United Utilities, the UK’s North-West-based water supply and treatment company, reported on Thursday that their gross debt pile has increased to over £9,148.6 million.

The company’s debt has risen by 9.1% in this half-year.

United Utilities shares had dipped margianlly by around 0.80% at the time of writing as concerns mounted about the group’s dividend.

According to Aarin Chiekrie, equity analyst at Hargreaves Lansdown, “net debt has increased but the balance sheet remains stable for now, but given the group’s ambitious £13.7bn plans to expand and upgrade its assets between 2025 and 2030, United Utilities needs to raise around £5.2bn of cash. That’ll require issuing new debt and will likely push debt levels towards the top of the group’s target range, potentially putting pressure on the group’s generous dividend yield.”

United Utilities’ half-year underlying revenue rose by 6.8% and underlying operating profit grew by 4.9%, to £271.1 million.

Chiekrie further stated that, “inflationary pressures are having an even larger impact on costs, particularly power, labour and chemical costs, meaning profits are growing at a slightly slower rate.”

However adding that, ” United Utilities is on track to deliver its best-ever year in terms of customer outcome delivery incentives, which are effectively bonuses for delivering above and beyond their committed levels of service to customers, which should help offset some of these higher costs”.

Interim dividends are set at 16.59 pence, an increase on last year’s interim dividend of 15.17 pence.

Overflows and ambitious growth targets

The UK’s growing vulnerability to extreme weather events has also affected the company. United Utilities wrote that higher levels of rainfall and storms caused a rapid decline in sewer flooding performance in the first half of the year.

Spills, leaks, and overflows are the water company’s worst enemy and have led to higher costs.

In the first half-year, the company came up with a detailed leak response programme. The goal is to be able to monitor 100% of overflows, the company states.

The company, whose water-provision-based services reach over 350.000 customers in the North-West, further announced that they will continue to stay on track to reach a 4-star rating from the Environmental Protection Agency (EPA) by the end of 2023.

The company recently announced £13.7 billion total expenditure across 2025-30 to help improve its infrastructure.

Burberry shares were down over 9% at the time of writing on the news the ongoing slowdown in the luxury sector had knocked the group’s sales.

The company’s Q2 report, published on Thursday, highlights that, due to more challenging trading conditions, Burberry now expects revenue for the year to fall short of its prior expectations and profits to be at the lower end of consensus expectations.

Like-for-like sales, however, saw a robust 10% rise in the first half, yet the growth decelerated notably in the second quarter, recording a modest 1% increase.

Despite concerns around sales, dividends were increased to 18.3p per share from 16.5p last year.

Due to tougher trading conditions, Burberry anticipates that annual revenue will be below its previous projections, with profits expected to be in the lower range of consensus expectations.

According to Charlie Huggings, Manager of the Quality Shares Portfolio at Wealth Club, Burberry’s slowdown in growth “is not a great surprise. Having splurged on luxury goods in the wake of the pandemic, wealthier consumers are now tightening their belts, meaning the whole sector is starting to feel the pinch,”, he stated.

The report states that in the second quarter, comparable store sales rose by 1%, driven by a 10% increase in EMEIA, a 2% increase in Asia Pacific, and a 10% decrease in the Americas.

According to Huggings, “this reflects a combination of weaker trading conditions and historically weak operational execution in the region. Improving performance here is a key priority for the new CEO, Jonathan Akeroyd, and it will take time to judge. For now, though, it remains a problem, child.”

Adding that, “while the long-term outlook for the luxury sector remains positive, trading conditions are tough right now and appear to be getting tougher. This means the near-term outlook for Burberry and its peers is murky at best.”

Sophie Lund-Yates from Hargreaves Lansdown shared this opinion by commenting that “Burberry has done pretty much all it can to place itself in a better position, both operationally and creatively. The issue is that while it’s a slicker and bolder beast, Burberry is currently residing in a hostile environment outside of its control.”

Colder weather aided Burberry’s sales, as outerwear sales were up 10% in Q2. Leather item sales were up by 3%.

Hotel Chocolat Group have announced that they have reached an agreement on the terms of a recommended £534m cash acquisition by Mars.

Under the terms of the acquisition, each Hotel Chocolat shareholder will receive 375p in cash.

The Cash Offer represents a bumper premium of approximately 169% to Hotel Chocolat’s share price of 139p yesterday. Hotel Chocolat shares were 162% higher at 365p at the time of writing.

The bid has taken Hotel Chocolat shares back to a level not seen since mid-2022.

Mars said it has long admired Hotel Chocolat’s credentials as a contemporary, premium brand with high-quality products and strong direct-to-consumer capabilities.

Hotel Chocolat recently released full-year results revealing a 10% decline in revenue and a sharp drop in EBITDA.

Mars considers itself well-positioned to support Hotel Chocolat’s next growth phase, providing an enhanced platform for UK and potential international growth. The chocolate giant believes it can provide Hotel Chocolat with better access to long-term capital and a supportive environment to achieve its strategic objectives.

Lazard and Liberum are advising Hotel Chocolat on the deal

Red Rock Resources shares whipsawed on Thursday after the company announced it had begun shipping lithium earlier in the week.

In a release issued on Wednesday, Red Rock said they had begun shipping lithium from Zimbabwe to a port in Mozambique, adding they had 200 tonnes ready to be shipped. 

However, the update lacked any major details, and investors dumped shares yesterday, before the stock rebounded on Thursday.

After a 7% fall on Wednesday, Red Rock shares opened 3% lower on Thursday before rebounding.

The company announced the targeting of lithium in Zimbabwe earlier this year and revealed a series of early-stage samples from rock outcrops in the country.

Red Rock has not confirmed any sales value of the lithium currently being shipped.

Red Rock Resources has a broad portfolio of precious and base metals, lithium, and fossil fuels across Africa and Australia.

The company generated zero revenue in the most recently reported half-year and has issued new equity on numerous occasions this year.

Shares are down 60% over the past year.

The FTSE 100 soared on Wednesday as UK investors cheered a material drop in inflation, which may mark the end of the cost-of-living crisis and the interest rate tightening cycle.

UK CPI plunged to 4.6% in October from 6.7% in September. UK inflation is now less than half the 11% peak recorded last year. 

The FTSE 100 was up 0.9% in a broad risk-on rally shortly after midday on Wednesday. Gains in London followed a bumper rally in US stocks overnight after US inflation fell to 3.3%.

It is now widely accepted the Bank of England and Federal Reserve are done with their respective rate hiking cycles.

In addition, lower inflation opens the doors to rate cuts, and markets were pricing in 80bps of UK rate cuts next year on Wednesday. 

“The FTSE 100 maintained the head of steam it had built up on Tuesday afternoon as UK inflation followed yesterday’s US reading and came in below expectations,” said AJ Bell investment director Russ Mould.

“With confidence there will be no rate increases before the end of the year the market is now looking ahead to the prospect of rate cuts. Whether falls in inflation will stall and whether the Bank of England is as keen as Rishi Sunak to declare mission accomplished in the fight against rising prices remains to seen.

“What will encourage observers in Threadneedle Street is the fall in services inflation – further falls in this area could be the precursor to a pivot towards bringing rates down.

“For now, investors are in the mood to celebrate, and the prospects of a big Santa Rally are building as we head towards December.”

Equity bulls have been out in force over the past 24 hours, but investors should remain cautious about upticks in the inflation rate in the coming months, potentially souring sentiment. 

Banks and housebuilders rally

As one would expect, interest rate-sensitive sectors, including housebuilders and banks, rose on Wednesday as gilt yields fell.

Although the two UK-centric sectors displayed signs of optimism on Wednesday, the gains weren’t exuberant, suggesting the drop in inflation had already been priced into stocks.

Taylor Wimpey gained 1.5%, while Barratt Developments added 1%. Banks continued their recovery from a disappointing round of earnings, with Lloyds perking up by 1.5% and Natwest shares 3% to the good.

While interest rates may not rise again in the current hiking cycle, there are still nagging doubts about the economy and the ‘long and variable lags’ of the sharp increase in rates over the past two years. This may cap UK-focused equity gains. 

There was strength across the mining sector after China released a relatively upbeat set of industrial and consumer economic indicators.

Glencore and Anglo American were up over 4%.

Experian was the top gainer, rising 6%, after profit before tax on an actual currency basis rose 48%.

Siemens Energy is set to shake up its struggling wind business Siemens Gamesa, which has contributed to the group’s €4.6bn annual net loss, with the goal of making the division profitable.

Frankfurt-listed shares in Siemens Energy were up 5.50% and are trading at €10.73 at the time of writing.

Revenue for the fourth quarter declined 2.5% to €8.5bn due to problems at Siemens Gamesa.

The group has a €112bn backlog in orders, although new orders declined in the fourth quarter.

“In a year of unprecedented challenges for Siemens Energy, two-thirds of our businesses are on a profitable growth trajectory, meeting or exceeding their full-year targets. For our underperforming wind business all eyes must be on cost-out, selectivity and acceleration of productivity while continuously working on the remediation,” says Christian Bruch, President and CEO of Siemens Energy AG.

“The current high demand for our products also brings challenges. We are therefore very glad that after very constructive discussions, we have now found a good solution with all parties to secure our energy transition-accelerated growth.”

Wind power businesses have come under increased scrutiny in recent times after Orsted scrapped major plans for offshore US wind facilities.

Siemens Energy had to set aside €1.6bn in provisions for faulty wind plants earlier this year but made no further provisions in today’s release.