Balfour Beatty shares were higher on Wednesday after the construction services group released 2023’s full-year results revealing a year of progress in terms of profits and revenue.

Revenue grew 7% to £9.6bn and underlying profit from operations (PFO) rose 2% to £236m. Profit before tax fell due to the impact of disposals.

Balfour Beatty shares were up 9% to 360p at the time of writing.

“Balfour Beatty has built a sturdy reputation with investors in recent years. The international infrastructure firm has consistently produced growing profits and delivered attractive shareholder returns. This morning’s earnings update will further cement that reputation,” said Mark Crouch, analyst at investment platform eToro.

“The business reported a jump in revenue and profits for 2023. Despite a marginal dip in the order book, they expect growth to continue into 2025. More welcome news for shareholders was the increase of the dividend and share buyback program, with the latter being raised to £100m, set to complete by December 2024. All are very good signs.”

Balfour Beatty’s outlook was particularly encouraging. The company said, ‘The Board expects an increase in PFO from its earnings-based businesses in 2024, with growth accelerating in 2025.’ The group sees investment in infrastructure projects supporting earnings in the coming periods as well as positive contributions from disposals.

Shareholders will enjoy a 10% increase in the final dividend to 11.5p.

The FTSE 100 made healthy gains on Tuesday despite US CPI inflation coming in hotter than expected as financial helped propel London’s leading index to the best intraday levels since January.

The FTSE 100 touched highs of 7,764 on Tuesday, a similar level the index had retreated from on several occasions in January. Should the index break above this level, it will attack levels not seen since April 2023.

“The blue-chip UK index was led by a rally in financials including a 3.1% gain from Prudential and a 2% rise from Standard Chartered. Interestingly, nearly all sectors were in positive territory, implying that investors were feeling upbeat across the board which is a healthy situation to have in markets,” said Russ Mould, investment director at AJ Bell.

“Investor sentiment was boosted by slowing UK wage growth which raises the chances of the Bank of England cutting interest rates sooner rather than later.”

The UK unemployment rate has increased to 3.9%, and wage growth slowed to 6.1%. Job vacancies also fell as the recession cooled the UK jobs market. While this isn’t great news for the underlying economy, it is excellent news for traders longing for easier monetary policy.

The FTSE 100 was 1% higher at the time of writing.

US CPI

It was a different story in the US. CPI inflation came in hotter than expected – but not to the extent that it would prevent the Federal Reserve from rates in the summer, and this buoyed equity bulls.

US equities jumped on the open as US CPI rose 0.4% month-on-month and 3.2% in the year to February.

“The recent data series came in slightly above expectations, particularly regarding core inflation. While this doesn’t derail the progress the Fed is making, it highlights the challenge of addressing inflation and getting it back to the 2% target,” said Ryan Brandham, Head of Global Capital Markets, North America at Validus Risk Management.

“US yields have been gradually declining throughout March, but this data might cause them to increase in the coming days as traders debate what it means for potential cuts in the US later this year.”

The merry-go-round of ‘will they, won’t they’ expectations of when the Federal Reserve will cut rates will continue, but, for today at least, the data suggests rate cuts are very much on the table for June/July.

Persimmon

Persimmon was the FTSE 100’s biggest faller, with a 2.2% loss, after the housebuilder said completions would increase only marginally in 2024 compared to 2023. Revenue sank 28%, and operating profits more than halved in 2023.

“Persimmon’s latest set of results will make for tough reading for shareholders after the UK housebuilder reported a 52% drop in profits in 2023, citing build cost inflation and weaker demand hampering performance. Also, the company’s cash position, while still relatively healthy, has fallen considerably,” said Adam Vettese, analyst at investment platform eToro.

“Persimmon shares looked to be mounting a recovery in the last six months, rallying over 40%, and after what has been a torrid few years for the housebuilder, investors would have been eager to see this continue at pace. However, as these results indicate, so much depends on factors outside of Persimmon’s control.”

AIM-quoted pawnbroker H&T (LON: HAT) reported strong growth in profit and further progress is expected this year despite higher wage costs. The pledge book is growing and the acquisition of Marcroft boosts parts of the business with potential for growth.

The AIM-quoted company is benefitting from increasing pawnbroking demand and higher gold prices. The retail side has been tougher, but this is being refocused on lower price points that are more in keeping with customer demand. Pre-owned jewellery margins remain high, but new jewellery margins slumped.

The pawnbroking book grew 28% to £128.9m. Group 2023 revenues were 27% ahead at £220.8m. Retail and other services were the only parts of the business making a lower profit contribution. Pre-tax profit was up from £19m to £26.4m. This enabled a rise in the dividend from 15p/share to 17p/share.

The recent Maxcroft acquisition increases exposure to self-employed and small business pawnbroking loans. The security is the same as for individuals. It also boosts the foreign currency business.

The new £85m debt facility means that H&T has all the cash it requires to expand the business, even after the £11.3m paid for Marcroft. A further 50 stores will be refreshed this year and up to 12 new branches could be opened.

The share price is 10.9% higher at 377p, which means that some of the downgrade-related losses from earlier in the year have been clawed back. The prospective multiple is seven and the forecast yield is 5.3%.

There is no new information about the potential bid for SmartSpace Software (LON: SMRT) but the share price has jumped 27.1% to 75p. The share price has been drifting downwards since the initial announcement that the company had received a bid approach from Sign In Solutions Inc at an offer price of 90p/share. Management says that it would back this offer, which values SmartSpace Software at £26m. This bid is subject to due diligence. Late last year, venue management software supplier Skedda Inc proposed an 82p/share offer for the smart building technology company, but last month it decided not to bid.

X-ray imaging technology developer Image Scan (LON: IGE) has launched the AXIS-CI cabinet with AI software, which is for building and mail screening. This helped the shares recover 21.7% to 1.4p.

Primorus Investments (LON: PRIM) is paying a special dividend of 1.5p/share, which will cost £2.1m. The ex-dividend date is 21 March. Primorus Investments received $6.1m from the takeover of Payapps Ltd. The share price rose 15.8% to 5.5p.

Dekel Agri-Vision (LON: DKL) director Lincoln Moore bought 500,000 shares at 1.3p each following yesterday’s production update. February 2024 crude palm oil production of 3,742 tonnes was 70% higher than the previous February. The share price is 15.4% higher at 1.5p.

FALLERS

Renalytix (LON: RENX) has raised £7.8m at 20p/share and this should be enough to fund the company until the fourth quarter of 2024. This will give time for the formal sale process to make progress. A large diagnostics company has made a bid approach to kidney disease diagnostics developer Renalytix. This sparked the formal sale process, so that the company can assess whether there are other potential bidders. It is also possible that there could be a decision to stay independent. The share price slumped 31.3% to 27.5p, which is below the level before the potential bid was revealed.

Digital media services provider Catenai (LON: CTAI) raised £720,000 at 0.3p/share and issued shares to pay creditors £76,600. Sanderson Capital has converted £151,000 of convertible loan notes and £65,100 of associated fees into 72 million shares and it has received 25.17 million warrants exercisable at 0.3p each.  The share price fell back 30% to 0.35p.

The Competition and Markets Authority’s announcement that it has concerns about the pet market knocked CVS Group (LON: CVSG) shares. Concerns include, lack of information, weak competition in certain areas and actions by large groups like vet practices operator CVS Group.  A package of possible remedies has been suggested by CVS Group and its peers and they believe these could be implemented more quickly than an 18-month investigation. The share price has recovered from its low, but it is still down 23.9% to 1108.5p.

Shoe Zone (LON: SHOE) has a history of beating forecasts in recent years, but at the AGM the retailer said that trading is marginally below expectations because of higher wage and freight costs. Also, the end of the autumn/winter season was slower than anticipated. The share price declined 17% to 232.5p.

Persimmon shares fell on Tuesday after the housebuilder announced a full year and operating profit sank in 2023.

Rising mortgage rates were largely to blame for a 27.5% drop in revenue. Operating profit fell to £355m from £1bn.

Persimmon’s numbers today were broadly expected and the focus was always going to be on the outlook. On this front, Persimmon expects to have a marginally better 2024 than 2023, with completions expected to be between 10,000 and 10,500 in 2024 compared to 9,922 in 2023.

The group said it expects the housing market to remain subdued, citing uncertainties around the UK election and mortgage rates.

“Although the near-term outlook for Persimmon remains uncertain, the significant pent-up demand for homes remains unchanged. Persimmon’s average weekly sales rates fell around 16% in 2023, as high interest rates and the removal of the Help-to-Buy scheme have weighed on buyer affordability,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

“As a result, total completions of new homes dropped by around a third to 9,922. These lower volumes, coupled with high levels of build-cost inflation, saw operating profit margins roughly halve. This impact would have been worse if it weren’t for the group’s in-house materials business, which is a key differentiator to peers and offers some relief to inflating costs.”

Persimmon’s net cash took a battering last year, dropping to £420.1m from £1,246m as operating cash flows dried up and Persimmon paid £255m in dividends.

The sharp drop in net cash will raise some eyebrows. Persimmon has been a cash generation juggernaut over the past decade and the halving of net cash demonstrates the challenging time the housebuilder had in 2023.

The reduction of cash will not impact the company’s ability to harness opportunities when growth returns – unless the UK property malaise lasts longer than many expect.

“With interest rates still up at around 5%, this has created something of a standoff between buyers and sellers in 2023, with neither willing to give any ground. The Spring Budget offered little to no incentive for either side, so the focus will now be firmly fixed on the Bank of England and the prospect of impending interest rate cuts later this year,” said Adam Vettese, analyst at investment platform eToro.