bank
On Tuesday evening, Sky News reported that American private equity firm Cerberus Capital Management LP is currently in “preliminary talks” to rescue hedge fund-owned Co-Operative Bank following months of turmoil due to the ongoing pandemic.
Sources revealed that Cerberus was “likely to seek a cut-price deal” during negotiations with the bank’s executive board and shareholders, with inside sources citing the firm could acquire the bank for as little as £200 million.
The Co-Operative Bank is owned by a number of US hedge funds – including Silver Point Capital, GoldenTree, Anchorage Capital, Blue Mountain and Cyrus Capital – and Invesco (NYSE:IVZ), who cumulatively took control from the Co-operative Group Ltd. after launching a £700m rescue deal in 2017.
Its reputation has been wrought with controversy over the past decade, when the hedge funds were called in after a £1.5 billion hole was discovered in its accounts in 2013.
Just a year later, the bank’s former chairman Paul Flowers was involved in a high-profile court case in which he pleaded guilty to possession of crystal meth, cocaine and ketamine.
The disgraced businessman was later banned from the City for life by the Financial Conduct Authority after “using company phones to access premium rate chat lines”.
Cerberus was one of the bidders involved in the Co-Operative Bank’s last formal sale process in 2017, but ultimately opted not to go through with a deal.
The firm is one of the world’s leading investors in banking and financial services, already boasting a major stake in Deutsche Bank. Today Cerberus also acquired Montreal-based toy manufacturers, Dorel Industries Inc., for a deal standing at C$470 million.
In the UK, Cerberus has been criticised over its treatment of so-called “mortgage prisoners” whose home loans were part of a £13 billion government sale in the aftermath of the 2008 financial crash.
Earlier this month, the Co-Operative Bank posted a “resilient” Q3 trading update, with a pre-tax loss of £23.5m – down from £80.1m for the same period in 2019.
CEO Nick Slape commented on the Q3 results, stating:
“This is a challenging time for all banks, given the uncertain economic outlook and continuing low base rate, but whilst we remain loss making as anticipated in our plan, the results also show our resilience as we continue to make significant progress in our turnaround”.
Nevertheless, the bank remains firmly in the red, with £68.1 million losses between January and September of this year.
A representative told Sky News on Tuesday that the ongoing negotiations cannot be guaranteed at this stage:
“The Bank continues to be in discussions with this financial sponsor, although such discussions remain at a preliminary stage.
“There can be no certainty that discussions with this financial sponsor will progress further, or that any binding offer will be forthcoming nor whether the Bank’s ultimate shareholders will find the terms of a binding offer (if any) acceptable”.
M&G launches new Climate Change Solutions fund
In September this year, Reuters reported that investors managing trillions in assets and more than 120 business leaders had urged the European Union to cut carbon emissions by at least 55% by 2030.
The mounting climate crisis has increasingly drawn the attention of investors the world over in recent years, highlighting the opportunity to accelerate alternative energy solutions to help reduce emissions.
Despite the ongoing coronavirus pandemic, the UN-backed Green Climate Fund pledged to ramp up efforts to tackle climate challenges – approving $879 million for 15 new projects – even as countries around the world struggle with the economic fallout.
Now, the latest to join the movement, London-based investment manager M&G plc (LON:MNG) has announced the launch of its new OEIC climate fund for investing in companies providing solutions to the challenges posed by climate change.
The M&G Climate Solutions fund is set to invest in around 30 different companies generating revenue across three key impact areas: clean energy, green technology, and the promotion of the circular economy.
The fund’s selection process will be based on each company’s net positive climate impact and revenue alignment, with M&G stating that they will refer to the climate-related UN Sustainable Development Goals as part of annual assessments.
Run by M&G fund manager Randeep Somel, the Climate Solutions fund carries an I share class annual charge figure of 0.7%, excluding transaction costs.
Commenting on the launch, Somel told Citywire:
“The green agenda and the need to provide solutions to the challenge of climate change has unlocked the creativity and ingenuity of many companies who have these solutions at the heart of what they do.
“This is a multi-decade opportunity for companies who deliver innovative products and services – and for those who invest in them”.
1.4 million retail investors sold over £10k of their shares during lockdown
New research published by behavioural finance experts, Oxford Risk, revealed that during the initial COVID stock market shock and first lockdown, 8% of savers and investors sold off some of their shares or took money out of the stock market.
Of the number who own shares, 34% said they now own fewer than they did at the beginning of the year, versus 12% who now own more.
Around 1.38 million retail investors sold £10,000 or more of their investments during the early stages of the COVID lockdown, while 531,900 people sold over £100,000 of their holdings. Regarding the freed-up funds, 59% left their money in savings, while 31% used it to contribute towards living costs, and 29% put the money towards clearing debts.
Over the summer, equities regained considerable ground, with tech and biotech shares enjoying the tail-ends of their lockdown surges. Despite the opportunities these easy-pickings rallies offered, 29% of investors who cashed in their holdings at the beginning of lockdown have not reinvested any of it back into markets. Similarly, only 10% have reinvested 50% or more.
Of the number who did reinvest, 26% said they did this in one fell swoop, while 52% said they did it in chunks, and 22% gradually ‘drip fed’ their money back in.
Speaking on the research findings, Oxford Risk’s Head of Behavioural Finance, Greg B Davies, PhD, said: “Many of the investment decisions retail investors make are for emotional comfort, and in a normal year this can on average cost them 3% in returns. Driven by the COVID-19 crisis, stock market volatility levels have been greater this year, so the losses will be higher.”
“Those investors who pulled money out of the markets in March will already have lost much more – they lost when the markets dropped, and many have missed out on the rebound since. Many are also likely to find it emotionally difficult to get this money reinvested for the long-term and so may lose out on even more foregone returns in the long-run.”
The recent findings follow the company’s previous report, which found that investors’ decisions to increase their cash allocation during the pandemic, may cost them between 4% and 5% per year in long-term returns. It added that the ‘Behaviour Gap’ – losses due to timing decisions caused by investing more money when times are good for stock markets and less when they are not – costs investors an average of 1.5% to 2% a year over time.
CEO of Oxford Risk, Marcus Quierin, PhD, concluded by saying that: “There are many behaviours common with investors during volatile and uncertain times, and they can be tempted to focus too much on the present and feel compelled to do something even when sitting tight is the best solution. […] Those worried about falling stock markets should remember that they only turn paper losses into real ones when they sell.”
“Retail investors should avoid watching the markets day-to-day as this increase anxiety and remain focused on their long-term plans and ignore much of the background noise that can tempt them into making the wrong investment decisions.”
Fintech firm Mintos smashes Crowdcube record
EU-leading alternative investment platform Mintos has broken records by raising a record €5.3 million on Crowdcube in just 24 hours, after reaching its initial target of €1 million in just 15 minutes.
The fintech firm – described as a “global online marketplace for investing in loans” – attracted over 4,600 investors in its first crowdfunding campaign to date.
Mintos also smashed another record by hitting €3 million in just over 2 hours, cementing the firm as the largest European company to raise on Crowdcube in terms of both funds and number of investors.
Already the leading alternative investment platform in continental Europe, Mintos currently boasts 340,000 investors and 28 million loans funded. Its investor base has been consistently growing at 125% per year for the past 5 years.
Last year, Mintos was awarded the Alternative Finance Platform of the Year award, as well as winning the People’s Choice award for the fourth year running at the annual AltFi Awards.
Up until this week, Mintos had managed to raise around €7 million from angel investors and had funded most of its own growth via its revenue. The company was launched in 2015 and “almost single-handedly built up the market of investing in loans in Europe” to €6.6 billion – with a 45% market share.
Commenting on the firm’s impressive news, Mintos CEO and co-founder Martins Suite stated:
“We are thrilled to have such a response from our community. This result is a huge endorsement of our vision and it goes to show how strong the relationship with our community is. We are looking forward to having our newly joined shareholders aboard and continuing our growth plans.
“However, this is just the beginning as today we are opening the campaign to the public and continuing to crowdfund. After such validation by our own community, we are very excited to see what the next stage of crowdfunding has in store for us”.
Mintos has stated its intentions to secure Investment Firm and EMI licenses by early 2021, with the hope of doing more business across Europe on a passporting basis to open up the larger markets.
“With additional funding, we plan to continue scaling up our business by focusing on customer acquisition and leveraging our customer base by offering new products”.
“We want to broaden our investment offerings by including loans with lower risk and return levels, and to provide new investment products (such as ETFs) and financial services (like Mintos IBAN account and debit card) to our customers”.
Boohoo appoints new Non-Executive Director
Boohoo (LON: BOO) has announced Shaun McCabe to be the new independent non-executive director.
Currently the chief financial officer at Trainline and the non-executive director at AO World, McCabe will join the fast-fashion retailer to improve governance issues.
Boohoo is working on issues following the scandal on poor working conditions at a factory in Leicester.
Mahmud Kamani, the executive chairman, commented: “As Executive Chairman, I am committed to supporting and driving our agenda for change to build a better boohoo for the benefit of all of the Group’s stakeholders. On behalf of the Board I am delighted to welcome Shaun to the Group. His deep knowledge and experience of e-commerce and retail will be a great asset to the Board. As a Group we are committed to implementing our agenda for change that will help us on our journey to lead the fashion e-commerce market globally, and look forward to providing further regular updates on our progress in due course.”
Shaun McCabe, said on his new role: “I am delighted to be joining boohoo at an exciting time when it is implementing its agenda for change. Having spoken extensively with fellow members of the Board, I look forward to helping the Group add further independent experience and increased oversight on matters of compliance and business practices.”
Following the news, shares in Boohoo (LON: BOO) increased by 2%. They are currently trading +1.83% at 289,40 (1404GMT).
Blue Prism shares bounce on 40% revenue growth
Robotic automation specialists, Blue Prism (AIM:PRSM), saw its shares soar as it posted strong full-year performance, in spit of COVID-19 challenges.
The company said that full year bookings of £180 million – £122 million of which was new business – contributed to what the company’s anticipated revenue growth of around 40% year-on-year.
Blue Prism added that its cloud offering now comprises 17% of the business, and expects the division to post a 147% growth in full year bookings. The company were encouraged by their client’s willingness to expand their digital workforce during 2020, and said that alongside positive momentum during the second half, they see a strong pipeline that gives them confidence in their long-term growth potential.
During the course of the full year, the company added 490 new customers, increasing its user base by almost a quarter. Similarly, over a third of customers from the previous year added additional licences to their digital workforce during 2020.
The company finished by saying that it expects its EBITDA loss to be better than consensus estimates, while annual recurring revenue would be around £154 million.Speaking on the company’s performance, Blue Prism CEO, Jason Kingdom, said:
“I am very pleased with the resilience and strength our business has shown through the extraordinary events of 2020. In the second half we have seen strong revenue retention with an acceleration in new business signed, particularly from Blue Prism Cloud. I am very pleased with the level of innovation from the Company too – with a step change in product releases and enhancements.”
“[…] We exit the financial year with a strong pipeline, underpinning our belief that intelligent automation will be key to driving recovery across enterprises of all sizes.”
“[…] We also continue to make progress towards cash break-even during 2021 and reassert our commitment to this.”
Following the update, Blue Prism shares rallied by around 10%, to 1,762p. This price is its highest level since lockdown started, and almost 30% ahead analysts’ target price of 1,237.50p a share. Analysts currently have a consensus ‘Hold’ stance on the stock, while the Marketbeat community gives it a 52.69% “outperform” rating.Craneware shares soar with ‘return to strong sales growth’
Provider of software solutions for the US healthcare sector, Craneware (AIM:CRW) saw its shares bounce on Tuesday, as it announced a “return to strong sales growth” ahead of its AGM.
The company said that trading during the first four months of the fiscal year were ahead of management expectations, and “considerably ahead” of the same period the year before. The company’s statement added that:
“[We] expect revenues and adjusted EBITDA for the Interim period to 31 December 2020 to be ahead of the equivalent period in the prior year, building the foundation for a return to double-digit growth in the future. We look forward to providing further details within our Trading Update for the 6 months ended 31 December 2020.”
The company’s Value Cycle software offering continued to be well-received by leadership teams at US hospitals, with its Trisus Cloud-based software enabling hospitals to improve patient outcomes, while improving the operational and financial performance of hospitals. The Craneware statement added:“With each hospital that joins the platform, Trisus becomes more powerful. Through the recent beta launches of the Trisus (cloud) versions of our core offerings, Chargemaster Toolkit and Pharmacy Chargelink, and our four live Trisus native cloud applications, we now have multiple means by which new and existing customers can join the Trisus Community, providing them with a gateway to the wider benefits the platform can provide.”
“We continue to see substantial new opportunities entering the sales pipeline and the Board is confident in the continued strong performance of the business.”
Following the update, Craneware shares rallied by almost 14%, up to 2,190p a share. This price is its highest since the first lockdown began, but around 25% shy of analysts’ 2,733.33p target price. Analysts currently have a consensus ‘Buy’ stance on the stock; its p/e ratio of 35.30 is good value versus the tech and computing sector average of 72.15; and it has a 54.39% “outperform” rating from the Marketbeat community.