Wood Group shares ticked higher on Tuesday after releasing an upbeat first half-year report that reflects favourable trading conditions.

Revenue rose 16% to $3bn and adjusted EBITDA rose 8.5% to $202m. Wood Group enjoyed growth across all business units including their sustainable business which saw revenue jump 20%.

The strong performance in the first half of the year gave Wood Group the confidence to increase their guidance for EBITDA and profit for the full year. 

“After a bid from private equity firm Apollo collapsed earlier this year Wood Group has been under pressure to deliver, and these results go some way towards doing that as it pulls the rabbit of slightly improved full year guidance out of its hat,” said AJ Bell investment director Russ Mould.

“The energy services firm has endured a difficult few years after the 2017 acquisition of Amec Foster Wheeler brought with it a whole deal of problems which the company is still addressing. These continue to act as a drag on cash flow although the situation is starting to improve.

“The main driver of the better first half performance was tight control of costs, no mean feat given how volatile the backdrop has been. Wood Group, which is a big provider of services to North Sea oil and gas firms, has a longer-term challenge of adapting to the energy transition.

“Get it right and there could be big opportunities for the company to help its client base through this process, but it needs to put its legacy problems behind it first.”

Plexus Holdings shares were flying on Tuesday after the oil and gas engineering firm said the value of a major contract rose from £5m to £8m.

Plexus Holdings were 40% higher at the time of writing on Tuesday.

Plexus is providing its POS-GRIP “HG” wellhead equipment on a rental basis for use in a subsea environment.

“I am pleased to be able to announce the additional revenue attributable to this important bespoke solution contract,” said Ben van Bilderbeek Plexus’ CEO.

“Using innovative technologies, like ours, oil and gas companies and operators can transform the industry for the better, particularly in relation to reducing methane emissions and meeting Net Zero goals as part of the global energy transition cycle.  This is pivotal as governments across the world strive for energy independence, and more recently in the UK, with the news that hundreds of new oil and gas licenses will be granted in the North Sea.

“Common sense seems to have finally arrived with the realisation that it is far more damaging to the environment to ship oil, and in particular LNG, across the world by tankers than it is to produce local pipeline gas and oil. Indeed, it is reported that LNG sourced from afar is up to x10 more CO2 intensive than local North Sea gas. We are encouraged by the increased interest in our POS-GRIP technology and look forward to updating shareholders on our continued progress.”

The FTSE 100 was hanging on to gains on Monday afternoon after a rambunctious start to the trading week. The FTSE 100 surged in early trade before the rally faded into the afternoon.

The index was 0.15% higher at 7,270 shortly after 2pm in London. The FTSE 100 had touched highs of 7,317 earlier in the session.

Investors will be preparing for a raft of PMI manufacturing data and the Jackson Hole Symposium later this week.

“The FTSE 100 ticked higher on Monday despite an initially lukewarm reaction to Chinese policy measures aimed at righting a listing economy,” said AJ Bell investment director Russ Mould.

“Rate cuts did not go as far as anticipated but nonetheless oil and gas stocks were among the risers in London on the potential implications for demand of easier monetary policy in China.

“Later this week a flood of PMI data from Europe, the UK and US should provide some insight into the current economic trajectory in the West and serve as an hors d’oeuvre to the main course provided by the Jackson Hole symposium which starts at the end of the week.

“This meeting of finance ministers and central bankers will provide some insight into the thinking of the Bank of England, Federal Reserve and European Central Bank ahead of their next set of meetings this autumn.”

Global equity indices sank last week and if the FTSE 100 fails to hold on to gains today it will sap further confidence from traders.

Housebuilders sink

Housebuilders were facing the pressure of a profit warning from Crest Nicholson with Persimmon, Taylor Wimpey and Berkeley Group among the FTSE 100’s top fallers.

“Weak house price data is hardly a surprise. Economic uncertainty is elevated, mortgage costs have gone through the roof and the Help to Buy scheme has come to an end. However, Crest Nicholson’s profit warning has laid bare the scale of the impact of a housing slowdown on the housebuilding sector.

“Sales of new homes have plunged alarmingly and, while not all developers in the space are created equal, the news, allied to Rightmove’s latest reading on the property market, has had a knock-on effect on share prices in the rest of the sector this morning,” said Russ Mould

“The £7,000 drop in the average asking price observed by Rightmove in the last month, allied to a big drop in transaction volumes,  is the kind of statistic to make estate agents distinctly uneasy.

“The scale of Crest Nicholson’s warning may come as a shock to investors given it reported its first half results just a couple of months ago and this hints at the speed and scale of the deterioration in the market.”

InterContinental Hotels was the FTSE 100 top gainer, up 2%.

Crest Nicholson Holdings today warned that full-year adjusted profit before tax is now expected to be around £50.0m, a significant downgrade from previous guidance.

Crest Nicholson shares were down 10% at the time of writing on Monday.

The housebuilder cited a “poor trading environment” and further legacy costs at its Brightwells Yard development as negatively impacting performance.

The profit warning comes amidst a backdrop of high inflation, rising interest rates, and weakening housing market activity. Transaction levels have deteriorated in recent weeks, with the sales rate per outlet per week falling to just 0.25 in the 7 weeks to August 18, down from 0.50 in the first half.

First-time buyers and those looking to upgrade are being deterred by the rising cost of mortgages and lack of government support schemes. The company does not expect trading conditions to improve materially before year-end on 31st October.

Crest Nicholson revealed it is negotiating several bulk land deals to support future delivery volumes. However, management is taking action to reduce overheads and scale back divisional growth plans to reflect the tougher market.

The company remains committed to its full-year dividend but warned that land investment will be “significantly” lower going forward.

Despite the near-term challenges, Crest Nicholson stated it has a strong financial position and experienced leadership to navigate the downturn. It believes inflation will eventually abate and mortgage rates reduce.

The profit warning indicates the UK housing market continues to face major headwinds. While Crest Nicholson retains a positive medium-term outlook, investors should brace for further downgrades if conditions do not improve.

“Today’s profit warning from Crest Nicholson suggests rising interest rates and higher mortgage costs are really starting to bite,” said Charlie Huggins, Manager of the Quality Shares Portfolio at Wealth Club.

“Crest Nicholson has seen trading conditions worsen significantly over the summer months. This means group pre-tax profit for the year is expected to come in around a third lower than previous expectations.

“The cost of borrowing has rocketed, and this has led to fewer homebuyers upsizing and to fewer first-time buyers. The end of the Help to Buy scheme has compounded these pressures, making it even harder for first-time buyers to get onto the housing ladder.

“The housing market is on very shaky foundations. Although inflation appears to be moderating, the Bank of England is expected to tighten the screw further in the coming months. As such, it seems unlikely that trading conditions for Crest Nicholson or its peers will improve any time soon.”

Power Metal Resources shares are trading near the lowest levels since the beginning of the pandemic after a disappointing run in the stock.

Power Metal Resources is a highly diversified minerals exploration vehicle with exposure to nickel, lithium, tungsten, uranium, gold, and PGEs.

There is a lot for junior mining investors to get excited about. For example, Power Metals have just begun lithium exploration activities in North America and directors have been buying shares recently.

Unfortunately, since the new CEO Sean Wade took the reins in March the Power Metal Resources share price is down circa 25%. The 1p mark is now only obtainable by a 50% rally. 

The drop may be symptomatic of a challenging macro environment but a recent trip to the US by the POW team has failed to materialise in any noticeable buying pressure.

This will be a major disappointment for long-term holders of the stock – but it may well be just the opportunity those sitting patiently on the sidelines have been waiting for.

With a market cap of just £14m, there is strong evidence for the argument Power Metal Resources is undervalued. Not enough is written about the strength of the Power Metal Resources portfolio.

Former CEO Paul Johnson was a staunch believer that the junior natural exploration sector could explode higher with an improvement in sentiment. This is supported by historical price action in junior explorers.

However, the question still remains for Power Metals Resources – how low will the POW share price go before turning a corner?