Tesla shares bounce 8% but does the inflated price have longevity?
Cult favourite tech innovation company Tesla (NASDAQ:TSLA) has seen its share price hit new heights, after soaring to unprecedented levels in February.
This week ended up being a romp for Elon Musk’s favourite project, with the company becoming the highest-value car company without making a profit. This followed a bumper second quarter, where Tesla churned out over 90,000 units.
The production figure was far ahead of analysts’ expectations, and saw the company defy its well-populated mass of shorters, who were ready to see the company repeat something similar to its February-March free-fall, where its shares dipped by almost $600 to $361 apiece. Instead, sales of some Tesla models surpassed expectations by 22%.
Manolete Partners profits surge 40% as insolvency activity gains pace
UK insolvency litigation financing company Manolete Partners (AIM:MANO) booked bumper full-year financial results, with the increased number of insolvencies likely offering the company an unusual range of opportunities.
The company was given a boost by a 36% year-on-year jump in revenues, up to £18.7 million, alongside a 139% increase in new core investments in UK insolvency cases, and an impressive ROI of 173%.
The saw Manolete Partners’ EBIT bounce by 36%, while gross profit soared 43% and profit after tax jumped 38% to £7.6 million.
The situation for Manolete shareholders was even more rosy. While diluted EPS spiked 70% to 17.00p, the company’s final dividend doubled year-on-year, to 3.00p a share.
Speaking on the company’s busy year and the opportunities business closures will offer the company going forwards, Manolete Partners CEO Stephen Cooklin commented:
“Despite the challenges of COVID-19, the activity levels within the business are at record levels, highlighted by the 47 new case investments (124% more than the same period last year) and 23 case completions (up from four in the same period last year) that the team has transacted in the first quarter of FY21. New case enquiries are also at all-time record levels, running at around double the rate we had this time last year. We entered FY21 with £8.4m of gross cash, a positive net cash balance and £12m of our HSBC Revolving Credit Facility unutilised. All these factors firmly underpin our confidence in the current and future trading performance of the business.
“With the widely reported economic disruption likely to ensue, we expect new case enquiries to increase over the foreseeable future and we will continue working to deliver outstanding returns to both insolvent estates and investors.”
Following the update, Manolete Partners shares rallied 6.87% or 35.05p, to 545.05p per share 12:28 BST 03/07/20. This is up on the company’s year-to-date nadir of 235.00p a share in March, but down from its high of 585.00p in mid-May. The Group’s p/e ratio is 39.23, their dividend yield is modest at 0.09%.Bella Italia owner collapses into administration
The owner of Bella Italia, Cafe Rouge, and Las Iguanas has fallen into administration.
The Casual Dining Group has 250 outlets, 91 of which will close immediately and lead to the loss of 1,900 jobs.
AlixPartners will handle the administration and are in the process of finding buyers for the remaining parts of the business
Clare Kennedy, from AlixPartners, said: “We appreciate that this is an extremely difficult time for all those associated with Casual Dining Group.”
“Our immediate priorities are to assist those whose employment has been affected by today’s announcement and to secure a sale for the group in order to protect jobs and provide the group’s much-loved brands with a sustainable platform for the future.”
The Casual Dining Group applied to appoint administrators back in May as the group struggled over lockdown to pay rents and saw revenues collapse as restaurants over the UK closed.
James Spragg, the chief executive of the Bella Italia owner, said: “We are acutely aware of our duty to all employees and recognise that this is an incredibly difficult time for them.”
“Working alongside the administrators, we will do everything we can to support them through this process, with a view to preserving as much employment as we are able to.”
The casual dining sector has suffered over the lockdown period. Many pubs and restaurants will be reopening on 4 July under social distancing measures.
Just this week saw Byron Burger announce plans to bring in administrators. SSP Group, the owner of Upper Crust and Caffe Ritazza owner said it plans to cut up to 5,000 roles.
“The casual dining sector was in distress before this crisis but this is what will tip many over the edge and towards collapse,” said Julie Palmer, a partner at the corporate restructuring firm Begbies Traynor.
“The make up of the high street before this crisis was such that one could not do without the other and they begin to spiral down together towards the bottom of their finances.”
US created record 4.8m jobs in June but Eurozone led the equities charge
The US Labor Department announced a non-farm payroll jump in June, with a monthly all-time-high of 4.8 million jobs created.
This surge was led by the reopening of factories and restaurants, and far surpasses both the 2.5 million joining the labour market in May, and the 3 million forecast for new jobs in June.
The Labor Department said that of the new jobs, over 2 million were in the hard-hit but high-staff-turnover hospitality sector. Other notable increases were 740,000 new employees in retail, 568,000 in healthcare and a 356,000 rebound in manufacturing employment.
The rally in new jobs was partially led by the government’s Payment Protection Program, which gives loans and partially waives some of the sums owed if the original loan has been put towards staff wages.
However, the jubilant reaction to today’s news involves a concerted effort to ignore the obvious grey clouds overhead. Funds for the PPP are running out, and in turn the job rally may lose some steam.
Similarly, all US optimism ignores the glaring fact that Coronavirus cases are rising at a worrying rate, with little to no contingency plans in place. Not only does this pose problems for consumer confidence and behaviour, but if it continues, could present challenges for US trade, travel and diplomacy – as seen with EU travel restrictions on US citizens.
In addition, as stated by Spreadex Financial Analyst Connor Campbell,
“The average hourly earnings showed a 1.2% contraction month-on-month, missing out on the forecast improvement. The weekly jobless claims reading showed another 1.427 million Americans filed for unemployment for the 7 days to June 27. And, crucially, those job additions across May and June barely account for a third of those lost in April.”
Oxford Economics described the fall in US employment (still estimated to be at 11%) and only a small reduction in new unemployment claimants (still at 1.43 million for the last week in June), as a “worryingly slow decline”.
Michael Pearce, Senior US Economist at Capital Economics, predicts that “the recovery from here will be a lot bumpier and job gains far slower on average”.Fed Chief Jerome Powell added that while June’s progress was an important marker for the economy entering a new phase, any prolonged success would be contingent on the US’s ability to contain the spread of the virus. With these bad omens in mind, US equities gains were comparatively muted versus their European counterparts. The Dow Jones was up 0.97% to 25,985 points while the S&P 500 rallied 1.01% to 3,148. In the meantime, the FTSE finished at 6,241 points, up 1.34%. The CAC and DAX stole the show, though, 2.49% and 2.84% to 5,049 and 12,608 points respectively.
746 arrested in ‘biggest ever’ crime sting as EncroChat phone network cracked
After cracking the code of encrypted phone service EncroChat, an international police effort has seen 746 criminals arrested in the ‘biggest ever’ organised crime bust.
EncroChat and criminal networks
The EncroChat service, which has since been taken down, had its encryption cracked by law enforcement agencies in April, with rumours about the breach beginning to swirl in June – which proved too late to alert many of the criminals using the service. The software, which was supplied via modified Android and Apple products costing £1,350 for a six month plan, had an estimated 60,000 users, including 10,000 in the UK. EncroChat claimed to offer ‘worry-free secure communications’, with features such as self-destructing messages and immediate device data wiping which required only a four digit PIN to be entered. The company had servers based in France, and Europol stated that French police were able to implement a “technical device” to access the messages. The Netherlands’ National Police added that while many criminals disposed of their devices, many of the messages had already been intercepted, and in turn few of the users were able to avoid detection.A ‘game-changing’ operation
Met Chief of Police Dame Cressida Dick said that the bust was ‘game-changing’ and ‘just the beginning’, with UK authorities responsible for 132 of the arrests on middle-tier and command-level gang members. The international name for the online crackdown was ‘Operation Venetic’, and between all involved authorities; 746 suspects were arrested, 4 grenades and 77 firearms including assault rifles, shotguns and 1,800 rounds of ammunition were taken, and two tonnes of class A and B drugs and 28 million Etizolam pills from an illegal factory were confiscated.Additionally, 50 high-end cars, 73 luxury watches and £54 million in cash were seized. Perhaps most impressive of all, though, is that the National Crime Agency claim over 200 threats to life were mitigated as part of the operation.While The Guardian reported there was a degree of luck in breaking the EncroChat encryption, once inside authorities were able to sit and watch criminals incriminate themselves. As well as plots for kidnappings, limb removals and acid attacks, authorities were also able to identify corrupt practice and involvement of Judges and Police Officers in these crime syndicates. Speaking on the operation, the NCA reported that one text message read: “This year the police are winning.” The NCA’s director of investigations, Nikki Holland, commented: “The infiltration of this command and control communication platform for the UK’s criminal marketplace is like having an inside person in every top organised crime group in the country.” “This is the broadest and deepest ever UK operation into serious organised crime.“ “Together we’ve protected the public by arresting middle-tier criminals and the kingpins, the so-called iconic untouchables who have evaded law enforcement for years, and now we have the evidence to prosecute them” she added.
What is the significance?
As far as the timing is concerned, this could not have come at a more opportune moment. Not only is the haul so huge, but today’s raid truly vindicates the dedication of resources to online and office-based police work, which is more able to tap into the goings on of high-end crime than officers on the street (though both are vital). Politically it is equally important. In what has been a difficult few months for police forces around the world, this is a rare high profile win to remind the public of the important role authorities play in protecting society. Home Secretary Priti Patel will also enjoy the refreshing change from the negative press she normally – rightly or wrongly – receives, and the NCA will use today’s breakthrough to make the case for more funding to be pushed its way. Among the few challenging questions that will be raised, however, is the fact that this successful operation was made possible by shared data and side-by-side cooperation with our European neighbours. While politicians will be keen to celebrate the victory that today’s bust truly is, do we have any guarantee that collaborative efforts such as these will continue unhindered, as the UK butts heads with mainland Europe?Booking surge buoys travel industry as quarantine rules to be lifted
Government sources have suggested that dozens of countries are to be made exempt from the current compulsory 14-day quarantine period upon arriving in the UK.
Last week saw a surge in holiday bookings as rumours began to swirl that the Foreign Office is set to relax its standing “essential travel only” advice to allow for overseas travel to certain low-risk destinations.
The move would mean previously-scrapped holiday plans to popular European sun traps, such as Spain and Greece, would be given the go-ahead without a lengthy quarantine on return.
The Eurotunnel website – managed by Parisian based railway company Getlink (EPA:GET) – was among the slew of sites which crashed as thousands of holidaymakers rushed to book a long-awaited summer break. Getlink’s director of public affairs John Keefe commented on the company’s record sales:
“The recent government announcement is great news for holidaymakers, bookings have surged since Friday; in fact we have had more customers accessing our online booking system this weekend than ever before”.
The company’s share price has since surged by 4.02%.
Ryanair (LON:RYA) leads the airline industry’s revival with reports of “very strong” bookings, as the company relaunched with 1,000 flights and 105,000 passengers on Wednesday. The budget airline’s share price has soared by 4.34% on Thursday afternoon in response to the encouraging news.
Joshua Mahony, Senior Market Analyst at IG, weighed in on speculation that the airline industry may be on track for a quick recovery:
“With airline activity expected to surge over the coming months, the ability to recover some semblance of normality for the typically busy summer months will be key to boosting the balance sheets after months of lockdown. The big question is whether we will see the Coronavirus cases kept low enough to allow for increased travel, with another lockdown or resumption of quarantine rules likely to deal a major blow to the travel sector if implemented”.
While a number of European countries begin to open their borders to British holidaymakers, rising fears that a second wave of coronavirus cases is imminent have been weighing heavily on global equities for weeks. Mounting cases across the US have caused states such as Texas and Florida to reverse their reopening plans, and the UK’s first local lockdown in Leicester has demonstrated that a quick and easy recovery may simply not be on the cards this summer.
Nevertheless, the hard-hit airline industry is surely grateful for the government’s change of heart. Last month, Ryanair, easyJet (LON:EZJ) and British Airways (LON:IAG) launched legal action against the government for its restrictive quarantine measures, which Ryanair boss Michael O’Leary described as “rubbish”.
DS Smith shares dip 9% as it cancels its dividend
FTSE 100 packaging company DS Smith (LON:SMDS) saw its share price dip during Thursday. despite booking robust full-year results.
Group revenue dipped by 2% year-on-year to £6.04 billion. In spite of that fact, the company were able to book a 5% jump in operating profit to £660 million, while profit before tax also rose 5% to £368 million.
Similarly, its return on sales increased 70bps to 10.9%, while its return on average capital employed dipped by 300bps to 10.6%.
The situation for DS Smith investors was equally mixed. Its basic EPS jumped 8% to 21.2p per share. However, notably, the group decided in early April that it would cancel the interim dividend payment due to be paid at the start of May.
The outlook for dividend payments looked equally bleak, with the company’s statement reading:
“The Board has since considered the overall dividend payment for this financial year and, taking into consideration the interests of all stakeholders, concluded that the outlook remains too uncertain to commit to a resumption of dividend payments in the short term. Recognising the importance of dividends to all shareholders, the Board will actively consider the resumption of dividend payment, when we have greater clarity over outlook.”
This decision came despite what the company described as ‘robust’ trading and strong liquidity. DS Smith boasted strong performance in Europe and only limited COVID-19 impact in March and April, though its US domestic performance was hampered by “continued weak export paper pricing”.
The company said that it had successfully integrated Europac into its business and disposed of its plastics division. It added that despite economic uncertainty, its outlook remained strong.
DS Smith response
After applauding the company’s 30,000 employees and lauding the resilience of its trading, group CHief Executive Miles Roberts stated:“Our business model is resilient, built on our consistent FMCG and e-commerce customer base. In the short term, however, the impact of Covid-19 on the economies in which we operate is likely to impact volumes to industrial customers and add to operating costs. In particular, infrastructure constraints have driven elevated OCC prices, although we currently expect the impact to be limited to H1. With the current economic uncertainty, we continue to focus on our employees, our customers, our communities and on the efficiency and cash generation of our business and accordingly the Board considers it premature to resume dividend payments at this stage.”
“In the medium-term, the growth drivers of e-commerce and sustainability are as strong as ever. The Covid-19 crisis is also expected to accelerate a number of the structural drivers for corrugated packaging and our scale and innovation led customer offering positions us well and gives us confidence for the future.”
Investor insights
Despite a controlled set of results, the cancellation of its dividend saw DS Smith shares dip 9.26% or 29.50p, to 289.20p per share 12:55 BST 02/07/20. This is down by approximately 21% year-on-year, and well below its median target price of 342.50p per share. The group’s p/e ratio stands at 9.57. Cancellation of the dividend and any freakish occurrences aside, the company naturally has a positive outlook. With a seemingly exponential trajectory for the growth of e-commerce, packaging and deliveries companies have a bright future.UK High Court rules against Nicolás Maduro in row over Venezuelan gold
The UK’s High Court has ruled against the Venezuelan government in a legal battle over access to $1 billion worth of gold currently held by the Bank of England.
Incumbent president Nicolás Maduro launched legal action against the Bank when it refused to hand over the gold, following opposition leader Juan Guaidó’s warning that it would be used for “corrupt purposes”. The Bank has been postponing the transfer of 31 tonnes of gold since 2018.
In a painful blow to Maduro’s struggling administration, the court “unequivocally recognised opposition leader Juan Guaidó as president”, in a reference to claims of illegitimacy during the country’s controversial 2018 presidential election.
The Venezuelan government has been internationally condemned, with accusations of banning opposition parties from participating in the vote and placing prospective leaders under house arrest. The USA and the European Union are among the critics of the 2018 election results, refusing to recognise Maduro as the legitimate winner in the polls.
Last year, Maduro publicly defended his administration’s legitimacy after the opposition-backed National Assembly called for the military to “restore democracy” in the oil-rich South American state. In a widely-shared tweet, the president declared: “To those who hope to break our will, make no mistake. Venezuela will be respected!”.
Crippling sanctions posed by the US have left Maduro with little room to manoeuvre as the poverty-stricken state battles the coronavirus pandemic. Selling its gold reserves might have generated a much needed cash boost for its struggling health service, currently battling over 6,000 virus cases.
Earlier this month, The New Humanitarian warned that Venezuela’s reported cases may only make up a percentage of the total number across the country, citing historic data appropriation and an ongoing humanitarian crisis.
Prezzo begins sale process as the latest chain struck by coronavirus crunch
Italian high street staple Prezzo has become the latest restaurant chain to seek out a buyer, as the dining industry looks set to emerge from the coronavirus crisis with a slew of bankruptcies and widespread job losses.
Prezzo has reportedly asked corporate advisors FRP Advisory to orchestrate an auction of the chain as its 180 restaurants across the UK prepare to open doors to customers once again on July 4th. The company currently employs over 3,000 staff, the majority of whom have been enrolled onto the UK government’s furlough scheme since March.
The chain is part-owned by American investment firm TPG Capital, a $103 billion buyout tycoon that also owns clothing brand J. Crew. A source close to Prezzo has stated that its shareholders intend to streamline the company’s current ownership model.
Prezzo joins the long list of brands that have struggled to stay afloat during the UK government’s strict lockdown. The complete paralysis of the retail and services sector has already seen the collapse of a number of iconic household names, including Victoria’s Secret, TM Lewin and Byron Burger.
Over the past 48 hours alone, a total of 12,000 UK employees have been made redundant. John Lewis and Airbus are among the companies to announce restructuring plans as they prepare for the post-coronavirus scene, with social distancing measures expected to stay in place until the end of the year.
Primark owner AB Foods shares rally despite quarterly profits dipping 75%
Clothing retailer Primark saw a large knock to its first half profits due to Coronavirus and its lack of online presence. Despite this and upon publishing its results on Thursday, parent company Associated British Foods (LON:ABF) enjoyed a healthy share price rally.
The company noted that its revenues had contracted 75% year-on-year for the three month period ended 20 June, and that Coronavirus lockdowns have cost the company an estimated £800 million. The revenues for the quarter were down to £582 million, and the retailer said it expected its full-year profits to fall by two thirds.
Having reopened all but 8 of its 375 stores, Primark said that sales had been “reassuring and encouraging”, with strong demand for children’s, leisure, summer clothing and nightwear.
However, the company did also say that were still suffering due to reduced footfall and changes in public behaviour, with demand for formal menswear and travel-related accessories “unsurprisingly weak”, with like-for-like sales across its ranges down 12% since it began reopening its outlets.
With the Coronavirus disruption in mind, Primark stated that “absent a significant number of further store closures”, and excluding exceptional charges, it expects to book full-year profits in the range of £300 million to £350 million, down from £913 million for the full-year ended September 2019.
The company did state, though, that for the week ended 20 June in England and Wales, sales were up year-on-year as non-essential retailers were allowed to open their doors. This, and a 9% revenue spike in ABF’s grocery operations, softened the blow of an otherwise glum trading update.
On the basis that things were bad but not as bad as they might have been – and with potentially strong activity going forwards – (ABF) Primark shares were up 5.47% or 107.50p, to 2,072.00p per share 11:31 BST 02/07/20. Today’s price represents around a 15% year-on-year dip, but is below the consensus target of 2,140.00p.
While analysts are in mixed minds about the stock, the majority have stated either ‘Buy’ or ‘Strong Buy’ stances. The group’s p/e ratio is 14.29, their dividend yield stands at 2.24%.