Jet2 shares descend as winter bookings slow

Eve Katz
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Jet2 shares descend as winter bookings slow

On Wednesday, airline Jet2 plc released interim results, which show that although the revenue rose in the last half-year period, bookings have slowed in recent weeks.

Jet2 shares were down 4.48% at the time of writing on Thursday and were trading at 1,080.30 p.

A major contributor to higher revenue was increased prices. The average cost of a Jet2 package holidays increased by 11%.

The net ticket yield per passenger sector for flight-only services reached £124.09, marking an 18% rise from the previous year’s £105.00.

Operating profit rose 19% to £617 million.

The company further states that there were instances when their operational performance was directly affected by various disruptions, including the NATS failure, Rhodes wildfires, and Skiathos flooding, resulting in an approximate loss of £14.0 million in profitability.

According to Russ Mould from AJ Bell, “Jet2 says it has a ‘wonderful product for challenging economic times’ but you imagine internally the company must be aware it has benefited from extreme pent-up demand in the wake of COVID, which meant people were so keen for a week in the sun they would prioritise it above almost anything else”.

Mould also added that “where Jet2 does have credit in the bank is in how it deals with customers—notably being more straightforward and decisive than rivals during the period of pandemic disruption.”

The total cash balance, which includes money market deposits, reached £3,214.6 million, marking a 14% increase from the previous year.

For the Winter 2023–24 season, despite a 21% rise in on-sale seat capacity to 4.49 million, the higher-margin per passenger package holiday mix for departing passengers has increased by 2.6 percentage points, the Jet2 report explains.

It further states that, while recent bookings have been slightly slower, average pricing remains strong.

The company’s CEO, Steve Heapy, stated that “we are pleased to have delivered another strong financial performance during the first half of the financial year, despite the well-publicised external challenges faced. This clearly demonstrates that our end-to-end package holiday is a popular and resilient product and is the right product for price-conscious customers.”

However, Russ Mould said on the topic that “Jet2 says it has a ‘wonderful product for challenging economic times’ but you imagine internally the company must be aware it has benefited from extreme pent-up demand in the wake of COVID, which meant people were so keen for a week in the sun they would prioritise it above almost anything else.”

Adding that, “An all-in package holiday, of which Jet2 is selling more and more, offers certainty on cost, but that doesn’t make it cheap”.

The Jet2 report further states that, looking ahead to summer 2024, the current seat capacity of 17.19 million seats is about 12% higher than summer 2023.

A UK Small Cap Rerate, Cadence Minerals, ECR Minerals with Alan Green

UK Investor Magazine
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A UK Small Cap Rerate, Cadence Minerals, ECR Minerals with Alan Green

Alan Green joined the UK Investor Magazine Podcast to dive into a selection of UK equities and provide scenarios for broader markets after the Autumn Statement.

This Podcast explores potential scenarios for UK markets and the catalysts for a rerating of UK mid and small caps.

We discuss Cadence Minerals (LON:KDNC) and ECR Minerals (LON:ECR).

Alan outlines the valuation case for Cadence Minerals, given the current share price and the underlying value of their portfolio of mining assets.

ECR Minerals is proceeding with a more positive tone after a change of leadership. Alan provides an update on activities.

Energy bills to rise in the UK

Eve Katz
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Energy bills to rise in the UK

Ofgem, Britain’s energy regulator, said in a statement on Thursday that the energy bills are to rise as the regulator raises the price cap by 5%.

The price cap, adjusted every quarter, establishes the maximum amount that can be charged to customers for energy bills.

For an average household using dual fuel and paying through direct debit, this means a yearly increase of £94, which is approximately £7.83 per month.

All together, given the new price cap, this adds up to £1,928.

Jonathan Brearley, CEO of Ofgem, said that “this is a difficult time for many people, and any increase in bills will be worrying. But this rise—around the levels we saw in August—is a result of the wholesale cost of gas and electricity rising, which needs to be reflected in the price that we all pay.

The current price hike was attributed to the wars in Ukraine and the Middle East, amongst other geopolitical challenges.

Nonetheless, the UK is still grappling with a degree of inflation and a cost of living crisis.

Although the inflation rate fell by 4.6% in October, some analysts attribute it to lower energy use due to a slightly warmer summer and autumn.

On Wednesday, Jeremy Hunt of the Conservatives announced 0.7% tax cuts, which will be worth £18bn of GDP.

Many were pleased with this and many other announcements. However, according to Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown,

“News that energy bills are set to rise for millions of households in January will come as a blow after the sweeteners offered by the UK government in terms of those cuts to NI tax”.

Similarly, Danni Hewson from AJ Bell said, “It’s a timely reminder that inflation might be falling, but some prices are still rising”.

The CEO, Jonathan Brearley, also said that “we are also seeing the return of choice to the market, which is a positive sign, and customers could benefit from shopping around with a range of tariffs now available offering the security of a fixed rate or a more flexible deal that tracks below the price cap”.

He advised the people to “weigh up all the information, seek independent advice from trusted sources, and consider what is most important for them, whether that’s the lowest price or the security of a fixed deal.”

Ofgem has issued updated guidelines for energy providers, emphasising the importance of giving priority to inquiries from vulnerable customers seeking assistance.

Suppliers are urged to proactively engage with households missing two monthly or one quarterly payment, assessing their financial challenges, and providing support such as affordable payment plans or potential repayment holidays if deemed suitable.

EIS & VCT sunset clause extended to 2035 in Autumn Statement

UK Investor Magazine
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EIS & VCT sunset clause extended to 2035 in Autumn Statement

The EIS and VCT sunset clause has been extended to 2035 in this week’s Autumn Statement, providing certainty for entrepreneurs and investors in young companies at the heart of the UK economy.

Venture Capital Trusts and the SEIS and EIS schemes provide vital tax incentives for private investors to invest in exciting early-stage companies.

Confirmation the sunset clause will be extended by 10 years to 2025 removes uncertainty for investors and managers, and demonstrates the government’s support for the UK’s entrepreneurs.

The tax benefits available to UK investors wishing to invest in early-stage companies are among the most generous in the world.

“It’s excellent news that the Chancellor has committed to extending VCTs’ sunset clause to 2035. This addresses an urgent issue as the sunset clause would have automatically ended VCT tax relief in April 2025. The extension to 2035 will help provide certainty to investors and businesses and enable VCTs to continue supporting UK growth companies,” said Richard Stone, Chief Executive of the Association of Investment Companies (AIC).

“VCTs play a vital role in providing funding and support to small, ambitious UK businesses, a key driver of economic growth. The AIC will continue to work with the government as the legislation passes through parliament and we hope this measure will unlock further investment.”

Shearwater heading back to profit

Andrew Hore
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Shearwater heading back to profit

Cyber security services provider Shearwater Group (LON: SWG) appears set to return to profit this year. The core software businesses have been integrated, as have two of the three consultancy businesses. The cost savings will show through in the second half.

In the six months to September 2023, revenues dipped from £10.8m to £10.5m. That was due to much lower software revenues.  Even so, gross profit improved and, stripping out amortisation and exceptionals, the underlying loss reduced £493,000 to £93,000. That is before restructuring costs.

AIM-quoted Shearwater is winning new contracts with 41 new clients signing up this year, including a UK government department. New software launches should help software revenues to rebuild.

The strong balance sheet has helped Shearwater to weather the tougher trading. The second half cash position is always higher than at the half way stage. Net cash of £5m is forecast for the end of March 2023.

Cavendish forecasts a full year turnaround from a loss of £1.3m to an underlying pre-tax profit of £1m. The share price lost 3.5p, ending the day at 45.5p. That is less than eleven times prospective earnings. There is a need for cyber security software and services and if Shearwater can continue to win business the share price should recover.

FTSE 100 dips after measured Autumn Statement.

UK Investor Magazine
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FTSE 100 dips after measured Autumn Statement.

The FTSE 100 started the day higher before sellers took the index lower through the session in the run-up to the Autumn Statement.

As we well know, past budgets have caused sharp swings in UK markets, but the raft of measures outlined by Jeremy Hunt barely moved UK equities, and bond yields remained steady.

The FTSE 100 was trading down 10 points to 7,471 at the time of writing.

The Chancellor was keen to cut taxes ahead of elections next year and delivered a cut to national insurance, and made full expensing of investment in business equipment permanent. The move allows companies to offset investment in IT and machinery against corporation tax.

The government would have been conscious of fallout in financial markets if they were too loose with tax cuts amid a downgrade to the UK’s growth forecasts.

Measures to help planning applications did little to help housebuilding shares, and news the government was considering a Natwest share sale to boost the population’s involvement in the UK equity market neither helped Natwest shares nor trading platforms such as Hargreaves Lansdown.

Taylor Wimpey was down 0.9% and Hargreaves slipped 0.8%. Natwest gave up 1.2%.

Kingfisher and Sage

The major movers on Wednesday were Kingfisher and Sage Group, who released very different trading updates and were met with very different reactions from shareholders.

Kingfisher was the top faller after saying poor weather caused a slowdown in their European business as total group revenue fell. The DIY company is suffering from lower spending after the pandemic and is facing macroeconomic headwinds. Their UK business showed strength with a minor sales increase as they increased market share.

Nonetheless, disappointment around the European business dragged shares 6% lower on Wednesday.

Sage shares surged as the software and solution company enjoyed growth across all areas, with exceptional growth in their cloud business. Sage Business Cloud revenue grew 25% to £1,628m as total group revenue increased to £2,184m.

Sage shares were 13% higher at the time of writing.

Autumn Statement highlights: ‘110 measures to help grow the British economy’

UK Investor Magazine
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Autumn Statement highlights: ‘110 measures to help grow the British economy’

The UK Chancellor has delivered an Autumn Statement that cuts the average worker’s tax by £450 per year and encourages businesses to invest in machinery and equipment.

The Chancellor started by taking credit for halving inflation, a questionable claim given the dynamics of inflationary cycles and the actions the government have actually taken.

The OBR said the measures announced today would reduce inflation but the Bank of England’s target 2% inflation won’t be met until 2025.

UK growth for next year and the year after has been downgraded substantially by the OBR. UK growth is expected to be 0.6% this year, 0.7% in 2024 and 1.4% in 2025.

Debt as a proportion of GDP will fall to 92.8% by 2029 after rising in the coming years.

Jeremy Hunt said his plans were designed for the long-term, which was met with laughter from the opposite bench. The conservatives are miles behind the polls and will do well to be in power after next Christmas.

The Chancellor also announced they were exploring a public share sales of Natwest shares and were allocating £7m to fight antisemitism. Speaking about the rise of antisemitism in the UK, he said “when it comes to antisemitism, and all forms of racism, we must never allow the clock to be turned back.” 

Housing

Reform the planning process to speed up planning applications by reimbursing local government for the costs of processing applications for larger business projects.

£450m allocated to local housing projects.

Permission for any house to be converted into two flats as long the exterior remains unchanged.

Stamp Duty on Shares

Stamp Duty relief on shares will be extended to growth markets, and the market capitalisation threshold is to be increased from £170 million to £450 million.

Matt Tickle, Chief Investment Office at independent consultancy Barnett Waddingham said:

“Hidden in the little red book is some good news which deserved to make the cut for the speech. The Chancellor is going to extend the relief from Stamp Duty on shares. It will now include smaller, innovative growth markets, as well as increase the threshold for the market capitalisation condition that is used within the exemption from £170 million to £450 million. These changes are set to be implemented from 1st January 2024.”

VCT and EIS

Government to extend the existing sunset clauses for EIS and VCT to April 2035 supporting investment into exciting early stage companies for many years to come.

Business Investment

£500m to be allocated to a fund to propel the UK’s AI sector through innovation centres and make the UK an ‘AI Powerhouse’.

£45bn to be allocated to the manufacturing sector in the years up to 2030. Money will be allocated to sectors like aerospace and life sciences.

Tax

National Insurance cut from 12% to 10%. This will reduce tax for 27 million across the UK. Someone earning £32,000 will save £450 a year.

The headline business tax cut was the making permanent of the 25% corporation tax offset businesses can claim back for investments made in plant and equipment.

75% business rates holiday for retailers and hospitality extended for an extra year.

Abolishment of Class 2 National Insurance for self-employed people, worth about £192 a year for the average self-employed person.

Benefits

National living wage increased to £11.44. This, combined with tax measures announced today, means people’s take-home pay will go up 30%.

Job seekers who haven’t found a job after 18 months will have to attend a compulsory course. Those who don’t attend will have their benefit revoked.

£10m will be made available to Veterans through mental health services.

To help the long-term sick and those with disabilities, new measures have been introduced to support working from home.

Universal Credit and other benefits are to be increased by 6.7% next year.

Pensions

The government committed to the pensions triple lock and increased pensions by 8.5% from April 2024.

“Despite some predictions that the government would look to change the way in which the State Pension Triple Lock works, by removing the effect of bonuses on the figure produced for pay increases, the Chancellor instead announced today that they would honour the Triple Lock in full,” said William Stevens, Head of Financial Planning at Killik & Co.

“This will be welcome news to pensioners, many of whom rely on the State Pension to provide the basis for their expenditure in retirement. The 8.5% increase will take the full state pension to as much as £11,502 on an annual basis. A retired couple living on the State Pension alone could therefore have as much as £23,000 per year of guaranteed income to support them in retirement.” 

Employees will have the right to ask employers to pay contributions into their existing pension pots.

Alcohol Duty

Alcohol Duty will be frozen until August 2024, taking 3p off the duty for the average pint.

AIM movers: Quadrise completes fuel trial and Plant Heath Care hit by destocking

Andrew Hore
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AIM movers: Quadrise completes fuel trial and Plant Heath Care hit by destocking

Quadrise (LON: QED) has completed the industrial demonstration MSAR and bioMSAR fuels test in Morocco. Emissions were very low when running at 100% of capacity. A technical report is being prepared for the client and a long-term commercial supply agreement will be discussed. The share price recovered 22.1% to 1.45p.

Shares in Tremor International (LON: TRMR) recovered after it announced slightly better than expected results and a $20m share buyback. The programmatic advertising reported third quarter EBITDA 4% ahead of forecasts at $21.3m on revenues 18% higher at $76.6m. Full year pre-tax profit is expected to fall by more than two-thirds to $38.3m before recovering next year. Net cash should increase to $121m. The share price improved 16.8% to 161.65p.

Lifestyle concierge services provider Ten Lifestyle (LON: TENG) has moved into profit for the first time. It swung from a loss of £2.7m to a pre-tax profit of £3.2m thanks to economies of scale. There was also a tax credit recognised due to past tax losses. Investment in its digital platform and the international spread of business is helping Ten Lifestyle. New contract wins will help to increase this year’s pre-tax profit to £3.9m, according to Singer. The share price increased 12.5% to 103.5p.

RUA Life Sciences (LON: RUA) shares are rising for the third day running following news concerning potential contracts for the manufacturing business and progress with development and testing of heart valve and vascular products. Cash is being conserved and a partner is being sought to help fund the £6m cost of regulatory testing of the vascular product in the US. The share price rose another 8% to 40.5p.

FALLERS

Plant Health Care (LON: PHC) says deteriorating agriculture market conditions have hampered growth. There is destocking in the agrichemical market. Full year revenues are likely to be flat, which is a relatively good performance when compared with the sector. Revenue expectations for 2024 have been cut by 28% to $16.6m – a 38% increase on 2023 revenues – and it should still make a modest profit. The share price slumped 31.6% to 3.97p.

Promotional products services provider Pebble Group (LON: PEBB) admits that full year revenues will decline from £134m to £124m and EBITDA is likely to fall from £18m to £16m. Net cash should be at least £15.1m at the end of 2023. Digital commerce platform Facilisgroup has improved revenues, but promotional products supplier BrandAddition has been hit by weaker demand from technology and consumer clients. The share price dived 31.4% to a new low of 60p.

Parity (LON: PTY) announced the sale of its remaining business yesterday afternoon. It will become a cash shell. Parity will receive up to £3m depending on working capital adjustments for recruitment business Parity Professionals. The deal costs will be £240,000. There will be £639,000 including costs spent to settle the pension liability and finance the search for an alternative business. The company will change its name to Partway. The share price has declined 23.5% to 1.3p.

GreenRoc Mining (LON: GROC) has raised £461,000 at 2.5p/share to complete the feasibility study on the graphite anode process plant and environmental studies for the Amitsoq graphite mine in Greenland. The plan is to develop a vertically integrated mining and processing operation.  The share price slipped 23.9% to 2.55p, which is a new low.

Floorcoverings manufacturer Victoria (LON: VCP) reported interims in line with expectations but warned that the second half was likely to be tougher. There was a dip in interim EBITDA from £100.1m to £95.8m on lower revenues. North America was the one region where profitability improved. There are cost savings to come, but the weaker markets will offset some of this benefit. Singer forecasts a decline in full year pre-tax profit from £76.9m to £60.5m. The share price fell 21.2% to 238p.

LXi REIT to sell 66 Travelodge hotels

Eve Katz
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0
LXi REIT to sell 66 Travelodge hotels

On Wednesday, the LXi REIT confirmed that it was planning to sell 66 Travelodge hotels in response to recent press speculation.

The REIT has received an offer for the sale of 66 Travelodge hotels, totalling £210 million, in line with their current book value as of 30th September 2023.

If the sale goes through, the proceeds will be used to pay down debt, reducing the group’s loan-to-value ratio from 38% to 34%.

The company further addresses the fact that this would also decrease the portion of the total rent roll contributed by Travelodge from 18% to 11%. 

It’s important to note that the sale is subject to contract and due diligence, and there’s no guarantee it will be finalised.

Kingfisher Q3 results disappoint 

Eve Katz
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Kingfisher Q3 results disappoint 

UK-based DIY retailer Kingfisher reported their Q3 results on Wednesday, which show a major decline in sales across almost all countries where the retailer operates. 

Shares fell over 5% in early trade on Wednesday as the company blamed poor weather for the slow results.

“The problem seems to be unseasonably warm temperatures dampening demand for insulation and heating products. Blaming the weather never goes down well with the market,” said AJ Bell’s Russ Mould.

In Q3, sales amounted to £3.2 billion, with a total sales decrease of -2.1% (reported) and -2.7% (constant currency). 

Like-for-like (LFL) sales experienced a -3.9% decline, including a -0.4% calendar impact. However, the company said overall volumes are showing signs of improvement.

Furthermore, data shows that retail and trade consumer trends remained resilient in the UK. 

France was the major weak spot for Kingfisher with sales crumbling in Q3. In France, sales were down 8.7% at reported currency and 8.5% at constant currency rates.

According to the CEO Thierry Garnier,” In France, our performance was impacted by a weak retail market, as well as a delayed start to insulation, plumbing and heating sales – to which Brico Dépôt is more heavily weighted – due to unusually warm autumn weather, and strong prior year comparatives in these categories.”

Sales in Poland were up 2.9% at reported currency and 7.5% at constant currency.  

Garnier commented on this by saying that “In Poland we are seeing early signs of recovery in the trading trend, against an incrementally more positive consumer and economic backdrop.”

Thierry Garnier further added that, ““We continue to focus on our execution and driving our strategy forward. Our online marketplaces are growing rapidly, with B&Q’s marketplace reaching 35% of its e-commerce sales in October.”

Adding that, “Screwfix has continued its international expansion, by launching as a pure- play online retailer in six new European countries, and opening four new stores in France in the quarter. We also continue to harness AI and data to support sales, profit and cash, including by growing our retail media proposition across the Group.”

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