Gear4music shares bounce 21% as annual earnings more than double

Jamie Gordon
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Gear4music shares bounce 21% as annual earnings more than double
A rare story of financial success emerged during the Coronavirus chaos, with musical instrument and equipment retailer Gear4music (AIM:G4M) watching their shares spike on an impressive set of full-year results. For the 12 months ended 31 of March, the company booked a 9% year-on-year jump in revenues, up to £120.3 million. This led a 16% jump in gross profits, up to £31.2 million, and a year-on-year swing from a net loss of £0.2 million, to a £2.6 million profit for the full-year ended March 2020. Further, the company noted that its growth margin rose from 22.8% to 25.9% on-year, while its number of active customers jumped 11% to 807,000 and its EBITDA skyrocketed by 239%, to £7.8 million. Looking ahead, the company is in a strong position. cash at the end of the period was up year-on-year, at £7.8 million compared to £5.3 million the year before. Gear4music also noted that trading was ‘exceptionally strong’ in April and May 2020, and it remained confident in further profit improvement in FY21.

Gear4music response

Company CEO Andrew Wass, said in response to the positive update:

“With an increasing number of people throughout the COVID-19 lockdown recognising the benefits that playing , creating and recording music can bring , we have seen a significant increase in demand during this exceptional period. Positive sales trends with improved margins have continued into June, and we have also incurred lower marketing costs than we would typically expect.”

“The improvements we have made during FY20, and the exceptionally strong trading we have experienced during the lockdown period, mean we are financially stronger and better placed than ever to make the most of future growth opportunities within our market.”

“Therefore, whilst still early in the current financial year, the Board is confident of continued financial improvements during FY21 and look forward to the year ahead with optimism.”

Investor insights

Following the news, Gear4music shares rallied 20.78% or 66.49p, to 386.49p per share 23/06/20 13:59 BST. The company are not currently paying dividends.

Velocity Composites shares rally despite demand falling by 75%

Jamie Gordon
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Velocity Composites shares rally despite demand falling by 75%
Supplier of advanced composite material kits to the aerospace market, Velocity Composites (AIM:VEL), saw their losses widen year-on-year as Coronavirus hits the airline sector. The company saw its revenues fall from £12.2 million to £9.5 million on-year for the first half. This led a switch from an adjusted EBITDA of £0.2 million for the six months ended April 30 2019, to an EBITDA loss of £0.3 million during the same period in 2020. Similarly, the company’s operating loss widened from £0.4 million to £0.7 million, while its gross margin dropped from 20.9% to 20.5% year-on-year during H1. The situation was equally bleak for the company’s shareholders, with first half losses per share widening from 1.2p to 1.7p per share. Operationally, the company noted that air travel restrictions and poor airline confidence created negative impacts for aircraft production, and in turn, a circa 75% reduction in near-term customer demand. Further, Velocity Composites said that it had taken advantage of the Government’s JRS to fund the furloughing of 60% of its staff. It also stated that in April, it commenced production of PPE for NHS staff. On a brighter note, the company announced that it had secured a supply agreement with Boeing in January (LON:BOE), which it looks to capitalise on once 737 Max production resumes. Additionally, the company received NADCAP Merit approval for ‘all special processes at all Velocity production facilities’, and once normal trading resumes, they have a pipeline of over £30 million worth of tangible opportunities being developed.

Velocity Composites response

Commenting on the results, company Non-Executive Chairman Andy Beaden, said:

“The effects of the COVID-19 pandemic and resulting lockdowns on the aerospace industry have been dramatic and unprecedented. Whilst we are not where we expected to be right now, our vision and strategy for Velocity’s growth are unchanged. The increased challenges facing our industry provide an even more meaningful commercial rationale for Velocity’s technology and services, as the industry drives for even greater efficiencies in their production programmes.”

“The Company’s financial liquidity remains robust and the Board believes it has adequate cash and banking facilities to work through this disruption. With this in mind, the Board is confident that Velocity is well placed to benefit as production levels pick up and that the prospects for the Company in the mid- to long-term remain positive.”

Investor insights

Despite a seemingly mixed update, Velocity Composites shares bounced 7.14% or 1.00p, to 15.00p per share 23/06/20 10:22 BST. The company isn’t currently paying a dividend, its p/e ratio is -7.00.

UK car industry warns one in six jobs at risk

Jamie Gordon
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UK car industry warns one in six jobs at risk
The Society of Motor Manufacturers and Traders state that there is a ‘critical need’ for help as it claims up to one in six car industry jobs will be at risk as the furlough scheme comes to an end. With one in three staff still on furlough across the industry – and with this support coming to an end in the autumn – the SMMT are calling for renewed support in the form of VAT cuts, to help prevent job losses. Since shutting down in March, many factories are now operating with a reduced output while others remain closed, and in June alone, 6,000 job cuts have been announced across the sector. The trade body’s recent survey found that nearly a million people are employed across the sector, including 168,000 in manufacturing. With annual car and van volumes expected to fall by a third, April saw a 99.7% fall in car volumes – to the lowest number since the Second World War. This kind of decline surely cannot come without a lasting impact on performance, and in turn, job losses. The CBI’s report on Monday cited transport and motor as some of the worst-hit industries of all, as it booked the biggest slow-down in output since records began. Going forwards, the SMMT predicts a combination of reduced demand and social distancing will continue to play a part in reduced productivity. The organisation are calling for, “unfettered access to emergency funding, permanent short-time working, business rate holidays, VAT cuts and policies that boost consumer confidence”. However, the SMMT Chief Executive Mike Hawes was keen to praise the government’s so far “unprecedented” support, by way of furloughed salaries through the Job Retention Scheme. “But the job isn’t done yet. Just as we have seen in other countries, we need a package of support to restart, to build demand, volumes and growth,” he said Looking ahead, the SMMT is worried about the impact Brexit could have on any potential recovery: “A ‘no deal’ scenario would severely damage these prospects and could see volumes falling below 850,000 by 2025 – the lowest level since 1953”.

FIH Group shares decline as Momart and PHFC trading hampered

Jamie Gordon
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2
FIH Group shares decline as Momart and PHFC trading hampered
UK and Falklands essential services company FIH Group (AIM:FIH) announced on Tuesday that it had booked reduced trading activity due to the impacts of Coronavirus. The company as a whole posted an encouraging 4,9% increase in revenue, up to £44.6 million. However, its underlying pre-tax profits dipped from £3.9 million to £3.7 million year-on-year. The upside in FIH revenues was led by its Falkland Islands Company operations, which boasted an impressive 23% rise in revenues, with the island’s housebuilding and rental income largely unaffected by COVID. In turn, it was able to book a pre-tax profit bounce of 37%, up to £2.1 million.

Meanwhile, the trading of its Momart business reflected ‘a weaker global commercial art market’, and in turn reduced income from galleries, auction houses and collectors. This saw the business’s pre-tax profits slide from £1.6 million to £1.0 million year-on-year.

Similarly, its Portsmouth Harbour Ferry Company operations had to bear a significant decrease in passenger numbers in March, which offset the benefits of annual fare rises in June 2019. As a result, PHFC pre-tax profits dipped from £0.8 million to £0.6 million.

FIH said that its Falkland Islands business had not been effected, however its Momart and PHFC operations had fallen to below 10% of normal trading. This in turn, saw the company book a loss during the first quarter of FY21.

FIH response to weak Coronavirus trading

Responding to recent trading, the company has furloughed 78% of its staff at Momart and those based in Gosport. It has also cut pay for Board members and cancelled all short-term capital expenditure. The situation is equally bleak for the company’s shareholders, with underlying EPS dipping from 24.1p to 21.7p year-on-year and diluted EPS of 24.1 in 2019 switching to a 37.8p loss during 2020. Further, the company said that it would implement a short-term cancellation on planned dividend payments. Commenting on today’s results, FIH Chief Executive John Foster said:

“We were on track to announce another strong trading performance for the year and while COVID-19 prevented us from doing so, we still recorded a good overall result. Like most businesses our focus is now on ensuring a smooth return to profitability whilst avoiding unnecessary damage to the long-term prospects of the business. Fortunately, FIH is well placed to do so backed by a strong balance sheet with good additional liquidity should it be required.”

“We believe we took the necessary cost reducing actions sufficiently early and that we have the resources to support the return to normal trading levels. This is of course subject to a reasonable time period for the recovery in passenger numbers in Portsmouth and a return in confidence and activity levels in the global commercial art market.”

“Given the environment, FIH is reasonably well positioned and I believe the fundamentals of the Group remain strong. We are therefore confident with regard to the medium to long term prospects for the business whilst also being mindful that the current crisis might bring M&A opportunities that would not normally arise.”

Investor insights

In light of the news, FIH shares dipped 4.14% or 12.00p to 278.00p per share. The company has a p/e ratio of 11.89 and a dividend yield of 1.69%.

Dow Jones flattened by housing market mixed messages

Jamie Gordon
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3
Dow Jones flattened by housing market mixed messages
The Dow Jones had a tough time deciding where it wanted to go after the bell, with US housing market news neither going one way or the other. After dropping over 150 points, the index bounced, fluctuated and now sits 0.34% up at 25,959 points. The confusion began with the headline that monthly home sales were at a nine-and-a-half year low in May, with US home sales falling 9.7% to just 3.91 million units. This fall was far greater than the anticipated drop of 3%, to 4.12 million during May, and represents the worst sale figure since October 2010. Existing home sales constitute about 90% of all US home sales, and the number of owned homes on the market in May was down 18.8% year-on-year.
Further, existing home sales were down 26.6% year-on-year during May, which represents the largest annual decrease since 1982.
On the other hand, June saw a decade-high number of mortgage applications, likely because of the lapse in activity the month before, in addition to some cut-price offerings from those keen -but until now unable – to sell their properties. The issue now becomes one of whether home sales will show a resurgence during the remainder of summer. Much like the Dow Jones today, analysts appear to be caught in two minds. On one side, the number of mortgage applications would suggest a healthy rebound is on the way when the current month’s data is released. On the contrary, and perhaps with a longer term outlook in mind, bears will cite the 44 million unemployment claims and limited stock of new homes being built, and perhaps anticipate any kind of rebound will be muted at best. “Home sales may bounce with pent-up demand following the shutdown of the economy starting in March, but the massive scale of job losses and cautious consumers rebuilding their savings may limit the sales turnover of the housing stock,” said Chris Rupkey, chief economist at MUFG in New York. One thing we ought to keep in mind, is the fact that fewer sales don’t necessarily correspond to lower prices. While median US house prices only saw an annual increase of 2.4% – the smallest increase since February 2012 – we can expect this rate of growth to accelerate as the summer progresses. No matter the anticipated hindrances to home-buying appetite, it is likely the demand for US homes will recover more quickly than the supply of new-builds, which has an inevitable effect on prices.

Happily, the Dow Jones was willing to let the contrasting house market data cancel each-other out; and happier still to ignore the growing number of US Coronavirus cases, as well as President Trump‘s ill-conceived ‘joke’ about slowing down testing to stop that number rising any further.

Plans filed for £770m Greenwich Peninsula tower cluster

Bronte Carvalho
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0
Plans filed for £770m Greenwich Peninsula tower cluster
Property developer and investor U+I (LON: UAI) has filed a planning application for a “major mixed-use” £770 million cluster of towers as part of its ongoing Morden Wharf scheme on the Greenwich Peninsula. The company’s share price has dropped, however, amidst widespread market uncertainty and the news that the Bank of England is expecting to wind down its quantitative easing measures in the months ahead, leaving the economy to fend for itself towards the end of the year. The Morden Wharf development plans include around 1,500 new homes on a six acre site, featuring “high-quality public realm” and a landscaped park running alongside the River Thames. A total of 12 residential tower blocks make up the base of the project – with additional room for commercial, retail and community spaces – as well as a new boathouse for Queen Elizabeth II’s royal barge, the Gloriana. Designed by private Dutch architecture firm OMA (Office for Metropolitan Architecture), the proposal features a riverfront park which will “offer fantastic views of the Maritime Greenwich World Heritage Site and Canary Wharf across the River Thames”. U+I has emphasised that the project’s design is “inspired by the site’s history as a marshland and will add a significant new ecological resource to the area” and is intended to “address the existing deficit of open space in the area”. The scheme offers a mix of private and commercial sales – of which 35% are described by the development firm as “affordable” – with a focus on family homes with “play and recreation” space for all ages. The project is predicted to generate some 1,100 permanent new jobs and an additional 2,400 during the construction process. Capitalising on the site’s rich history, the Morden Wharf is renovating “an existing warehouse on the site of an old pub, The Sea Witch, that was destroyed by a bomb during the Second World War” into a new bar, adding to the long list of amenities that make the proposed scheme so attractive to potential buyers. Overlooking the River Thames and only a short tube journey away from Canary Wharf and the o2 arena, the project is sure to drum up considerable interest. U+I Chief Development Officer Richard Upton welcomed the proposal with a statement on the company’s official website: “Morden Wharf will bring together new homes, retail, leisure, employment and an extensive riverfront park, to create a diverse community rooted in the site’s heritage. Centred on a beautiful park and world-class public realm this scheme is set to transform the area into a distinctive, green, mixed-use development, while driving growth and employment and delivering 1,500 much-needed new homes”. The plans are currently sitting with the Royal Borough of Greenwich waiting for approval, following “extensive consultation with the local community and key stakeholders”.

Investor insight

U+I’s share price has failed to jump following the firm’s announcement, down a disappointing 4.76% or GBX -4.00 at GBX 80.00 BST 15:37 22/06/20. A positive leap, however, from a nadir of GBX 76.30 during March. The company’s dividend yield currently stands at 0.099%.

CBI states UK factory output fell at fastest rate since records began

Jamie Gordon
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CBI states UK factory output fell at fastest rate since records began
The CBI noted that UK factory output had fallen at its fastest pace since records began in 1975, during the first three months of the year. The pressure group stated that 360 firms responded to their survey between late Mate and mid June, and of that number, an unsurprising 74% said they had produced less in the three months to the end of March. The CBI said the negative balance, between gross increase and decrease in factory outputs, reflected a 57 percentage point dip -which is the largest fall since records began in 1975. While most subsectors of manufacturing reported falls, the greatest declines were seen in vehicle, transport, mechanical engineering and metal products. Despite a modest recovery in June, the CBI noted that order books remained weak, with 71% of firms reporting that order books were below normal levels for the time of year – down 58 points in June versus negative 62 points in May. Similarly, export books were at their lowest level on record, with a mere 2% of respondents stating that their output was better than normal. Commenting on the results, CBI Chief Economist Anna Leach stated: “The UK manufacturing sector remained in a deep downturn in June due to the ongoing Covid-19 crisis. Output volumes declined at a new record pace and export order books fell to an all-time low, reflecting the significant fall in demand in the UK and abroad. Firms are again hoping this will ease somewhat in the next three months.” “The government has already undertaken a huge amount of work to provide financial lifelines to businesses throughout this unprecedented period. With firms having been encouraged to restart operations, the government must continue to engage with the sector to understand their specific concerns and provide support as needed.” Further to the CBI’s announcement, the Employers’ Organisation stated that no evidence had been found in its monthly industrial trends survey to suggest that the recovery in high street and online spending had filtered through into greater demand for British manufactured goods.

Rishi Sunak announces Nikhil Rathi as new FCA Chief Executive

Jamie Gordon
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Rishi Sunak announces Nikhil Rathi as new FCA Chief Executive
Chancellor of the Exchequer Rishi Sunak announced on Monday that Nikhil Rathi will take over as Chief Executive of the FCA. Prior to today’s announcement, Mr Rathi served as the Chief Executive of the London Stock Exchange from 2015, and is well-acquainted with Treasury officials, having served as Director of Financial Services for five years from 2009. In his new role at the Financial Conduct Authority, Rathi will succeed Christopher Woolward, who acted as the interim Chief Executive following Andrew Bailey‘s departure to head up the Bank of England in March. Rathi is being appointed on a five-year term, with Woolard continuing to act as interim Chief Executive until the appointment begins. Speaking on the announcement, Chancellor Rishi Sunak, said: “Nikhil is the outstanding candidate for the position of Chief Executive of the Financial Conduct Authority, and I am delighted that he has agreed to take up the role.” “We have conducted a thorough, worldwide search for this crucial appointment and, through his wide-ranging experiences across financial services, I am confident that Nikhil will bring the ambitious vision and leadership this organisation demands.” Once Rathi assumes his new role, he will be paid an annual salary of £455,000 and be required to give up any of his existing interests in the London Stock Exchange. As reported by The Guardian, he will be the first BAME chief of the FCA, and during his tenure, Rathi aims to make the FCA a ‘more diverse organisation’, as well as focusing policy on tech innovation, climate change and continuing Woolward’s legacy of focusing on vulnerable consumers. Speaking on his new role, incoming FCA Chief Executive Nikhil Rathi commented: “I look forward to building on the strong legacy of Andrew Bailey and the exceptional leadership of Christopher Woolard and the FCA Executive team during the crisis. FCA colleagues can be very proud of their achievements in supporting consumers and the economy in all parts of the UK in recent months.”

“In the years ahead, we will create together an even more diverse organisation, supporting the recovery with a special focus on vulnerable consumers, embracing new technology, playing our part in tackling climate change, enforcing high standards and ensuring the UK is a thought leader in international regulatory discussions.”

 

BoE Governor says UK was on brink of insolvency

Bronte Carvalho
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BoE Governor says UK was on brink of insolvency
Bank of England governor Andrew Bailey candidly revealed the true extent of the impact of the coronavirus pandemic on the UK economy, admitting that Britain reached the brink of insolvency in the early stages of the outbreak. If the Bank had not intervened, the government would have faced a “market meltdown” and struggled to fund itself for the first time in its 325-year long history.

Unprecedented times, unprecedented measures

Speaking to Sky News podcast ‘The World Tomorrow’ on Monday morning, Bailey reflected on the extreme measures that the Bank of England was forced to take in order to keep the UK economy afloat earlier this year. After a record 20.4% contraction in April and warnings that the economy could shrink by 14% over the course of 2020, the Bank has already injected a total of £300 billion in efforts to maintain market liquidity, but the forecast for the rest of the year remains decidedly grim. Bailey warned that many viable British companies will fail to make it to the other side of the crisis – with widespread predictions of a recession – and added that the Bank’s unprecedented quantitative easing programme should not be taken for granted. Last week, the finance institution raised its bond purchase target to £745 billion, following on from a record drop in interest rates to 0.1% back in March. He commented on the economy’s 2020 performance: “We basically had a pretty near meltdown of some of the core financial markets”.

Getting back on track

After starting as Governor of the Bank of England in the week before UK lockdown measures came into force, Bailey has faced a challenging first few months on the job. He has since suggested that the Bank should start to cut back on its asset purchases before it begins to raise interest rates again, in direct opposition to his predecessor’s strategy. “When the time comes to withdraw monetary stimulus, in my opinion it may be better to consider adjusting the level of reserves first without waiting to raise interest rates on a sustained basis”. Previous Governor Mark Carney said that the Bank would increase interest rates before selling purchases back to the market in its post-pandemic plans. On the contrary, Bailey stated that he wants to avoid high central bank holdings of government debt in the future, adding: “Elevated balance sheets could limit the room for manoeuvre in future emergencies”.

Uncertainty grips markets

After a tumultuous Monday morning for global equities amid fears of a second wave of coronavirus, the FTSE 100 (INDEXFTSE: UKX) is down by 18.42 points or 0.29% BST 14:25 22/06/20. The DAX (INDEXDB: DAX) continues its downward trajectory at -0.49% CEST 15:07 22/06/20 and the CAC 40 (INDEXEURO: PX1) struggles to recover from a pessimistic performance earlier on at -0.47% CEST 15:09 22/06/20.

Centrica shares dip despite announcing digital and renewable British Gas X

Jamie Gordon
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0
Centrica shares dip despite announcing digital and renewable British Gas X
British energy company Centrica (LON:CNA) announced on Monday that it had launched British Gas X, a modern-day challenger to its British Gas flagship brand. The company said a test website for British Gas X was already up and running, and that the new service would be entirely online and designed for ‘digitally savvy’ consumers. It added that existing British Gas customers can switch to the new service ‘at any time with no exit fees’, and that they will offset the energy customers use from ‘100% renewable’ sources. The new company has been launched in an effort to stay with the times, in the highly competitive British energy market. This follows the continued trend towards decarbonising British energy, which is having something of a renaissance under the ‘build back better’ initiative, which aims to see Britain rebuild from the Coronavirus pandemic by relying on greener energy solutions. The likes of BP with its drive towards renewables, Drax Energy extending its ESG facility and Abuandance launching its renewables-based fixed-rate debentures, are all testament to recent efforts to modernise British energy generation. Today’s news also comes after the announcement that Centrica would axe up to 5,000 jobs, while rival Ovo planned to close offices and lay off 2,600 staff. Following the update, Centrica shares dipped by 3.51% or 1.51p to 41.51p per share 14:05 BST 22/06/20. The company’s p/e ratio stands at 5.89, its dividend yield is generous at 12.09%.
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