FairFX shares soar after reporting £1bn turnover
Payments service FairFX (LON:FFX) reported turnover of over £1 billion in the half year to June, saying it was confident it would meet full year expectations.
The group had already been boosted by an 146.2 percent year on year increase in turnover to £1.1 billion in the first half, and, excluding the acquisitions of Cardone and City Forex, turnover rose 22.8 percent.
Like-for-like turnover from prepaid cards and international payments, one of its most well-known services, rose 8.5 percent to £181.7 million and 39.1 percent to £334.6 million, respectively.
“The performance of FairFX during the first half of 2018 demonstrates the execution of the Company’s strategy to scale its core FX services whilst evolving the digital banking offering. The substantial growth in turnover has also been achieved without reduced margins and this gives us great confidence for the prospects for 2018 and beyond,” said FairFX CEO, Ian Strafford-Taylor.
Shares in FairFX are currently up 13.16 percent at 129.00 (0913GMT).
US-China trade war kicks off with the first round of tariffs
Donald Trump has signalled the start of a trade war by imposing US tariffs on $34 billion (£25.7 billion) of Chinese goods.
The US President imposed the 25 percent tariffs at 12:01 am Washington time on Friday. China soon retaliated with a 25 percent tariff on US goods.
Gao Feng, a spokesperson from the Commerce Ministry, said: “China will not bow in the face of threats and blackmail.”
“The Chinese side, having vowed not to fire the first shot, is forced to stage counter-attacks to protect the… interests of its people,” he added.
Trump initially threatened to impose tariffs on Chinese goods in March. He tweeted: “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win.”
The US has imposed tariffs on over 800 goods including medical devices, industrial goods and auto parts.
China’s tariffs will affect over 500 different US items.
The new tariffs have had little impact on Asian stocks. Shanghai fell in morning trade before recovering and ending 0.6 percent higher. Hong Kong and Tokyo rose by 1.3 percent.
Mark Weisbrot, co-founder of the Washington DC-based Centre for Economic and Policy Research, said the effects of the tariffs could remain fairly limited.
“I don’t think that a serious trade war is in the making. The quantity of goods affected is still small (about 1/6 of one percent of US GDP for the tariffs on Chinese imports). Trump has so far been mostly interested in promoting the interests of America’s biggest corporations, despite occasional rhetoric to the contrary,” he said.
“They don’t want a trade war and neither do the Chinese. Trump doesn’t even want anything that will push stock prices down. So, although Trump is unpredictable, if I had to bet, I would bet there won’t be any serious economic damage coming from trade wars in the foreseeable future.”
Trump threatened on Thursday to up the goods subject to tariffs to over $500 billion.
Glencore, Gertler and Government Corruption
Mineral extraction in Africa has been put in the spotlight over the last couple of days with mining giant Glencore plc receiving a subpoena from the US Department of Justice. This follows scrutiny by the UK Serious Fraud Investigation and allegations of the firm’s dealings with mining tycoon, Dan Gertler, breaching the US Foreign Corrupt Practices Act.
The firm’s partnership with Gertler was first brought to light in the Paradise Papers, with the company buying Gertler’s stake in Mutanda mines and holding an 86 percent stake in Katanga mining, which in turn has a 75 percent stake in KCC – a company Gertler is associated with.
In 2017, Glencore paid $1 billion to Gertler’s Fleurette Group, to boost its stakes in both Mutanda and KCC copper and cobalt mines. In return it was agreed that Glencore would pay royalties to Gertler’s companies at a rate of 2.5 percent.
This agreement ended last December, after the US Department of Justice imposed sanctions on Gertler for malpractice regarding alleged Human Rights abuse and promoting corrupt practice. Following this, Glencore stopped paying royalty fees and severed all ties with Gertler earlier on this year. Soon after, in March, Gertler sued two Glencore plc subsidiaries for a total of $2.9 billion worth of royalty payments.
The issue here is not the sum Glencore were being told to pay – rather – the firm were put into a Scylla and Charybdis scenario. On the one hand, they could not transfer money from their US-based accounts to pay off the backlog of royalties, as this would be in breach of the US sanctions, which blocked US institutions from having dealings with Gertler. On the other hand, the Democratic Republic of Congo is the largest exporter of cobalt, Glencore is the largest cobalt-mining company in the world, and Gertler has the power to decide who is able to mine in the Congo.
As stated by the US treasury, “Gertler has used his close friendship with DRC President Joseph Kabila to act as a middleman for mining asset sales in the DRC, requiring some multinational companies to go through Gertler to do business with the Congolese state“.
Gertler earned his fortune when he moved to the Congo in 1997, setting up a deal to mine diamonds with the current president’s father. Once this deal collapsed, Gertler maintained a close relationship with current president Joseph Kabila, and now has large stakes in the country’s copper and cobalt mining sectors, as well as sway to decide who else is allowed to mine in the country. Such an arrangement has persisted for almost two decades, with Gertler allegedly paying off ministers with sums reported to be in the tens of millions of dollars; though the Congolese state has lost an estimated $1.36 billion from the undervaluation and sale of mining rights to Gertler alone.
As such, Glencore was put in an impossible position. In the end they resorted to transferring funds to non-US accounts and paying off Gertler in euros rather than dollars. The result of this action was Tuesday’s subpoena by the USDOJ, which accused Glencore of money laundering.
The company “[…] is reviewing the subpoena and will provide further information in due course as appropriate”, said a Glencore spokesperson. However, their actions were most likely deemed necessary in order to protect their cobalt mining interests in the Congo. It is thought that Glencore will fare well during their trial, as they are a large firm with experience in dealing with legal disputes regarding mining in high-risk areas.
RBC Capital Markets have been questioned for their optimistic ‘Buy’ stance on Glencore stock. However, should the trial go their way, they will be able to continue with business as usual, with their share price currently sitting at below-normal levels due to the outcry surrounding the subpoena. However, if their business is somewhat disturbed by a negative result in the trial, their dominant stake in the world cobalt market means that cobalt prices will only rise past their current record levels, which will boost their earnings per share (EPS).
Gertler operates outside of US and UK jurisdiction but effectively has a monopoly on the largest national reserve of cobalt in the world. Glencore will do what they deem necessary to protect their interests – this not being the first time they’ve circumnavigated international law. In the 1990s they were criticised for allowing child labour in their African mines and trading with apartheid South Africa. More recently, the firm have come under fire for ignoring sanctions on Iran and trading with Iraq under Saddam Hussein’s leadership, thus their dealings with Gertler are almost overshadowed by the controversies they have escaped in the past.
Uranium trader Yellow Cake has AIM debut
Yellow Cake plc (LON:YCA) announced its first day of trading on the Alternative Investment Market of the London Stock Exchange.
Preceding this move, the firm raised £151 million through their IPO, with an oversubscribed placing and subscription of the 76.2 million ordinary shares, priced at 200p a share.
Yellow Cake plan to use the proceeds raised from the IPO to buy 8.1 million pounds of uranium from its supplier Kazatomprom. Their contract price is $21.01 a pound, which is 7.5 percent below uranium’s market spot price.
“Due to an exceptional set of circumstances, uranium is one of the few commodities yet to recover from the recent commodities bear market and we believe that uranium is currently fundamentally and structurally mispriced,” said Yellow Cake CEO Andre Liebenberg.
He added, “Yellow Cake’s long-term supply contract with Kazatomprom has allowed us to secure a highly significant and strategic position in physical uranium, at a competitive price, and to offer that exposure to a potential resurgence in the uranium price to investors, while avoiding direct exposure to exploration, development, mining and processing risk.”
Peter Bacchus, Chairman and Chief Executive of Bacchus Capital said, “The highly successful initial public offering of Yellow Cake demonstrates the depth and breadth of interest emerging in uranium as a commodity, and reflects the U.K. market’s continued strong support for the natural resources sector where an opportunity presented is on-theme, clearly articulated and compelling in nature.”
The company’s share price has remained steady throughout the day, ranging from 193-200p, the last five trades on LSE’s AIM were between 198-199p, and the stock is currently trading at 198p.
Purplebricks’ share price and profits fall following expansion
Purplebricks’ (LON:PURP) share price has dipped alongside another year of losses for a company playing a high-risk strategy, with large-scale investment to expand their operations on an international scale.
The hybrid agency reported a pre-tax loss of £26 million for the year to April, this is up on the £5.1 million loss the year before. UK figures showed an adjusted Ebitda of £8.1 million, which is up from £1.7 million the year before. However, their overseas ventures suffered losses of £11.8 and £16 million in Australia and the US respectively.
“Whilst the markets in the UK and Australia have been and continue to be challenging for the industry, with overall transaction volume and sentiment down year on year, we have managed to gain market share, increase revenues and grow customer engagement in all three countries in which we operate.” said Michael Bruce, chief executive of Purplebricks.
Figures haven’t yet been released for their expansion into the Canadian market, which was their opening gambit of 2018. This move came after the $29.3 million acquisition of real estate agents DuProprio. Also earlier in 2018, Purplebricks sold an 11.5 percent stake to German publishing group Axel Springer for £125 million.
“We are confident that Purplebricks’ market leadership will continue, given the strength of its brand, the continuing investment into team, technology and processes and our £153m war chest for global growth, following the strategic investment by Axel Springer,” added Mr Bruce.
The firm’s revenue increased from £46.7 million to £93.6 million in the last year. Their share price dropped 4.7 percent to 303.65p in the first hour of trading, and Peel Hunt reiterated their ‘Buy’ stance on Purplebricks stock.
Anglo American shares rally amidst Glencore controversy
Anglo American plc’s (LON:AAL) share price has rallied this morning, with talks to sell part of its African operations to Vedanta Resources (LON:VED) a stake sell-off to Royal Bafokeng Rasimone Platinum (JSE:RBP), and buyers moving over from rival Glencore plc (LON:GLEN).
Vedanta has made an offer of an equivalent £5.3 billion, via a shares swap, to take control of Anglo American’s South African business. Vedanta chair Amir Argawal already owns a 20 percent stake in Anglo American, and seeks to expand this after buying out Vedanta’s minority shareholders for £800 million.
“It could happen, whether it makes sense depends on the numbers. There will probably be a significant equity component given that Mr Agarwal is a big holder of equity but how that pans out is difficult to see,” said Hargreaves Lansdown analyst Nicholas Hyett.
Additionally, Anglo confirmed this morning that its subsidiary, Anglo American Platinum, has sold its 33 percent interest in Bafokeng Rasimone Platinum Mine for $135 million, in an effort to focus capital into its own-managed mining projects.
Further, it has been suggested that the ongoing investigation into the dealings of Glencore plc have pushed investors towards Anglo American, with the firm’s subsidiary, De Beer, reporting an increase of $34 million in diamond sales in its fifth sales cycle, compared to last year. The company’s share price has increased this morning, up 2.78 percent or R842.00. Analysts from JP Morgan Cazinove and Morgan Stanley have reiterated their ‘Overweight’ classification, while Citigroup and Credit Suisse reiterate their ‘Neutral’ stance.
Innovative Finance ISA launched for care home investments
A new Innovative Finance ISA (IFISA) focused on specialist care home investments has launched in the UK, offering annual returns of up to 7 percent.
Brought to the market by The Barbican Group, the ethical ISA will support over 83 specialist healthcare properties in the UK that look after the most vulnerable.
The Barbican Group, which operates in healthcare, logistics and renewables and has current assets valued at over £105 million, will offer the Barbican ISA as a three-year bond, offering investors a fixed rate of interest of seven per cent tax-free per annum with no opening or management fees.
Funds in the ISA will go towards refurbishing existing care homes as well as enhancing the management and structure of the individual care home facilities.
“We are excited to offer UK investors the opportunity to enjoy a healthy rate of return on their savings whilst investing in an IFISA that will make a real difference to some of the most vulnerable people in the country.
“There is an alarming care home crisis in the UK, which is putting a strain on our NHS. At The Barbican Group, we have always been passionate about helping and supporting those people in society that need it the most,” The Barbican Group said.
The Barbican ISA is run by Northern Provident Investments and is both asset and property backed.
“Investing in The Barbican ISA will allow us to continue to improve the structure and quality of care within our care homes and give us the capacity to expand our portfolio of properties, refurbish existing homes and reach even more individuals.
“Our Innovative Finance ISA gives investors a refreshing alternative to many of the cash ISAs on the marketplace which have historically low interest rates.”
All of the care home properties are owned by the Group and are monitored and accredited by the UK Government CQC (Care Quality Commission) in order to provide outstanding care to local authorities and service users.
Persimmon report steady growth as confidence remains “resilient”
Housebuilder Persimmon (LON:PSN) reported another half of steady growth on Thursday, on the back of “resilient” consumer confidence.
Revenues rose 5 percent to £1.84 billion over the first half of 2018, up from £1.75 billion in the same half last year.
Housing completions rose 3.6 percent to 8,072, with the average selling price increased by 1.2 percent to around £215,800 from £213,262 the previous year. This comes in comparison to Bovis Homes, who also released sales figures today, who saw the average selling price of their property fall over the period to £261,000.
“Consumer confidence remains resilient in our markets and attractive mortgage products provide compelling support to purchasers of new homes,” Persimmon said.
“Persimmon is still selling more houses at higher prices, but business is not booming like it was last year. Indeed the share price has fallen by more than 10 percent in the last month,” noted Laith Khalaf at Hargreaves Lansdown.
The group’s results come just after the disclosure that its chief executive, Jeff Fairburn, is paid 3,000 times more than its lowest paid worker.
Shares in Persimmon are currently trading down 0.64 percent, at 2,466.00 (0954GMT).
Superdry shares up 10pc on special dividend announcement
Superdry (LON:SDRY) shares shot up over 10 percent on Thursday morning, on the announcement of a special dividend after a year of double digit growth.
Both sales and profits soared in the fiscal year to April 28th, with revenue up 16 percent to £872 million after a strong performance from its wholesale division.
Retail revenue was up 9.2 per cent, boosted by a 25.8 per cent rise in online sales. Store revenue also did well despite challenging high street conditions, rising by 3.4 per cent. Underlying basic earnings per share rose 10.8 per cent to 93.6p.
Euan Sutherland, CEO of Superdry, said Superdry had had “another strong year”.
“We have made good progress in delivering our strategy and significantly strengthened our platform and capabilities, while delivering another year of double digit growth in sales and profitability,” he said.
“Our focus remains on executing our growth strategy and realising the potential we have identified across products, geographies and channels.
“Whilst the consumer environment continues to be challenging, the Board remain confident that Superdry is a uniquely advantaged, highly cash-generative business that will continue to deliver sustainable growth for our investors. This confidence is demonstrated through our second special dividend in two years.”
Shares in Superdry (LON:SDRY) are currently trading up 9.92 percent at 1,285.00 (0925GMT).
Sophos shares tank as revenues slow
Sophos (LON:SOPH) became the biggest faller on the FTSE 250 in early trading on Thursday, after it made an unexpected warning on slowing revenues.
The cyber security group’s billings growth was lower than expected in the first quarter, coming in at 6 percent for the quarter ended June.
According to Sophos, the lower billings were driven by its Enduser security business, which faced a “particularly challenging comparable”. Despite this, underlying Enduser billings growth in the first quarter of the previous financial year was “in excess” of 50 percent at constant currency.
The company said these factors would continue to impact on results during the second quarter as well:
“As the prior-year comparators normalise, we expect a return to mid-teens constant currency billings growth in the second half of the year,” the group said.
Its full year outlook remains unchanged. Shares in Sophos are currently trading down 22.01 percent at 480.00 (0906GMT).