Frasers Group’s profitability improved materially in the full-year ended 28th April as the fashion retailing group repositioned its product strategy to focus on better thought of brands.

The group has been associated with tired brands at the end of their life, which Frasers Group sold at a discount through outlets including Sports Direct.

The discounting even started to creep into House of Fraser, damaging perceptions of that brand and risked the entire group being perceived as a B&M for dead fashion brands.

The company set about rectifying this with its ‘Elevation Strategy’ focused on attracting a wider audience with high-profile brands – and it’s working.

The successful execution of the Elevation Strategy has strengthened brand partnerships, including the onboarding of new brands such as The North Face, On, and Columbia.

This helped drive a strong year with Adjusted Profit Before Tax (APBT) reaching £544.8 million, a 13.1% increase and at the upper end of the guidance range. Adjusted Earnings Per Share (EPS) saw a significant rise of 33.6% to 95.8p. The firm anticipates continued strong growth, projecting APBT for the fiscal year 2025 to be between £575 million and £625 million.

Sports Direct delivered year-on-year growth in both revenue and gross profit as the company strengthened relationships with third-party brands and worked on Sports Direct’s market positioning.

Demonstrating a clear growth strategy, Sports Direct are increasing presence in the Nordic countries, establishing a joint venture in Southeast Asia, and the ongoing acquisition of a leading sports retailer in the Netherlands.

“This has been a break-out year for building Frasers’ future growth. As well as delivering a strong trading performance, particularly from Sports Direct, we made significant progress with our Elevation Strategy,” said Michael Murray, Chief Executive of Frasers Group.

“We expanded our retail ecosystem, establishing valuable partnerships with new brands. Our brand relationships have never been stronger, giving us invaluable support as we continue the international expansion of our business. We invested in group-wide operational efficiencies in warehouse automation and digital infrastructure, which we expect to yield a tangible impact as early as FY25. And we generated new growth opportunities with the rollout of Frasers Plus, including recently signing our first third party partner in THG.

“I’m really proud of what we have achieved at Frasers this year and would like to thank all colleagues for their continued hard work and our brand partners for their support. Together, we are building a resilient, profitable growth retail ecosystem that delivers exceptional value for our partners, consumers and shareholders. We have built a lot of momentum this year and are entering the new financial year with many exciting growth opportunities ahead of us, which we will continue to invest in for the long-term benefit of the Group.”  

A strategic partnership with THG plc has been agreed upon, which will integrate Frasers Plus into THG’s Ingenuity platform, marking the first external partnership for Frasers Plus.

The launch of Frasers Plus, the FCA-regulated credit scheme, has shown encouraging early performance as the group gets in on the finance game. Frasers have set ambitious long-term goals for Frasers Plus, including over £1 billion in sales, £600 million in balances with a yield exceeding 15%, and more than 2 million active customers.

Avacta Group has announced its decision to settle the upcoming July quarterly amortisation payment for its unsecured convertible bonds in cash. The payment, totalling £3.13 million, comprises £2.55 million in principal and £580,000 in interest.

The company, known for developing innovative cancer treatments and diagnostics, said it carefully deliberates each payment as it arises. The board considers various factors, including the firm’s cash runway, potential shareholder dilution, and overall business outlook before making a decision.

Investors will be pleased that this particular payment has been settled in cash and avoids any dilution for investors.

Following this cash settlement, the outstanding principal on Avacta’s convertible bonds will decrease by £2.55 million to £33.15 million.

Avacta raised around £30m by way of a placing in Q1 2024 to develop the AVA6000 pre|CISION molecule targeting improvements in patient outcomes during chemotherapy.

The FTSE 100 dipped on Wednesday after UK inflation data made a Bank of England rate cut in August less likely. 

Many investors were hoping the stars are aligning for a reduction in borrowing costs and today’s data will only serve to dash these hopes. 

“UK stocks took a tumble after components of the latest inflation data lowered the chances of a near-term interest rate cut from the Bank of England,” said Dan Coatsworth, investment analyst at AJ Bell.

“Services inflation still looks too high for comfort. The Bank has long said it is data-driven and today’s numbers don’t look soft enough across the board to convince the policy committee to change gear.

UK inflation remained steady at 2% – the Bank of England’s target – yet the reading was higher than expected, fuelling doubts about the trajectory of inflation in the coming months. 

“The BoE hawks take the victory. UK inflation held steady at 2% in June, slightly above expectations, driven by rising hotel and restaurant prices, while clothing prices fell. This persistent inflation reduces the likelihood of an August rate cut, with markets reacting cautiously. Further wage data on Thursday will be crucial in shaping future monetary policy decisions,” said Sam North, analyst at investment platform eToro.

“The GBP initially spiked higher before pulling back to pre-release levels. For those hawkish BOE members, the ones who wanted to see the central bank keep things on hold again next month, this is exactly what they would have wanted to see. Whilst services inflation was higher, it wasn’t higher than the previous month. A silver lining for the dove maybe but I would be surprised now to see the BOE cut rates on August 1st.”

The Bank of England has been clear that it wants to see sustained evidence of falling inflation, and the figures released this morning do not fit the bill. 

The disappointment with this morning’s release was evident in UK-centric stocks with retailers including JD Sports, Frasers Group and Next among the top fallers.

Although there will be concerns about borrowing costs and the impact on the real economy, some of the FTSE 100’s weakness on Wednesday can be attributed to the stronger pound that weighed on mega-cap overseas earners such as AstraZeneca.

Antofagasta was the top faller, down 4%, as the copper miner followed the recent trend of releasing poor production updates. Despite production rising 20% in the last quarter, full-year production is down, and the group lowered its guidance for the year.

Morningstar analysts have reacted to yesterday’s Ocado results with a fair value estimate suggesting Ocado is worth three times the current share price.

Yesterday, Ocado reported a reassuring increase in revenue and a very encouraging increase in EBITDA guidance for the year. After many periods of disappointing updates, Ocado finally produced respectable increases in revenue, demonstrating progress in the rollout of its technology business and higher engagement with premium food delivery in conjunction with M&S.

Shares spiked higher early in the session after results were released, but the gains diminished with short-term traders banking profits as the session progressed.

However, those with longer time frames, such as the equity analysts at Morningstar, see the potential for substantial appreciation in the share price as the company gains further traction in its grocery delivery service, and the technology element of Ocado’s product suite.

“Ocado shareholders finally received some good news yesterday in the form of a strong half year update, with group revenues up almost 13%. The strong share price reaction came as management upgraded profit guidance for the full year,” explained Michael Field, European Equity Strategist, Morningstar.

“Underlying this strong performance was Ocado’s Technology Solutions business, the area of the company that deals with automation, fulfilment, and the online grocery market. Technology Solutions saw growth of more than 20% in the first half of the year, with an operating margin of 14.5%, materially higher than the rest of the Ocado business. 

“Some investors might expect that shares are up with events after a near 15% move in the share price, but we believe there is far more to come with this story. Our fair value estimate for this stock is GBX 920, almost triple the current share price!

“How do we square the difference between our fair value and the GBX 400 consensus target price? Ultimately it comes down to small differences in assumptions, but over a very long time period. Over the longer term we believe online penetration will reach 25% of the grocery market, with this generating strong growth for both Ocado’s retail and technology solutions businesses.”

Ocado shares were trading at 358p at the time of writing.

hVIVO gathered momentum in the first half of 2024 achieving a 30.6% increase in revenue to £35.6 million compared to £27.3 million in the same period last year.

The company’s EBITDA margin has also seen a significant boost, rising to approximately 24% from 19.1% in H1 2023. This improvement is attributed to enhanced operational efficiencies and better utilisation of quarantine facilities.

UK Investor Magazine recently included hVIVO in our ‘Four UK Small Cap Growth Shares to Watch Summer 2024’. Today’s results highlight just why we included hVIVO.

The combination of higher revenue and operational strength saw hVIVO reaffirm its full-year revenue guidance of £62 million. hVIVO has set a medium-term revenue target of £100 million by 2028.

Investors will be pleased to see the company’s contracted orderbook at £71 million as of 30 June 2024, providing good visibility into 2025. Notably, 100% of the full-year 2024 revenue guidance is already contracted.

hVIVO’s new facility in Canary Wharf is now fully operational, positioning the company for future growth. This state-of-the-art quarantine facility offers increased capacity and containment level 3 capability, allowing hVIVO to expand its core human challenge trial offering to include new pathogen models.

hVIVO continues to diversify its service offering, which is expected to positively impact growth and margins. New services include Phase II and Phase III field studies, volunteer recruitment services, and standalone hLAB services.

In a significant development, hVIVO recently secured its largest field study contract to date. The company has been selected as the sole UK clinical site for a multicentre study, with plans to enrol up to 1,000 volunteers.

“The results of H1 2024 reflect the hard work, flexibility and commitment of the team. During a period of significant activity including the build-out and move to a new facility, we have not only materially increased our revenue but also further improved our margins. The concurrent running of three different facilities helped to boost our revenues for H1 2024, creating an expected H1 2024 weighting,” said Yamin ‘Mo’ Khan, Chief Executive Officer of hVIVO.

“We have full visibility over our expected 2024 revenues and continue to deliver on our sustainable growth strategy. The orderbook remains strong in spite of record revenue delivery in H1 2024. The recent Omicron characterisation study contract and the award of our largest field study to date are two key sales highlights for H1 2024. In addition, the current sales pipeline includes several advanced stage opportunities that we expect to convert in the coming months.  

“The outlook for hVIVO is positive as we welcomed our first volunteers into our new facility at Canary Wharf – the world’s largest human challenge trial unit. I believe we have laid the foundations for strong performance in the months and years ahead.”

Spectra Systems Corporation, a leading provider of high-speed banknote authentication and security technologies, has announced an agreement worth £29.7 million to manufacture sensors for an existing central bank customer.

Spectra Systems shares were 13% higher on the back of the news on Tuesday.

The contract is expected to expand further, with an additional £1.3 million tranche anticipated later this year upon signing of the related manufacturing agreement. This would bring the total value of the sensor manufacturing contract to £31 million.

Revenue from this substantial deal is projected to be recognised from the first quarter of 2025 through the fourth quarter of 2027, with additional manufacturing contract revenues of about £3.5 million expected to continue until 2029.

“This long-awaited contract for the third generation of sensors follows after over $14.8 million of development funding by our customer and reflects both the continued need for banknotes as well as the trust our customer has in Spectra Systems,” said Dr. Nabil Lawandy, Chief Executive Officer.