This morning’s H2 Trading Update from DX (Group) (LON:DX.) reported that the delivery solutions business will show some 10% uplift in revenues to £470m (£428m).

The group’s brokers have both come out positive and have upped their estimates.

Performing up to Management expectations, the parcel freight, secure courier and logistic services business has seen its expansion strategy going according to plan.

In spite of the current economic headwinds, the group remains encouraged about its growth prospects, while the recent additional Tuffnells Parcels Express volumes secured will help to enhance profitability in the new financial year and beyond.

The financial year ended 1^st July 2023 is expected to generate strong cash flows and net cash up by 39% to £37.6m (£27.0m), which is slightly ahead of management’s target.

That boosted cash balance was after capital expenditure of £10.9m (£6.2m) and the payment of an interim dividend of £3.0m (nil). 

There will be a further update on trading with the full year results, due in early October.

Analyst Opinions – Target Prices 50p to 57p a share

Guy Hewett at finnCap has a Target Price of 57p on the group’s shares.

He is estimating that the year to 1^st July will see adjusted pre-tax profits of £26.0m (£20.3m), lifting earnings up to 3.8p (2.8p) and paying a 1.5p per share dividend (nil).

For the new year he sees £519.2m sales, £32.0m profits, 4.3p earnings and a 1.7p dividend.

Over at Liberum Capital analyst Gerald Khoo rates the shares as a Buy looking for 50p.

For the last year he has £26.7m profits, 3.4p earnings and also a 1.5p dividend.

The current year into 2024 could see £494m revenues, £33.1m profits, 4.0p earnings and a 1.7p dividend.

Conclusion – strong cash balance will fund further expansion

This expanding group’s strong cash balances are exemplary. Its will certainly give it a good pillow against any further ‘headwinds’, especially as its beds down on the agreement to take over 15 former Tuffnells Parcels Express depots and to take on volumes from former Tuffnells customers.

The group’s continued success is built upon its consistent high customer service levels, there is no reason to expect that to change going forward.

The shares of this £196m capitalised company, at just 32p and on 8.4 times historic PE and near 5% yield, offer a very attractive upside.

United Oil & Gas expects to report a drop in revenues to $6.4 million for the first half of 2023, down from $9.8 million in the same period last year. The company attributed this to lower realized oil prices, which averaged around $78 per barrel versus $105 last year.

United Oil & Gas shares were down over 23% at the time of writing on Tuesday and have given up 36% of their value over the past year.

In terms of production, output from the Abu Sennan Licence in Egypt averaged 1,051 barrels of oil per day in H1 2023  (net to United’s 22% working interest), with an additional 93 barrels of oil equivalent per day of gas. Two new development wells came online in Q1 and Q2, helping boost output. However, the ASH-8 well has seen declining production after initial high rates.

Additional drilling is planned for H2 2023, including an exploration well in the ASM prospect. In the UK, United continues to progress plans for the Maria discovery and Waddock Cross field, with potential drilling in 2024. The company also seeks farm-in partners for exploration in Jamaica.

While revenues were down, United said cash collections remained strong at $7 million. However, repatriation of funds from Egypt has become more difficult and costly due to macroeconomic challenges and reduced USD liquidity. The company continues to manage its working capital position.

Brian Larkin, United Chief Executive Officer, commented:

“We have had a strong start to the first half of the year from our Egyptian drilling programme with two successful development wells coming onstream and positive results from our low cost workover programme. We are cognisant of the short term challenges in Egypt and with this in mind are delighted to continue drilling in the second half, initially targeting one exploration and one appraisal well In this highly prospective licence. We look forward to announcing further details in due course.

“In parallel, we remain focused on securing a partner in Jamaica for this potentially transformational licence and we are delighted to have multiple quality potential partners advancing their evaluation of the project. We look forward to the remainder of the year and updating our shareholders on our progress.”

UK-based hydrogen power company AFC Energy has renewed its collaboration with Air Products, the world’s largest hydrogen producer, extending their partnership for 5 more years.

AFC Energy shares over 5% in early trade on Tuesday after the renewed deal confirmed AFC Energy’s commitment to the expanding European hydrogen market.

AFC Energy will repurpose its existing hydrogen fuel cell facility in Stade, Germany into a site for factory acceptance testing (FAT) of its H-Power hydrogen fuel cell systems. The move leverages the site’s existing hydrogen infrastructure and grid connection, requiring little investment.

The facility will employ local staff to test systems prior to customer deployment, positioning AFC Energy to support growing deployments in Germany and Europe where hydrogen adoption is accelerating. Germany was chosen partly due to far lower hydrogen fuel prices compared to the UK, delivering major cost savings.

Given rapid growth expected in the European hydrogen market, especially Germany, establishing a footprint there is strategic for AFC Energy. The company is also assessing potential co-location of a development and manufacturing facility in Germany, benefitting from its extensive fuel cell supply chain and skilled manufacturing.

Adam Bond, Chief Executive Officer at AFC Energy, said: 

“The repurposing of our Stade facility creates a solid footprint within Germany and the wider EU hydrogen market whilst providing a cost effective path for our H-Power Generator factory acceptance testing programme. The market for zero emission off-grid power generation continues to grow internationally with our Stade facility now set to become a further catalyst in the delivery of H-Power Generators within one of the world’s fastest growing hydrogen markets.”

The FTSE 100 started the week on the back foot after a raft of Chinese economic data provided further evidence the world’s second-largest economy’s recovery from the pandemic was facing major obstacles.

Chinese GDP missed analyst expectations and came in at 6.3% v forecasts of 7.1%. Retail sales data came in lower than consensus estimates.

• 2Q GDP GROWS 6.3% Y/Y; EST. 7.1%
• JUNE RETAIL SALES RISE 3.1% Y/Y; EST. 3.3%
• JUNE INDUSTRIAL OUTPUT RISES 4.4% Y/Y; EST. 2.5%

“The FTSE 100 has relinquished some of the gains it accumulated last week on weaker-than-expected Chinese economic data. China’s GDP rose 6.3%, which was higher than last quarter but some way below expectations,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.

“The sheer scale of China’s economy means a perceived stalling in the post-pandemic recovery has ramifications for global demand and economies. There’s also little news to distract the market from looming UK inflation data later this week, with the UK poised to assess the latest reading and what this will mean for the interest rate trajectory.”

The FTSE 100 started the week down around 0.4% before buyers stepped in and helped close the gap from Friday’s close. As the session progressed, the FTSE 100 fluctuated in negative territory was down 17 points to 7,417 at 13.30pm in London.

Oil was weaker, with Brent trading down around 0.8% to $78.17 at the time of writing.

FTSE 100 movers

Weakness in commodities hit the FTSE 100’s natural resource constituents with miners suffering. Glencore fell 2.5%.

Ocado was down 2.8% ahead of half-year results due to be released tomorrow. The company’s retail business has suffered since the pandemic and the group as a whole is experiencing an identity crisis with some focused on average basket sizes of their food delivery service while speculation swirls Amazon are eyeing their technology business and are preparing a bid. Neither Amazon or Ocado have commented on takeover talks.

Johnson Matthey was the FTSE 100 top riser after Deutsche Bank raised their rating to buy with a 2,500p price target.

There were few other gainers of note.