The FTSE 100 was heading into the second half of 2023 on the front foot with a rally driven by housebuilders, UK banks and financials.

The FTSE 100 was trading 0.7% higher on the day at the time of writing and is up 1% so far in 2023. This compares to a 14.5% gain in the S&P 500 and a 15% rise in the German DAX.

“As we conclude the first half of 2023, investors are taking stock of markets and what might happen next. Essentially last year’s losers have become this year’s winners, with the US market bouncing back fast. The S&P 500 is on track to record a 15% first-half improvement thanks to a handful of tech stocks which account for most of the gains,” said Russ Mould, investment director at AJ Bell.

“In contrast, the UK has not been able to keep its crown following last year’s decent showing. In the first six months of 2023, it’s done zilch for investors’ portfolios excluding dividends.

“One might think this is a confusing turn of events. After all, recession fears have been focussed on the US while the UK has proved to be more robust than previously thought. Yet if you exclude the handful of mega cap winners in the US, performance hasn’t been as good.”

UK housing data

On Friday, much better-than-expected UK house price data sparked a wave of optimism in UK assets, with UK banks and housebuilders among the top risers.

According to data released by Nationwide, UK house prices rose 0.1% in the month to June, smashing economist estimates of a 0.3% decline.

Persimmon shares were 1.8% higher, and Berkeley Group Holdings rose 1.6%. NatWest was up 2.5%.

Despite the better-than-expected house price data for June, some analysts warned the outlook for the UK housing market was not as rosy as last month’s data suggests.

“A toxic cocktail of ruinous property prices and devastating mortgage rates could kill off any lingering optimism over house prices. The market held it together in June, but this was before mortgage rate hikes took their toll,” said Sarah Coles, head of personal finance at Hargreaves Lansdown.

“At the end of May, the average 2-year fix was 5.38% and the average five-year deal was 5.05%, according to Moneyfacts. In June, house-hunters with this kind of mortgage in their back pocket were treated to a bumper array of homes for sale and sellers who were desperate to do a deal. It’s these buyers who were prepared to pay house prices up 0.1% from a month earlier.

“By the end of June, things look very different. With the average two-year fix at 6.37% and the average five-year deal at 5.94%, it puts an enormous dent in affordability, and may well drive a huge number of buyers out of the market.”

Ocado

Ocado was again the FTSE 100’s top riser amidst ongoing takeover speculation and stakebuilding by a major fund.

At the time of writing, 86 of the FTSE 100’s constituents were trading in positive territory.

Tekcapital’s Innovative Eyewear are set to showcase its new Lucyd Lyte smart eyewear at the Miami Swim Fashion Show.

Their presence at the Miami show will coincide with the launch of a limited edition range of ChatGPT-enabled Lucyd Lyte smart eyewear.

“A big part of what makes Lucyd Eyewear unique among smartglasses is that our frames align closely with current trends in the traditional optical and sunglass markets,” said Harrison Gross, CEO of Innovative Eyewear.

“Not only do some of our new Lyte 2.0 frames offer styling similar to some of the most popular “analog frames” of 2023, we believe our new Sundrop lens collection brings the freshest trends in lens tints to our best-in-class smart eyewear.”

“We are thrilled to exhibit our exciting new collection at Miami Swim Week, one of the largest swim, resort and beach product shows worldwide.”

Tekcapital currently owns approximately 40% of Innovative Eyewear, Inc.

On Friday, Kodal Minerals shares were struck down by more delays to their Bougouni lithium project in Mali as the long stop date for receiving funding from their Chinese partners was again extended.

Kodal Minerals are struggling to meet the conditions set out by their Chinese funding partner Hainan Mining Co and today’s extension is the third in as many months.

Kodal Minerals said they were in regular contact with the government in Mali and are working towards meeting the required conditions.

Kodal Minerals shares were down around 12% to 0.47p at the time of writing on Friday and are now worth circa 50% less than their April 2023 high.

“Kodal and Hainan remain firmly committed to completing the transaction and are working together towards the completion of all condition precedents,” said Bernard Aylward, CEO of Kodal Minerals.

“Kodal has continued to work with Hainan and its team in the review and planning of the proposed development of the Company’s Bougouni Lithium Project located in southern Mali and are preparing for the rapid development of the project following completion of the transaction.”

tinyBuild shares jumped on Friday as bargain hunters stepped in after a dramatic selloff yesterday.

The premium video games publisher lost around three-quarters of its value yesterday after warning performance was being detrimentally impacted by changes to games platforms and disappointing activity in two game titles.

“As CEO and a major shareholder, I am disappointed with the H1 performance. What fills me with confidence is that we have an incredibly strong pipeline of new games under development with the potential to create multiple new long-lasting franchises,” said Alex Nichiporchik, Chief Executive Officer of tinyBuild

“Our diverse portfolio, strong back catalogue and financial position will allow us to reposition the Company for growth and capture advantageous opportunities when peers may be forced to retrench. We are transforming the Company at speed to adapt to new industry trends.”

tinyBuild reduced their expectations for cash balances at the end of 2023 to $10-20m, a reduction of prior guidance of at least $26.5m.

With a current market of £14.9m, the company is trading at the value of predicted cash balances at the end of the year, completely discounting its operations and revenue generation capabilities.

tinyBuild shares were trading 16% higher at 8.5p at the time of writing.

tinyBuild released the results of their AGM on Friday, where all resolutions were passed apart from a resolution to allow their CEO to buy shares up to a 45% stake in the company without extending the offer to wider shareholders.

Belluscura, the developer of portable oxygen enrichment technology, announced a material increase in full-year revenue on Thursday and said they were confident about demand for the launch of DISCOV-R.

Belluscura, a Tekcapital portfolio company now listed on AIM, has developed portable oxygen devices that have the potential to improve the lives of millions of people with respiratory diseases.

Revenue for the full year surged to $1.54 million from $0.42 million the year prior and the company believes they are positioned to ‘deliver substantial growth.’

“The Group has made considerable progress in the year to 31 December 2022, during which it launched the next generation X-PLOR, built up significant distribution across the US and commenced an international roll out, established high quality manufacturing facilities and developed the DISCOV-R for a well-received launch in 2023,” said Robert Rauker, Chief Executive Officer, Belluscura.

“Trading in the first half of 2023 has continued in line with our expectations for the full year, with a significant second half weighting expected, as previously stated. Demand for X-PLOR, which is predominantly a Direct to Consumer unit, is growing, and we expect our affiliation with GoodRX, a leading digital healthcare platform that makes healthcare affordable and convenient for all Americans, will help it to continue to gain momentum over the coming months.

“The commercial launch of DISCOV-R will be transformational for the Group. Having received a positive reception at Medtrade, we are very encouraged by the fact that over 125 distributors have requested access to DISCOV-R, with the distributors indicating potentially significant demand for units.

“Following the recent fundraising, and as we are now utilising the Company’s previously high inventory levels, the Company is well positioned to deliver substantial growth in the coming years.  We look forward to the future with confidence.”

Tekcapital has a 12% stake in Belluscura.

At the start of this year the shares of the Bolton-based AO World (LON:AO.) were changing hands at just 52p.

After suffering some inevitable trading hurdles after Covid-19, the group had been looking to recover its momentum.

The company operates through online retailing of domestic appliances and ancillary services to customers in the UK, selling major and small domestic appliances and a range of mobile phones, audio visual, consumer electricals and laptops, delivering them through its in-house logistics business and selected third parties.

It also provides ancillary services, such as the installation of new products and recycling of old products, as well as offering product protection plans and customer finance.

Upping Its Profits Again and Again

On 10^th January, the recovering group issued a statement upping its profits guidance to the market.

At the end of February, it issued yet another update pointing the market towards higher expectations.

In March, both Odey Asset Management and JPMorgan Chase added to their holdings in the group, some 17.26% and 6.04% respectively.

Trading Update

By the middle of April, the group’s shares were over 50% better at 76p, which is when it published its Full Year Trading Update for the twelve months to end March 2023.

It noted that the company was continuing to see positive traction from its initiatives to reduce costs and improve margins.

Come the end of May the group’s shares had subsequently eased back to 63.85p on understandable profit-taking.

And then along came Mike Ashley’s Frasers Group

On Monday 12^th June the group announced that Frasers Group (LON:FRAS) had acquired an 18.9% strategic stake in AO with the purchase of 109,400,000 issued shares at a price of 68p totalling an investment of £75m. 

The group stated that the investment was the culmination of productive talks over the last two years about establishing a strategic partnership.

Frasers CEO Michael Murray commented that:

“Through this investment, Frasers will benefit from AO’s valuable know-how in electricals and two-man delivery, helping us to drive growth in our bulk equipment and homeware ranges. In turn, AO will have the opportunity to benefit from Frasers’ expertise and ecosystem.”

The shares were purchased from both Odey and JPMorgan, with the latter going below the reporting minimum threshold in the process.

Subsequently Frasers has been adding to its stake and taking the shares a great deal higher in price as it did so – now up to 22.20% of the AO World equity, some 128m shares.

As a matter of interest AO founder and CEO John Roberts owns almost 106m shares, representing 18.35% of the AO equity.

Analyst Opinion – mixed views

A consensus of analysts that follow the recovering group closely suggest that the year to end March 2023 saw revenues of £1.13bn (£1.56bn), with EBITDA of £41.0m and earnings of 1.3p per share.

For the current year now underway the average view is for sales to rise to £1.15bn, while the EBITDA figure shows a big improvement to £54.0m, with 3.3p of earnings per share.

The house analysts, Simon Bowler at Numis Securities, and Andy Wade at Jefferies International, both rate the shares as a Buy.

Sector analyst Tony Shiret at Panmure rates them as a Hold, while David Reynolds at Davy Group has a Neutral rating on the group’s shares.

Both Bradley Hughes at Shore Capital and John Stevenson at Peel Hunt have not rated the shares.

Conclusion – has Ashley other ideas?

Next Wednesday will see the group declare its results for the year to end March 2023, together with an Update on current trading and prospects.

The group’s shares, which touched 96.18p on Wednesday of last week, are currently 82p, valuing the company at £503m.

The big question is just how Mike Ashley and John Roberts will be faring after next week’s results statement, will they have big smiles on their faces (similar to the AO World logo)?

Will it be a ‘partnership made in heaven’ or has Ashley other ideas, especially as he has now built up a 10.39% stake in Currys (LON:CURY)?

After shaking off initial concerns about interest rates after yesterday’s Sintra central bank panel, the FTSE 100 reacted to the prospect of higher rates for longer on Thursday.

The Sintra panel included the heads of the Federal Reserve, ECB, Bank of England and Bank of Japan. The general message was to expect additional rate hikes in the near term and not to expect interest rates to fall anytime soon.

The FTSE 100 was down 0.16% to 7,488 at the time of writing.

“The FTSE 100 was on the back foot on Thursday as central bankers used a conference in Portugal to ram home the message that more rate hikes could be coming and rates could stay higher for longer than the market thinks,” said AJ Bell investment director Russ Mould.

“The next set of central bank meetings in late July and early August will provide the proof in the pudding and until then markets may continue to hedge their bets.

“Monetary policymakers must balance the need to show their commitment to fighting inflation, while also having some awareness that there will be a lag before their actions take full effect in the economy and not creating so much stress in the financial system that something breaks. It’s not an easy task.”

FTSE 100 movers

Ocado continued to be the most volatile FTSE 100 constituent with a 2% after trading down as much as 10% intraday yesterday. Ocado has a Beta of 2.37, meaning the company’s shares move 2.37x the rate of the benchmark FTSE 100 index.

B&M European Value was the FTSE 100’s top faller after releasing a trading update for the 13 weeks from 26 March 2023 to 24 June 2023. By all accounts, it was a positive trading period in which B&M’s like-for-like sales rose 9.2%, and total revenue jumped 13.5%.

Nonetheless, B&M shares were down 6% at the time of writing.

“B&M is the ultimate play on the cost-of-living crisis, offering a range of goods at cheap prices. Chief executive Alex Russo says the business has ‘strong trading momentum’ which is no wonder when interest rates keep going up,” said Russ Mould.

“So why has the share price fallen 6% on the news? It could be the lack of full-year guidance which implies no upgrades to earnings expectations. The shares have already had a strong run this year, up more than 30%, so perhaps some investors are banking profits while the going is good.”