With some 280 stores across the country, it is surely a sign of the times when the UK’s largest pawnbroking group reports, in its AGM Trading Update issued today, that it has seen yet another record month for the demand for its pledge loans.

That makes records being broken for three out of the first four months of this year.

What Is A Pledge

Pledged loans are a kind of secured loan that requires the borrower to pledge assets as collateral to secure funding.

A Pawnbroking Loan or otherwise known as a Pledge, is a short-term loan, secured against items of Gold, Silver, Platinum Jewellery or Quality Watches, with the amount of the loan being dependant on the items provided as security.

Management Comment

Group CEO Chris Gillespie stated that:

“It is pleasing to be able to report a solid start to the year, with robust demand across the Group’s product offering.

Profit Progression Continues

Brokers Shore Capital Markets are very positive about the group’s shares, with their analyst Gary Greenwood estimating that the current year to end December will see adjusted pre-tax profits rising from £26.4m to £33.5m, lifting earnings to 57.2p (48.7p) and its dividends to 18.5p (17.0p) per share.

For next year he sees £36.7m profits, worth 62.7p in earnings and triple covering a 20.0p per share of dividend.

My View

The group’s shares, which were up to 502p last October, are currently trading at around 419p, up 20p in reaction to the record lending news.

At that level they trade on 7.5 times price-to-earnings and offering a yield of 4.3% – making the shares a very attractive investment at the current levels, with a run back up to new Highs being an early expectation.

What do the French-based ELEVA Capital, Ennismore Fund Management, GSA Capital Partners, GLG Partners and the Hong Kong investment managers Qube Research & Technologies have in common? 

The answer is simple – they are all ‘short’ of the shares in the Kumani’s online clothing empire. 

In total their positions represent a bearish 5.05% chunk of the £455m group’s equity. 

Is It An Apt Definition? 

The meaning of ‘boohoo’ is to weep loudly and with sobs. 

The impeccable Lord Jeffrey, editor of The Edinburgh Review, confessed to having cried, blubbered, boohooed, snuffled, and sighed – over the death of Little Nell Trent in The Old Curiosity Shop, which was written by Charles Dickens and published in 1841. 

Nowadays the phrase is often used as an interjection, especially in mocking imitation of another’s tears, complaints, unhappiness. 

Could that describe the market onlookers as they observe the share prise demise of the boohoo group since its peak at over 412p four years ago – having collapsed over 87% to the current 36p.  

But Who Is It Good For? 

The answer could well be that the recent mega-loss news is of benefit for Mike Ashley’s Frasers Group (LON:FRAS). 

That is because he has been taking advantage of the lower share price to carry on ‘mopping up’ more shares in the fashion group, recently buying around 13m to add to his position. 

His group is now the biggest holder of boohoo equity – with some 293,028,671 shares, representing 23.10% of the company’s stock. 

Recent Results 

The results announced last Wednesday were as expected, reflecting ongoing challenging conditions, with the year to end February 2024 showing sales down 17% at £1.46 bn, with the adjusted pre-tax loss collapsing from a previous £1.6m negative to a massive £31.0m loss. 

In the last trading year, the assorted brands within the group have seen an 11% fall in active customers to 16m, with a 13% drop in orders to 48.5m, and a 3% easing in the average order value to £51.68. 

On a geographical basis, the group’s revenues were 63% derived from the UK, 20.5% from the USA, 11.3% from the Rest of Europe and the Rest of the World generating the balance. 

With the hope for improving market conditions, the group is expressing confidence in its medium-term outlook. 

Group CEO John Lyttle stated that: 

“The group is now well positioned to return to growth, and we are focused on ensuring that growth is both sustainable and profitable.” 

Broker’s Views 

Analyst Rachel Birkett at Zeus Capital considers that the group is now on track for some £125m of annualised cost savings in the current year, she is anticipating a return to growth delivering some operational leverage, enabling a doubling of EBITDA margins to range 6% to 8% over the medium term. 

For the current year Birkett estimates £1.48bn sales, a more than halved adjusted pre-tax loss of £15.3m. 

For the 2026 year she goes for £1.55bn revenues, and a £2.4m loss. 

Her DCF valuation of the group’s shares is equivalent to 57.2p per share. 

Analyst Wayne Brown at Liberum Capital has retained his Hold recommendation, with a target price of 32p, compared to the current 37p. 

He notes that the group is using 2024 as a ‘fix-up’ year but it won’t get interesting until the second half. 

“It has shifted its strategy to core brands that have created ‘noise in revenues’ and despite the tough trading there are ‘green shoots appearing’, with improvement in earnings margins reflecting ‘work done on admin and distribution costs’.” 

“The shares look attractive trading at only 1.3 times price to book, and while we believe the group could soon turn the corner back into revenue growth, the timing of this remains uncertain so we remain “hold” but the second half of this year looks much more interesting.” 

Across some 17 analysts that follow the group, the average Target Price is 35p, with 75p being highest estimate price and just 19p as the lowest aim. 

The FTSE 100 traded higher on Wednesday as investor confidence continued to flow through the UK’s leading stocks despite a potential hurdle in the form of UK inflation later in the session.

The FTSE 100 was 0.3% at the time of writing.

“The market’s optimism is starting to look rather heroic. Despite higher than anticipated factory gate prices, US stocks made progress overnight and the FTSE 100 has followed this cue to reach a new record high,” said AJ Bell investment director Russ Mould.

“The next test of the prevailing positive sentiment comes tonight with US consumer prices data – overnight Federal Reserve chair Jerome Powell said he did not expect rates to increase again but this release is one of a number which could help determine just how soon cuts come.”

In addition to mild optimism around interest rates, corporate earnings helped lift the FTSE 100 on Wednesday.

Strong results from Experian sent the stock 7% higher as the group posted sales growth at the top end of the range.

“Credit giant Experian is ticking all the boxes,” said Matt Britzman, equity analyst, Hargreaves Lansdown.

“A strong final quarter capped off a good year, and investors should be happy with guidance that points to further top-line growth and improving margins. Experian is a leader in its field, with US operations taking centre stage and driving cash flow that can be reinvested into growth markets like Latin America.”

Burberry

Burberry was the biggest disappointment on Wednesday with a 4% drop after the luxury group released sluggish sales figures.

“The last twelve months have been particularly tough on Burberry. With inflationary pressures weighing heavily on consumer spending, the luxury goods market has inevitably taken a hit, and with-it Burberry seems to have fallen out of fashion,” said Mark Crouch, analyst at investment platform eToro.

“As consumers’ appetite for luxury goods has dried up, the knock-on effect for Burberry has been severe, issuing two profit warnings in six months sending the share price tumbling.

“Burberry’s full year earnings are, at best, disappointing. Operating profits fell by 34% and like-for-like sales fell 12% in the final quarter wiping out gains made earlier in the year.”

Low-sodium salt technology company MicroSalt has announced it has been granted an important patent protecting the IP of its micron-sized salt.

This particular patent, entitled Low Sodium Salt Composition, is concerned with how MicroSalt’s low-sodium salt adheres to food particles in a different way than traditional table salt. 

Although MicroSalt’s core USP is the reduction of sodium in food without sacrificing taste, today’s announcement demonstrates a broad suite of possible benefits the technology can provide food manufacturers. 

“We believe the grant of patent 11,992,034 is an important milestone for the Company as it further strengthens our IP position in the global low sodium market,” said Rick Guiney, CEO of Microsalt.

MicroSalt has already won commercial contracts from one of the world’s largest snack food businesses and is undergoing testing with others. 

MicroSalt shares were 6% higher at 104p at the time of writing. Tekcapital listed MicroSalt at 43p in February in the first AIM IPO of 2024.

Raspberry Pi announced this morning it plans to list on the premium segment of the London Stock Exchange, a move that will be a major boost to London’s markets.

The company specialises in high-performance, low-cost single-board computers with IoT applications and uses in education and learning.

“A remarkable ecosystem of individuals and businesses has grown around Raspberry Pi, supporting both the enthusiast and industrial markets to innovate and succeed with our products,” said Eben Upton, CEO of Raspberry Pi.

“We’re now seeing the former feed into the latter, as the first generation who encountered Raspberry Pi as young people take their experience with our technology into their professional careers, and today the industrial and embedded market accounts for 72% of units sold.”

In the full year ended 31 December 2023, Raspberry Pi’s revenues were $265.8m, driving a gross profit of $66.0m and an operating profit of $37.5m.

Raspberry Pi is a fantastic business with abundant ESG credentials and strong financials. This is just the type of company London needs to get back on track.

While the IPO is welcoming news for London’s markets, investors may be put off by the company’s motivations. As well as raising fresh funds by issuing new shares as part of the IPO, the Raspberry Pi Foundation, the company’s biggest shareholder, will offload some of its stake during the IPO process.

Initial public offerings with major shareholders selling from the get-go aren’t as preferable to those where major shareholders hold onto their stakes or are locked in for a period.

Ultimately, new investors in a company want to know existing shareholders see an IPO as the next step in their growth journey, not an opportunity to cash in.

The attraction of CleanTech Lithium shares increased this week after the Chile-focused miner announced positive results from its lithium brine processing pilot. 

We included CleanTech Lithium in our article ‘Three undervalued AIM-listed junior miners to watch this summer’, published at the beginning of this week.

The article notes the importance of CleanTech Lithium’s Direct Lithium Extraction (DLE) process and the favourable economics it can provide for the company’s extraction and processing operations. 

Subsequent to the publication of our article, the company released an encouraging update on its DLE pilot project, which was well received by the market.

On Tuesday, CleanTech announced that its DLE pilot plant had produced high-quality eluate with low impurities. This demonstrates that the company’s technology has the potential to produce desirable lithium offtake and deliver the hoped-for economics for investors. 

“The analysis of the eluate shows the DLE performance has exceeded our expectations, concentrating the lithium grade of the feed brine by 3.6X while achieving high recovery rates and low impurities,” said Steve Kesler, Executive Chairman, of CleanTech Lithium.

“The first full batch of 24m³ of concentrated eluate is scheduled to be shipped in the coming weeks. The pilot plant has met its design capacity capable of producing 1 tonne of LCE per month, positioning CleanTech Lithium to produce significant quantities of lithium product samples for potential strategic partners.

“We are edging closer to be one of the first DLE based companies in Chile to produce battery-grade lithium carbonate.” 

CleanTech has sent the pilot plant’s eluate to North America for additional testing and processing into high-grade lithium carbonate.

The success of the pilot plant significantly derisks CleanTech Lithium’s business model and will go a long way to counter any arguments against the DLE process being experimental and unproven.

There is still a way to go to validate the process works at scale, but this week’s news is a vitally important milestone.

Tekcapital’s Innovative Eyewear said it was ‘bullish’ about its outlook as it announced a 165% increase in first-quarter revenue.

While the company has made significant progress in revenue generation, it hinted that it that this may just be the beginning of an upward trend trajectory in sales as new lines are launched later in the year.

The Tekcapital portfolio company launched Nautica smart eyewear, powered by Innovative Eyewear’s brand Lucyd, earlier this year and said three more product lines are set to hit the market later in 2024. 

In an earnings update released Tuesday, Innovative Eyewear said it was ‘bullish’ about its outlook as it prepared for the much-anticipated launches of world-renowned Reebok and Eddie Bauer branded smart eyewear powered by Lucyd technology.

Eddie Bauer and Reebok branded smart glasses, as well as the Lucyd Armor smart safety glasses line, are due for release in 2024, significantly bolstering the company’s addressable market.

Eddie Bauer and Reebok are owned by Authentic Brands, which generates over $29bn in annual revenue.

The company also provided an interesting insight into its future distribution plans, which will focus on eyewear outlets and retailers that supply prescription lenses to enhance margins.

“Our most recent quarter marked the third sequential quarter of year-over-year revenue growth. I am pleased by our continued growth and excited by the potential of further growth later this year with the upcoming launches of new product lines and upgraded app releases,” said Harrison Gross, CEO of Innovative Eyewear Inc.

“This is an exciting time for the Company,’ Gross continued.

“After several years of rigorous R&D and brand development, I believe we are very well-positioned to capitalize on blooming consumer interest in smart eyewear. Recently, we have seen powerful incumbents such as Apple and Meta bringing renewed interest to smart glasses, which helps us quite directly by raising consumer awareness for the category.

“We believe this has enhanced investor and consumer confidence in the category. As the value leader in prescription smart eyewear, we are a practical alternative to the Apple Vision Pro and Meta Glasses for consumers seeking a lightweight, AI-enabled and affordable option for all-day wear.

“The fact that our products are available in dozens of different styles, with thousands of frame and custom lens combinations, provides consumers with the necessary optionality that they expect when making an eyewear selection. We continue to expect that smart eyewear will be a key component of the generative AI revolution, due to their transparent interfaces and ergonomic form factors perfectly suited for voice-based interaction.”