August retail sales flatline as uncertainty prevails
The British Retail Consortium (BRC) and KPMG said on Tuesday that retail sales “flatlined” in August.
The 12-month average dropped to a new low of only 0.4%, the report shows.
The report said that with a budgetary Spending Review, the Brexit deadline approaching and a potential general election, the only thing that is certain is additional uncertainty.
“Greater economic and political uncertainty has driven down consumer demand,” Helen Dickinson OBE, Chief Executive at the British Retail Consortium, said in the report.
The report comes just a week after Boris Johnson asked the Queen to suspend parliament ahead of the extended Brexit deadline. The move limits MPs’ ability to block a no-deal departure from the European Union, throwing the future of the nation into further uncertainty.
“While the summer weather gave a small boost to food sales, this was cancelled out by a drop in non-food sales,” Helen Dickinson OBE continued.
“Summer discounting and poor footfall have hit in-store sales particularly hard. If the Government wants to avoid seeing further store closures and job losses on the UK high street, they must take action. Last month, fifty retail CEOs wrote to the Chancellor demanding he fix the broken business rates system, allowing businesses to fund vital investment during this unprecedented period of transformation.”
Indeed, over the past year, several high street retailers have had to battle against the difficult trading conditions to hit the UK high street. Job cuts and store closures have been widely reported by retailers struggling for survival.
“August proved to be yet another incredibly disappointing month for retail, with like-for-like sales down 0.5% and total sales flat-lining at zero. It’s clear that for much of the retail market, efforts are being focussed on preservation, not growth, in this adverse and uncertain climate,” Paul Martin, UK Retail Partner, KPMG, added in the report.
Broadly speaking, fashion sales were boosted by back-to-school promotions for children’s fashion and footwear.
Online sales outperformed the high street, according to the report, but with a growth as little as 2.2%, showing that even this channel has taken a hit.
Food and grocery sales did, however, see year on year growth in August, driven by the Bank Holiday heatwave.
Lego Group half-year results driven by Marvel superheroes
The Lego Group posted a 5% increase in global consumer sales on Tuesday, driven by the particularly strong performance of its LEGO Marvel Avengers sets.
The Danish toy production company also revealed a 4% rise in revenue for the first half of 2019 to 14.8 billion Danish crowns.
Operating profit amounted to 3.5 billion Danish crowns, declining by 16%, whilst net profit was 2.7 billion Danish crowns, dropping 12% and driven by “significant investments in long-term growth”.
The toy maker said that LEGO Marvel Avengers and LEGO Movie 2 sets contributed to consumer sales growth.
The group also added that it will continue to invest in China and is on track to having over 140 stores in 35 cities by the end of the year.
It also plans to open an office in Mumbai early next year, where the company hopes to expand its presence in India.
“We are satisfied with our performance given the transformative shifts which continue to reshape the global toy industry,” the LEGO Group CEO, Niels B Christiansen, said in a company statement.
“Against this backdrop, we continue to grow consumer sales and market share in our largest markets,” the CEO continued.
“At the same time we’re making upfront investments to create a strong foundation from which to grow in the long term and inspire future generations.”
“This includes opening new markets, expanding in China, creating innovative retail experiences and developing exciting new products and play experiences.”
“We are pleased with the performance of our evergreen favourites such as LEGO City and LEGO Technic,” said the CEO
“We are also excited to explore innovative ways to bring the brick to life through digital play experiences such as new LEGO Hidden SideTM which blends the best of building with the awesomeness of augmented reality.”
Last year Legoland, inspired by Lego’s iconic building bricks, was ranked among the unhealthiest tourist attractions.
Frenkel Topping shares dip despite ‘significant progress’ in fundamentals
Independent financial advisor and asset manager Frenkel Topping Group plc (LON: FEN) saw progress across its financial fundamentals during the first half of 2019.
The Group’s profit from operations jumped 100% and statutory pre-tax profit bounced 111% on a year-on-year comparison, to £0.8 million and £0.596 million respectively. This was led a 14% growth in revenue between H1 2018 and 2019, from £3.6 million to £4.1 million.
Frenkel Topping shareholders enjoyed similar progress; while the interim dividend paid during the periods was flat at 0.32p a share, basic EPS spiked 88% from 0.32p for H1 2018, to 0.6p a share for H1 2019.
Management said that trading performance was in line with its expectations, with the Company achieving a 98% client retention rate and increasing its AuM by 12% on-year for the first half.
Frenkel Topping comments
Paul Richardson, Chairman, said,“I am pleased to report an excellent set of results and a period of significant progress. Despite challenging financial markets over the period, we have delivered a 14% increase in revenue, a 111% rise in pre-tax profit and made considerable progress against our strategic commitments. New business income increased by 30% over the comparative period whilst client retention remained high at 98% – reflecting our ability to conservatively manage our clients’ money and generate returns. Our growth has been supported by strategic investments made in developing talent and marketing which has invigorated and strengthened the business for the long term.”
“The Company has built a strong platform to generate further growth and current trading is line with management expectations.”
Investor notes
Despite today’s positive update, the Company’s share price dipped 1.56% or 0.50p to 1.51p a share 03/09/19 09:22 BST. Analysts from finnCap reiterated their ‘Corporate’ stance on Frenkel Topping stock. The Group’s p/e ratio is 28.83 and their dividend yield stands at 4.10%. Elsewhere in asset and investment management, there have been updates from; Hargreaves Lansdown PLC (LON: HL), River and Mercantile Group PLC (LON: RIV), Brewin Dolphin Holdings plc (LON: BRW), Hansard Global plc (LON: HSD), AJ Bell PLC (LON: AJB) and Intermediate Capital Group plc (LON: ICP).Sterling stalled by this week’s No-Deal Brexit showdown
This week the House of Commons looks set to give us a crescendo before it takes its involuntary recess. The vote on further delaying Brexit will effectively push the UK into one of two scenarios; a nigh-on guarantee of a No-Deal trajectory (excluding the possibility the EU blinks and offers concessions), or Boris Johnson removing the whip from Tory rebels and calling a general election in an attempt to solidify his majority. Either outcome will spell more uncertainty – market sentiment is in a Scylla and Charybdis scenario.
Speaking on market opening movements this morning was Spreadex Financial Analyst Connor Campbell,
“Sterling likely feels it is in a no-win situation, a sentiment expressed in another rough open for the currency this Tuesday.”
“If the week’s Commons Brexit delay vote fails, then the country remains on track to crash out of the EU without a deal. If it succeeds, then it appears it will trigger a general election on October 14th, the prospective uncertainty of which is enough to turn the pound’s stomach.”
“Then you get to the potential outcomes of such a snap vote: a Corbyn government, which investors wouldn’t be a fan of; a strengthened hand for the no-deal-chasing Johnson; or another ambiguous muddle that leaves no party with a workable majority.”
“Subsequently, it is not hard to see why sterling has started Tuesday sinking to a near-3-year intraday nadir of $1.1975 as it fell 0.8% against the dollar – if it ends up closing below $1.20, if will be the first time cable has done so since 1985. Things are a bit more manageable against the euro, though even then a half a percent decline puts the pound at a 12-day low of €1.0944. A construction PMI that is expected to remain in contraction territory even if it does rise month-on-month isn’t going to help.”
“Interestingly, this didn’t give the FTSE much of a lift. The UK index is sitting a smidge away from 7300, a level it abandoned around a month ago; however, it might be feeling a bit uneasy itself given how precarious the political situation is right now.”
“As for the Eurozone indices, the DAX and CAC fell 0.5% and 0.3% respectively, perhaps put off by the euro’s gains against the pound, alongside the confirmation of fresh tariffs on Chinese goods by the US.”
So that marks the end of last week’s consistent rally – but it shouldn’t be all doom and gloom. Needless to say the FTSE rallied on the Sterling dive in 2016, and we can only assume a similar pattern will emerge in a likely post No-Deal scenario, where the pound dives and our exports soar. Other news and macro financial updates have come from; Parliament being prorogued, No-Deal Brexit preparations, UK GDP during the second quarter, the London Stock Exchange Group (LON: LSE), the US-China currency manipulation debacle, and analysts’ outlook for markets and currencies.
Maintel shares dip, improved H1 fundamentals offset by CEO departure
Communications cloud and managed services provider Maintel Holdings Plc (LON: MAI) has seen its share price dip despite first half profits and shareholder returns both improving on a comparison with the same period last year.
The Company noted that while revenue contracted 3% to £64.5 million for the six month period, their profit before tax rose £1.8 million, up to £1.5 million from a loss of £0.3 million for H1 2018. Further their adjusted profit before tax grew 17% to £4.9 million.
Their shareholders enjoyed a similarly positive turnaround, with Maintel swinging from a 2.6p loss per share to 10.6p earnings per share during H1 2019. Likewise, adjusted earnings per share jumped 16% to 30.0p and their interim dividend paid during the period increased 1% on-year, from 15.0p to 15.1p per share.
Regarding its strategy and operations, the Company said they would focus investment into more high growth areas, and that their transition into a cloud and managed services business progressed well, with cloud and software sales making up 20% of total revenues. A likely contribution to today’s pessimistic stock market reaction was the announcement of CEO Eddie Buxton’s departure from the Company at the end of the year.
Maintel Holdings comments
Responding to the update, Chairman John Booth, said,
“Performance in the first six months of the year marks continued progress towards our goal of transforming Maintel into a cloud and managed services business and demonstrates the benefits we are receiving from investment in our cloud and software capability, notably improved margins and higher cash conversion. Our ICON platform continues to attract new customers from both public and private sectors with contracted seats growing at 32% to over 66,000. Gross margin increased to 29%, and underlying data revenues have grown 6% as customers transition to cloud.”
“Notwithstanding this significant progress, Group revenue in the period was impacted by the continued market transition to new technologies driving both a change in the revenue profile for project implementation and the revenue of our support business. In addition, we have seen some delays in the award of public sector contracts as the new Public Sector framework goes live.”
Investor notes
Following the publication of today’s results, the Company’s shares have dipped 7.05% or 31.00p, down to 409.00p a share 02/09/19 12:06 BST. Analysts from finnCap reiterated their ‘Corporate’ stance on Maintel Holdings stock. The Group’s p/e ratio is 6.72 and their dividend yield stands at 8.12%. Elsewhere in the tech sector, there were updates from; Bigblu Broadbend PLC (LON: BBB), Avanti Communications Group PLC(LON: AVN), Maestrano Group (AIM: MNO), Vitec Group plc (LON: VTC), TT Electronics (LON: TTG), SDL plc (LON: SDL) and Seeing Machines (LON: SEE).Kavango Resources shares jump on MOU with LVR GeoExplorers
Copper mining company Kavango Resources PLC (LON: KAV) has seen their share price rally duirng morning trading on Monday, following its signing of a Memorandum of Understanding with Botswana company LVR GeoExplorers, to farm two prospecting licences of the Botswana Kalahari Copper Belt.
Exploration of the two sites will commence within four weeks of the Farm-In Agreement. Kavango will act as the manager of the exploration and development of both sites, with the option to withdraw at any time, provided they give a two month notice period.
For the first 12 months following the signing of the Farm-In Agreement, the Company will have to spend BWP1.25m (around £92,000) on each licence to acquire a 25% interest – thos has already been allocated within their current budget. Their working interest in either or both licences can increase to 90% provided they take a project through to bankable feasibility.
Kavango Resources comments
Michael Foster, Chief Executive Officer, responded to the update,
“The signing of an MOU with LVR GeoExplorers represents an excellent opportunity for Kavango to acquire an interest in some highly prospective ground in the KCB area, which is now regarded as one of the world’s most promising under-explored copper provinces. We believe that the proposed Joint Venture with LVR represents excellent value for shareholders, who now have the prospect of acquiring an interest of up to 90% in these licences. We will continue to consider other opportunities in this exciting copper province, while our main focus remains the KSZ Project”.
Investor notes
Following the update, the Company’s shares rallied 10.83% or 0.18% to 1.88p a share 02/09/19 09:39 BST. The Company’s p/e ratio and dividend yield are unavailable, their market cap is £2.90 million. Elsewhere in the mining and minerals sector, recent updates have come from; URU Metals Ltd (LON: URU), Resolute Mining Limited (LON: RSG), Bisichi Mining PLC (LON: BISI), Polymetal International Plc (LON: POLY) Cora Gold Ltd (LON: CORA), Glencore PLC (LON: GLEN) and Bushveld Minerals Limited (LON: BMN).UK manufacturing PMI falls to lowest level since July 2012
UK manufacturing during August was heavily hit by high levels of widespread economic and political uncertainty, new data on Monday revealed.
The GBP/USD is trading below 1.2100 as Brexit uncertainty prevails.
The IHS Markit/CIPS Purchasing Managers’ Index (PMI) was at 47.4 in August, down from 48.0 recorded in July and falling to the lowest level since July 2012.
According to the research, the level of new export business shrank at the fastest rate in over seven years during the period. Manufacturers have cited global trade tensions, slower world economic growth and Brexit uncertainty as factors contributing to the reduced demand.
Additionally, it was reported that some EU-based clients were routing supply chains away from the UK as a result of Brexit.
A low level of business optimism was also recorded, connected to the weakening market conditions, signs of a global economic slowdown, Brexit uncertainty and subdued client confidence.
“High levels of economic and political uncertainty alongside ongoing global trade tensions stifled the performance of UK manufacturers in August,” Rob Dobson, Director at IHS Markit, which compiles the survey, commented on the data.
“Business conditions deteriorated to the greatest extent in seven years, as companies scaled back production in response to the steepest drop in new order intakes since mid 2012,” Rob Dobson continued.
“Demand from domestic and export markets both weakened in August, with new export business suffering the sharpest fall in seven years. The global economic slowdown was the main factor weighing on new work received from Europe, the USA and Asia.”
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, also provided a comment:
“Soured by the continuing intensely difficult conditions, the sector resorted to some job shedding and increased their own prices as a last-ditch effort against renewed pressure from a weakening pound.”
“As Brexit planning intensifies, some firms were resorting to more inventory building whilst others were unravelling their stocks. With some supplies impacted by port delays and poor supplier performance, a creeping dread is descending on the sector that there will be more of these obstacles to come.”
Just last week, Boris Johnson asked the Queen to suspend parliament, preventing MPs from blocking a no-deal departure ahead of the extended Brexit deadline.
Cabot Energy shares bounce 31% on financial position update
Canada-focused oil and gas production company Cabot Energy PLC (LON: CAB) today announced three developments in its financial position, which saw its share price jump.
The first update was that the company had entered into a non-binding term sheet with a private energy lender, for an asset-level loan facility of up to C$5.0 million. This will fund their ‘Winter Work Programme’.
They also signed a Subscription Agreement worth US$0.3 million, with High Power Petroleum LLC, to fund the commencement of their late ‘Summer Work Programme’.
Finally, they have an Open Offer set to launch in October 2019. High Power Petroleum LLC will participate in the Open Offer for a minimum interest of US$0.7 million.
