Lloyds shares were weaker in early trade Thursday despite announcing a fresh £2bn share buyback and Q4 profit before tax coming in higher than analyst estimates.

However, early disappointment diminished as a fairly sizeable share buyback provided the desired effect on Lloyds shares on Thursday. Lloyds performed well during the last quarter with Q4 profit before tax coming in at £1.8bn compared to a £1.7bn analyst consensus.

While underlying performance was strong, bad memories of provisions related to wrongdoing dominated the Lloyds share price in early trade Thursday as the company set aside £450m in provisions for a motor financing probe by the FCA.

“Lloyds delivered a decent set of results and a confident medium-term outlook. Striping out the £450mn provision, set aside as a buffer for any incoming charges from the FCA review into motor financing, and profit before tax was a decent beat. That was driven almost entirely by a release of credit impairments back into the profit line with better economic assumptions and a single-name creditor paying back a hefty chunk of debt,” said Matt Britzman, equity analyst, Hargreaves Lansdown.

“On the FCA review, the £450mn provision was less than some had feared but there will be question marks around how Lloyds has come to that figure. Lloyds has been honest in saying the outcome of the review is largely unknown. What we do know is that Lloyds is one of the more exposed banks should the FCA deem there was misconduct and customer loss.”

Concerns about future provisions and the potential amount Lloyds will be liable for may be a factor weighing on Lloyd’s share price today. Lloyds shares were down 2% before reversing losses to trade 2% higher at the time of writing.

It is not too long ago that each quarterly update from Lloyds and other UK banks was poured over for how much they were forced to set aside for PPI claims.

After the financial crisis, the PPI saga rocked UK banking valuations and the sector has never fully recovered. The sector trades below the FTSE 100 average PE Ratio and individual banks are valued well beneath book value.

Although today’s £450m provision was less than it could have been, investors will fear further provisions in the coming quarters and this seems to be offsetting any positivity around buybacks or higher profits.

Notwithstanding provisions for motoring financing, Lloyds had a relatively good quarter. Net interest margins met guidance as underlying net interest income rose 5% to £13.8 billion.

There were ten companies that left AIM in January 2024, while SigmaRoc (LON: SRC) was readmitted after its acquisition from CRH. The only new admission was AdvancedAdvT (LON: ADVT), which moved from the standard list.  Four companies were taken over, two chose to leave, three left after a lengthy suspension of trading and one was in financial difficulties.

4 January

Petroneft Resources

Russia-focused oil and gas company Petroneft Resources was trying to sell its oil and gas interests and wind up the company. There was a deal to sell the assets to chief executive Pavel Tetyakov, but the Russian authorities had not approved this by the time of the AIM cancellation. The cash will be used repay loans, settle creditors and pay staff before gaining shareholder approval to wind up the company.  

The company did not find an auditor for its 2022 accounts and trading in the shares was suspended on 4 July. The quotation was cancelled after a six-month suspension period.

The final share price was 0.085p. The issue price on 27 September 2006 was 19.8p, which valued the company at £35m.

5 January

Real Good Food

Food ingredients supplier Real Good Food was in financial difficulties for more than six years following the discovery of problems with past accounts relating to inter-company trading and consolidation. This led to disposals to keep the company afloat. Last November, Rainbow Dust Colours was sold for more than its asset value and there was a strategic review of the remaining Renshaw ingredients business, which was trading poorly.

Trading in the shares was suspended on 29 November 2023. An administrator was appointed at the beginning of December 2023, and the remaining assets sold to British Bakels. Cavendish resigned as nominated adviser.

Real Good Food joined AIM on 29 September 2003 at an issue price of 110p, which valued it at £5.7m. A reverse takeover on 14 May 2004, valued the company at £19.2m and another reverse takeover on 31 August 2005, valued the company at £72.8m.

8 January

Online Blockchain

Beaumont Cornish resigned as nominated adviser to Online Blockchain, and this left one month to find a replacement, which did not happen. Online Blockchain was known as On-Line when it joined AIM on 18 December 1996. The issue price was 100p. Trading in the shares was suspended on 6 December at 15.5p/share. The website is www.onlineblockchain.io.

The move into the blockchain and AI technology sector as an investor and adviser led to a soaring share price, but it has been declining since early 2021. One of the products is Synthia, an AI whole-life assistant. This includes setting up meetings, checking information and creating images.

A stake in ADVFN (LON: AFN) was reduced last November and Online Blockchain retains 3.1 million shares that are equivalent to 6% of the financial information provider. That is worth just over £300,000 at the current ADVFN share price of 12p.

8 January

Tintra

Fintech business Tintra gained shareholder approval for the cancellation of its AIM quotation. Allenby previously resigned as nominated adviser and broker and trading in the shares was suspended at 32.5p.

Management believed that the share price was too low and that made it difficult to rase cash. It says that costs can be reduced by £505,000 by leaving AIM, which is ridiculously high for a company of this size, and it is strange that the management has let them get out of control. That is before any indirect cost.

A Middle East investor may become a partner after the AIM cancellation and there is talk of a Middle East listing.

Trading in the shares had been suspended at the end of July and it subsequently received a bid approach at 150p/share, which was double the market price, but nothing came of that.

JP Jenkins is providing a matched bargain facility, although the minimum bid price is apparently going to be set at 150p/share for the first nine months so there is unlikely to be much trading.

Originally known as Weather Lottery, the company was introduced to AIM on 13 September 2006. After a subsequent 1,000-for-one share consolidation the initial share price was the equivalent of 9000p. The lottery business was not a success and the company tried other activities and was variously known as Boxhill Technologies and St James House.

Tintra won the best performing share award at the 2022 AIM Awards. There was a 310% increase in the 12 months to the end of July 2022, although much of that rise came at the end of the period when a scaling up of the financial technology business was announced.

12 January

Holders Technology

PCB materials and lighting control systems supplier Holders Technology launched a tender offer prior to the cancellation of the AIM quotation and acquired 2.145 million shares at 43p/share, leaving 2.08 million in issue. Management was keen to reduce ongoing costs that outweighed the benefit of being on AIM.

In the year to November 2022, revenues declined from £12.4m to £8.32m and the business swung into loss. There was also an interim loss even though there was a recovery in revenues. At the end of May 2023, NAV was £3.6m (85p/share), including net cash of £1.81m.

Holders Technology transferred from the Main Market on 8 October 2001 when the share price was 52.5p. The final share price was 50.5p.

18 January

Rotala

A bid vehicle backed by its chief executive Simon Dunn offered 63.5p/share in cash for bus operator Rotala, which valued it at £23.5m. There was a lack of liquidity in the shares as well as a lack of institutional investment. Management believed that Rotala would be better suited as a private company.

Revenues reached £85m in the year to November 2022. In February 2023, a £10m tender offer at 55p/share was oversubscribed. Last July, the Bolton bus depot was sold for £30.4m. Prior to that net debt was £45m.

Rotala was floated by Durlacher as a shell on 29 March 2005. The issue price was 4p. A reverse takeover was achieved on 30 August 2005 at 6.5p/share. In all, 20 acquisitions were made in 18 years.

18 January

Unbound Group

Unibound Group was originally Electra Private Equity, which moved from the Main Market to AIM. All the businesses were sold or demerged other than the Hotter Shoes comfort-based footwear manufacturer. There was a direct to consumer model, although it still had some retail stores. Hotter had a large database of customers, but trading conditions were tough.

In 2022, Unbound raised £3.3m at a discounted price of 15p. An open offer could have raised up to £1m more but ended up generating £134,000. This fundraising hit the share price and it did not prove to be sufficient cash.

A proposal from Marwyn Investment Management to inject £10m into the business at a placing price of 10.5p did not go ahead. Cost savings came too late as trading got worse.

On 19 July, trading in the shares was suspended at 0.75p because the accounts were not going to be published in time. The main subsidiary was sold by its administrator to WoolOvers for £6.7m in cash, which will go to the creditors of the subsidiary. Unbound had creditors of £900,000 and it has some investments to offset against this. It is uncertain what might be left for investors.

The company moved to AIM on 1 February 2021 and the introduction price was 54.6p. In July 2023, Richard Bernstein subscribed £65,000 at 1p/share. There is hope that a reverse takeover could still be achieved.

18 January

Velocys

Velocys did not meet the conditions for the $15m strategic investment from Carbon Direct Capital Management that would have enabled it to remain independent and develop its renewable fuel projects. The sustainable fuel developer needed to raise an additional $40m, including $8m it had already raised, and management found it difficult to secure investors.

Velocys needed more cash before the end of 2023. A consortium including Lightrock, Carbon Direct, GenZero and Kibo Investments bid 0.25p/share, which valued Velocys at £4.1m.

The bidders have pledged to invest £31.5m in the business. There is a significant market opportunity in sustainable aircraft fuel. Velocys has Fischer-Tropsch reactor technology suitable for this area.

Velocys started out as Oxford Catalysts, a spin-off from IP Group. It joined AIM on 26 April 2006 at an issue price of 174p. There was a reverse takeover on 20 November 2008 with a share issue at 125p.

26 January

Hotel Chocolat

Hotel Chocolat recommended a 375p/share bid from Mars, nearly treble the previous market price. That valued the chocolate company at £534m. The share price had not been that high for 18 months.

Mars is keen to help Hotel Chocolat expand into new regions. The track record of international expansion by the company has been mixed and it will help to have the backing of a larger company with greater resources.

Shareholders could accept an alternative offer of one rollover share in the bid vehicle for each share. The value of these shares will be dependent on the performance of the business, and this would be taking a risk.

Trading was strong during Covid lockdowns as online revenues soared. However, revenues subsequently declined, and the company fell into loss.

Hotel Chocolat joined AIM on 10 May 2016 at a placing price of 148p. The company was founded in 1993 and has 131 stores in the UK and 21 stores in Japan, as well as its own cacao farm in St Lucia.

30 January

DX (Group)

Freight and parcel delivery company DX agreed a 47.5p/share bid from HIG European Capital Partners, which valued the freight and parcels company at £315m, after the payment of a final dividend of 1p/share. Net cash was £37.6m and the business is cash generative.

DX, which was previously private equity-backed, joined AIM on 27 February 2014 at 100p/share. The business ran into problems and the share price slumped. An attempt to merge with the distribution division of John Menzies fell through because of shareholder disapproval. Gatemore Capital Management took a significant stake and put in a new management team that turned DX around.  

Profit was steadily improving, but there were problems with corporate governance that led to a nine-month suspension of trading in the shares and the subsequent departure of most of the management team, excluding the finance director, that had put the improvement in place. Despite this, the performance did not appear to be significantly affected and profit continues to grow as does the cash pile.

The FTSE 100 was trading in the red on Wednesday as investors reacted to HSBC results and braced for Nvidia results, which will be released after the US close.

The FTSE 100 was trading down 0.75% at the time of writing.

Stock-specific considerations were driving trade on Wednesday. HSBC weighed on the FTSE100 index after profits fell in Q4 due to impairment charges, and the company issued mixed guidance for the year ahead.

“If there was an award for simple and clean results then HSBC would get the booby prize. There’s a lot to unpack here, with the fourth quarter alone impacted by two major impairments: a $3bn write-down in the value of BoCom (Chinese bank) and a $2bn write-down from the sale of its French operation. Backing out a lot of the mess, it looks like performance was a little worse than expected with higher operating costs more than offsetting slightly better impairments,” said Matt Britzman, equity analyst, Hargreaves Lansdown.

As the FTSE 100’s third-largest constituent by market cap, the 9% drop in HSBC shares erased many points from the FTSE 100 on Wednesday.

Rio Tinto & Glencore

Miners were under pressure on Wednesday after Rio Tinto and Glencore issued disappointing results following a year of depressed commodity prices. Glencore slashed its dividend while Rio Tinto increased the final dividend, but the full-year dividend will still be lower than last year’s.

Profits were falling across the two miners, and cash generation was lower due to a slowdown in China and falling demand for natural resources.

Nvidia

Nvidia’s results after the US close tonight could prove to be the most explosive event of the day.

Whether they hold Nvidia or not, investors will be preparing for the chipmaker’s results tonight for evidence of sustained momentum in AI that has dominated markets over the past year.

“While equities have run out of steam in recent days, Nvidia’s results could be make or break time for markets,” said Danni Hewson, head of financial analysis at AJ Bell.

“Elevated expectations mean the chip specialist has no room for error. It needs to smash it out of the park and show that the AI boom still has momentum.

“Last time round it spooked investors with a warning about a slowdown in Asian sales linked to export restrictions. While that factor should have already been priced in by the market, there is still a chance some investors will have forgotten about the headwinds and get spooked by any weakness in that part of its results. Supply issues could also be a pinch-point for the business if the AI boom has intensified, although there have been suggestions by investment bank analysts that lead times are shortening.”

If Nvidia doesn’t satisfy investors’ expectations this evening, European stocks could open deep in the red tomorrow.

Rio Tinto shares were marginally lower on Wednesday after the diversified miner said profits and cash generation fell in 2023 due to lower commodity prices.

Cash generated from operating activities fell 6% to $15.1bn in 2023 compared to 2022 and free cash flow sank 15% to $7.6bn. It’s worth bearing in mind Rio Tinto and other miners are highly cyclical and earnings fluctuate significantly year-to-year. Rio Tinto generated $25.1bn in cash from operations in 2021.

EPS fell 12% to 725 cents per share in 2023 while increasing copper production by 3%, highlighting how metal prices dictate earnings.

The impact of ongoing disruption in the Chinese economy was the main culprit, as lower demand for raw materials weighed on commodity prices.

Lower profits inevitably led to lower dividends for the full year, but only marginally. Rio Tinto paid out $7.1bn in dividends, equating to 435 cents per share, which still makes the miner a serious income play. The company has a 60% payout policy.

Despite slowing profitability, analysts remained positive on Rio Tinto shares citing its low valuation on an earnings basis and very respectable dividend yield.

“Rio Tinto delivered another solid operational performance in the 2023, although financial results were slightly impacted by lower commodity prices. Against this backdrop, the 60% dividend pay-out ratio and maintained capex guidance reinforces our favourable view on the company’s conservative capital allocation policy,” said Andrew Duncan, Senior Equity Analyst at Killik & Co. 

“Rio Tinto shares trade on 8.1x 2024 consensus earnings estimates with an estimated ordinary dividend yield of 7.3% in 2023, and we reiterate our Buy recommendation. (Buy).”

Although lower commodity prices eroded profit over the past year, Rio Tinto remains committed to expanding its portfolio, ready for future growth when underlying prices eventually pick up.

“We are making clear progress as we shape Rio Tinto into a stronger and even more reliable company. By focusing on our four objectives, we are building a portfolio that is fit for the future – including our Oyu Tolgoi underground copper mine in Mongolia and the Simandou iron ore project in Guinea,” said Rio Tinto Chief Executive Jakob Stausholm.

“We will continue paying attractive dividends and investing in the long-term strength of our business as we grow in the materials needed for a decarbonising world.”

AIM-quoted pawnbroker H&T (LON: HAT) is acquiring the trading assets of Essex-based rival Maxcroft Securities for £11.3m. The share price is 3.4%n higher at 382.5p.

Maxcroft has a store in Ilford that has been trading for four decades. The pledge book is worth £6.1m.

Maxcroft has a different client make-up to H&T because it provides working capital to the self-employed and small businesses. The average size per customer is £4,023. Maxcroft could help H&T grow these activities in its current operations.

Pricoa Private Capital is providing £25m in additional financing for the operations. There is £10m lasting until February 2029 and £15m due in February 2031. This takes total funding to £85m. Some of the new capital will be used to pay down the revolving capital facility with Lloyds.

Net debt was £31.6m at the end of 2023 and even after the acquisition there should be £30m of headroom.

BAE Systems shares were weaker on Wednesday after the defence company announced very respectable revenue and profit increases in 2023.

The company has been the beneficiary of increased defence spending globally, especially by the US, and sales rose 9% in 2023 to £25.3bn while underlying operating profit rose 9% to £2.7bn.

Despite BAE System releasing robust numbers for 2023, shares were trading down 2.5% at the time of writing on Wednesday. This is likely a result of traders booking gains in the stock, taking a ‘buy the rumour, sell the fact’ approach to BAE shares, which are up 34% over the past year amid expectations of strong defense spending.

“BAE Systems continues to move from strength to strength, with both its full-year revenue and underlying operating profits coming in ahead of its prior guidance,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

“The group manufactures heavy-duty military equipment like fighter jets, aircraft and submarines, and recent global events are keeping demand for its products strong. Despite being a UK-based company, a whopping 42% of its sales came from the US last year, making it the largest single contributor. On an absolute basis, US military spending trumps any other country in the world, so having a large exposure here is proving very beneficial and has helped the group bring in a record £37.7bn worth of orders in 2023.”

BAE Systems now has a record £69.8bn backlog driven by order intake of £37.7bn during 2023.

“The record order intake and backlog also gives the impression that there is another solid year of growth to come from the firm in 2024 and with a bump up in the dividend and more buybacks coming, shareholders will unlikely be going anywhere given the handsome returns the shares have already generated,” said Adam Vettese, market analyst at eToro.

After announcing a £1.5bn share buyback in August last year, BAE Systems increased shareholder returns by hiking the dividend by 11.1% to 30p for the full year.

At the current share price of 1,222p, BAE Systems’ dividend yields 2.4%.