Tekcapital has taken an important step in the roll-out of its AI investment strategy by securing capital to allocate to investments in the area.

The company raised £2m by way of a placing at 10p with a proportion earmarked for investment into a ‘Generative AI portfolio company opportunity’.

The remaining funds will be used for working capital, repayment of a loan, and the launch of autonomous vehicle safety company Guident’s new headquarters.

Tekcapital first announced its intentions to diversify its portfolio into the booming AI sector last year, and today’s announcement signifies a material step toward making an investment in Generative AI. The company has hired two experts in the area: Dr Russ Salakhutdinov, the former director of AI at Apple, and Alexander Mordvintsev, who is currently a senior research scientist at Google.

“We are pleased to consummate this funding round which will enable us to strengthen our balance sheet, complete the build-out of Guident’s new RMCC to facilitate servicing its growing client base, and form a fifth portfolio company in the Generative AI space,” said Clifford M. Gross Ph.D., Executive Chairman of Tekcapital.

Ocado shares rose on Thursday after the food technology and premium online grocery company announced rising revenues and a swing to positive EBITDA.

Ocado Group saw strong revenue growth in 2023, with total group revenue increasing 9.9% to £2.8 billion.

This growth was driven by a 44% increase in revenue from Ocado’s Technology Solutions division to £429 million, thanks to the addition of new customer fulfilment centres (CFCs) during the year. Meanwhile, Ocado Logistics revenue grew 1% to £680.5 million and Ocado Retail, Ocado’s premium online supermarket business, saw a 7% revenue increase to £2,408.8 million.

This topline growth filtered down to the bottom line, with the Group swinging to a positive adjusted EBITDA of £51.6 million, versus a £74.1 million loss last year. All three divisions were profitable, with Technology Solutions generating £15.4 million in EBITDA, Ocado Logistics £30.1 million, and Ocado Retail rebounding to a £10.4 million profit.

Improved profitability reflects lower operating costs, particularly for the Ocado Smart Platform direct costs which declined from 2.02% to 1.65% of installed sales capacity. Ocado also continued to tightly manage cash, reducing the underlying cash outflow by £356 million versus the prior year.

Ocado shares were 4.8% higher at the time of writing underscoring a well-received update.

“I am pleased to report good progress across the Group in 2023. Our technology is transforming the way people shop for food as we help some of the world’s best and most innovative retailers set the bar for excellence in grocery ecommerce worldwide. We opened three new state-of-the-art robotic CFCs; in Chiba city (near Tokyo) in Japan, Calgary in Canada, and Luton here in the UK and increased the amount of installed capacity for our clients by a quarter. We now have installed capacity at our retail partners for gross annual grocery sales of over £8bn,” said Tim Steiner, Chief Executive Officer, Ocado.

“Ocado Retail, our JV with M&S in the UK, has had significant success growing customer numbers, taking online grocery market share and rebuilding profitability, proving, once again, the attractions of our online model. Ocado Intelligent Automation, which brings our world-leading Automated Storage and Retrieval Systems (“ASRS”) technology, and the automation of warehouses to sectors outside of grocery, signed its first deal with pharmaceutical giant McKesson in Canada.”

Avacta shares sank on Thursday after the healthcare therapeutics and diagnostics company announced a heavily discounted placing.

Avacta raised £25.7m via a placing at 50p, a 34% discount to the closing price on 27th February. The company has secured funds from new and existing investors, including high-quality institutions and a European specialist healthcare fund.

Retail investors were able to partake in the fundraise through a REX retail offering.

Avacta shares were 30% lower at 52p in early trade on Thursday.

Avacta said it plans to use the majority of the proceeds from the placing to fund expansion of clinical trials and Phase 2 efficacy studies for its lead drug candidate AVA6000. The new funding will also provide working capital through the end of 2025.

AVA6000 is a modified form of the chemotherapy drug doxorubicin, designed to target tumors more precisely. The dose expansion trials are expected to begin in the second half of 2024 in the United States, followed by a Phase 2 efficacy study pending FDA approval. The trials will focus on treating rare cancers such as soft tissue sarcomas.

“Under very challenging market conditions we have raised financing that allows Avacta to progress at full speed its lead pre|CISION? targeted chemotherapy, AVA6000, into the expansion and Phase 2 efficacy studies. The emerging clinical data from the Phase 1 safety study strongly supports our belief that pre|CISION can change the way in which cancer is treated and we are pleased that we are now in a position to also progress the broader pre|CISION pipeline,” said Alastair Smith, Chief Executive Officer of Avacta Group.

In 2022, Avacta raised approximately £64m to fund the M&A-driven expansion of its Diagnostics division it now says it is seeking to divest in a way that maximises shareholder value.

On Wednesday, the FTSE 100 was firmly in the red as concerns about the UK and Chinese property markets dragged on the index. Sharp declines for St James’s Place and Reckitt Benckiser compounded negative sentiment.

The FTSE 100 was down 0.65% at the time of writing.

“Housing woes are front and centre today as investors reflect on the difficulties of UK housebuilders and a deepening property crisis in China. The FTSE 100 has been on the back foot in early trade, with little to ignite a wave of buying, as investors also await a key inflation report stateside,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown

“Housebuilder Taylor Wimpey has underlined the pressure high borrowing costs have put on sales rates, while inflationary winds have whipped up costs.  Shares fell in early trade as investors digested the 49% plunge in annual profits but also the prospect of clouds staying low over the housing sector in the coming months. The outlook has disappointed with the company expecting a further fall in completed home sales and the squeeze on profit margins continuing.”

Taylor Wimpey shares were down 2.2%, dragging Persimmon 1.4% lower with them.

However, the major weight on the index was China’s property market. Miners fell as further bad news from the world’s second-largest economy cast doubt over the demand for natural resources.

“China’s property house of cards has wobbled again as the woes of another huge real estate developer Country Garden come into sharp focus. A liquidation petition has been filed against it in Hong Kong by one of its creditors, Ever Credit Limited. The development threatens to reignite concerns about the fragility of the sector and cast doubt on efforts made by authorities to shore it up and stop contagion,” Streeter said.

Anglo American was down 2% and Rio Tinto dropped 0.8%.

St James’s Place and Reckitt Benckiser

Following the release of full-year results, St James’s Place and Reckitt Benckiser were the biggest fallers on Wednesday.

St James’s Place cut its dividend after recording a £426m provision for increasing complaints. The wealth manager’s assets under management grew, but investors were clearly distraught with the dividend slashing. St James’s Place shares were down 28% at the time of writing.

Reckitt Benckiser shares fell 11% after announcing revenue that missed expectations. Higher costs and lower sales resulted in materially lower operating margins. Volumes fell as customers shunned the group’s premium brands in favour of budget options amid the cost of living crisis.

St. James’s Place is a shell of its former self. The business model that enriched the company with high fees for managing individuals’ wealth has come crashing down around them, culminating in a dividend cut and a loss for 2023.

Today, the company issued its results for the year ending 31 December 2023, highlighting the impact of £426m redress provisions, which have entirely wiped out profits after tax.

St. James’s Place shares were down 28% at the time of writing and, at 442p, are worth around 25% of the stock’s all-time highs.

The company has set aside a substantial amount for customer complaints as regulatory pressure increases on high fees and the quality of advice services.

In the context of the FCA’s push to improve outcomes for retail investors, St. James’s Place’s struggles as a business represent a fairer and better value wealth management market for UK savers.

St. James’s Place has been criticised for unfair charges, including prohibitive exit fees.

Wealth firms have been found to fail customers in terms of ongoing customer service, and this accounts for a large proportion of the redress set aside by the company today.

“The Cash result for the year of £68.7 million (2022: £410.1 million) has been significantly impacted by an assessment into the evidencing and delivery of historic ongoing servicing and the provision we have established for potential client refunds,” said Mark FitzPatrick, Chief Executive Officer.

“This work was undertaken following a significant increase in complaints, particularly in the latter part of 2023, mostly linked to the delivery of ongoing servicing.”

The post-tax Cash result of just £68.7 million was significantly impacted by a one-off £426.0 million pre-tax provision for potential client refunds related to historical service evidencing and delivery.

Net inflows fell to £5.1bn as assets under management grew to £168bn compared to £148bn in 2022 due to higher asset prices. The problem for St. James’s Place is the level of fees they will able to generate from assets under management in the future.

A major blow for investors is the slashing of dividends.

SJP has declared a final dividend of 8p per share, bringing the total dividend for 2023 to 23.83p per share. This is down from 52.78p in 2023.

In the future, SJP has revised its dividend policy to set total annual shareholder distributions at 50% of the full-year Underlying cash result. Such a policy will likely lead to much lower dividends on an ongoing basis.

Reckitt Benckiser’s 2023 full-year results are a blow to investors. Expectations were conservative, yet the company missed revenue guidance, and shares fell accordingly.

The company was expected to generate £14.75bn revenue in 2023. However, the impact of the cost-of-living crisis meant the owner of brands including Strepsils, Nurofen, Durex, and Dettol, only brought in £14.61bn.

In percentage terms, the miss wasn’t amazingly drastic, but this is a low-margin business reliant on high volumes.

The impact of higher input costs and lower-than-expected revenues devastated operating margins which fell by 5.2% to 17.3%. Diluted EPS fell 29.6%.

“Shareholders of Reckitt Benckiser will be disappointed with this morning’s Q4 earnings update, as the consumer goods retailer missed net sales expectations for the period, citing weakness in cold and flu season products, managing only minimal net revenue growth of 3.5%,” said Mark Crouch, analyst at investment platform eToro.

Reckitt Benckiser shares were 10% lower at the time of writing and were approaching the lows of the pandemic.

The company has been seen as a safe haven traditionally but Reckitt’s is rapidly losing this categorisation as consumers shun expensive brands in the face of rising prices.

The pricing gap between budget options and Reckitt’s premium offering is growing while the perception of quality is narrowing. This is a big problem for a company that needs growing sales to support profitability.

“So much for the idea that big brand owners are bulletproof during periods of higher inflation. It’s clear from industry trends that cash-strapped consumers have shifted to cheaper alternatives including supermarket own-brand items,” said Russ Mould, investment director at AJ Bell.

“As the owner of a large portfolio of well-known brands, Reckitt has found life a lot tougher and its latest results suggest its pricing power isn’t as strong as some people thought. The idea that it can keep pushing up prices without damaging demand has gone out the window as its fourth quarter numbers are truly miserable. It looks like people are voting with their feet and going for the cheaper option.

“Reckitt’s results are plagued by a multitude of problems. Sales volumes fell 4.3% in the fourth quarter which is a worrying sign for the company. It reported declining health sales, a big drop in nutrition revenue and revealed that some employees had been up to no good with regards to accounting issues in the Middle East. For a company that was once seen as an industry leader, Reckitt has been a big disappointment in recent years and the latest results keep that theme going.”

Taylor Wimpey shares were firmly lower on Tuesday after the housebuilder announced 2023FY results and said the first half of the current year would see lower margins due to pricing pressure.

Against the backdrop of rising mortgage rates and a cost of living crisis, Taylor Wimpey’s revenue fell 20% to £3.5bn, and operating profit sank 49% to £70m.

“Taylor Wimpey’s put in a relatively resilient showing given the difficult market conditions of 2023. Full-year operating profits came in at the top end of group guidance, but this still represents a roughly 50% fall from the prior year’s levels,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

Taylor Wimpey shares were down 3.5% at the time of writing.

Investors will hope the worst conditions of the current UK housing market cycle are behind us, with mortgage rates showing signs of improvement and early signs of buyer interest picking up.

Indeed, the company is confident 2024 will generate a similar level of completions as 2023. Taylor Wimpey is targeting the completion of 9.5k to 10k homes in 2024 which is only marginally lower than the 10,766 homes completed in 2023.

“A combination of real house price declines and lower mortgage rates have helped to ease some of the affordability pressures for buyers since the beginning of 2023, and these trends appear to have carried into the new year. According to Rightmove, the first six weeks of 2024 saw a 7% increase in buyer enquiries year-on-year,” Chiekrie said.

Although there are some indications of improvement, the slowdown in the UK housing market last year was material, and we are not entirely out of the woods in terms of higher mortgage rates, with many lenders increasing rates in recent days.

The drop in the share price today will reflect not only the cloudy outlook for the market but uncertainties around a CMA investigation announced within a week, which could curtail margins further.

Despite the gloomy reaction in shares today, there may be positive developments for Taylor Wimpey at next week’s budget. Reports suggest the UK government could be looking at 99% mortgages – a measure that will surely fire up demand for new homes.

“The potential introduction of a 99% mortgage is a significant boom for the housing market, particularly since many of Taylor Wimpey’s buyers are first-time buyers,” said Yanmei Tang, Analyst at Third Bridge.

The FTSE 100 lacked direction on Tuesday as positive sounds from China helped support mining companies, but a disappointing update from Croda and weakness in Imperial Brands acted as a counterweight.

London’s leading index traded in a remarkably tight range of around 20 points on Tuesday, with little fresh news to fire traders up.

“The FTSE 100 ticked higher on Tuesday, despite modest losses on Wall Street overnight, as markets found a moment of calm after a series of big macro-economic and corporate announcements,” said AJ Bell head of financial analysis Danni Hewson.

“Mining companies did a lot of heavy lifting for the index, as leading commodities consumer China took steps to bolster confidence in its currency and economy ahead of a big leadership summit which kicks off in Beijing in early March.”

Anglo American was the top gainer, with a rise of 2.5%, while Antofagasta added 1.7%. The promise of measures by China to support its economy is starting to wear thin, and the gains in miners failed to spark a substantial FTSE 100 rally.

The benign trading conditions may not last long. Big US economic data points due for release later this week may provide insight into how the Federal Reserve approaches its next interest rate decisions and spur positioning in equity markets.

“Later tonight a reading of US consumer confidence starts the gun on some big releases across the Atlantic. These could offer insight on whether a soft landing can be engineered for the US economy,” said Danni Hewson.

“The latest estimate of fourth quarter GDP follows on Wednesday, and on Thursday the core PCE reading of inflation is published. This metric is closely followed by the Federal Reserve when it comes to making decisions on interest rates.”

Imperial Brands

Threats of a vaping tax hit, reported by the Times, hit Imperial Brands on Tuesday, sending the shares 3.5% lower. Vapes are taxed differently from tobacco products, and reports suggest this could change in next week’s budget.

Imperial Brands has made a big push in vaping products and is much more exposed than peer British American Tobacco, whose shares fell only 0.25%.

“Although the industry is jostling for position in the vaping market, given the volumes declines in tobacco, these products are still a relatively small part of the picture. Investors had also been expecting greater regulation in the sector, so a potential increase in tax isn’t a wild surprise and given they are global companies a change in UK fiscal policy won’t move the dial too much,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

Croda was the FTSE 100’s biggest casualty after reporting an 18% decline in sales in 2023. Croda was down 5% at the time of writing.