Capital Gains Tax speculation heats up after Labour identifies funding gap

UK Investor Magazine
-
0
Capital Gains Tax speculation heats up after Labour identifies funding gap

Rising capital gains tax receipts and a public spending mismatch are fueling speculation about the new Labour government’s potential changes to CGT rates.

Some experts suggest that Chancellor Rachel Reeves may consider equalising CGT rates with income tax rates to address the total public finance gap of around £20 billion per year.

As well as shelving major spending projects, speculation is mounting that Reeves will boost the coffers through a raid on capital gains.

Recent data reveals that capital gains tax (CGT) receipts in the UK reached a record high of £16.929 billion in the 2022/2023 tax year. The number of individuals paying CGT has also seen a significant rise, increasing by 50% to 394,000 over the five years leading up to 2021/2022.

The annual tax-free allowance for CGT was substantially reduced from £12,300 in the 2022/23 tax year to £3,000 in the current tax year. This reduction is likely to bring more individuals into the CGT net, potentially leading to even higher receipts in the coming years.

Despite CGT already set to impact more individuals, the government is thought to be planning additional changes to the tax which could result in more people paying more tax.

The government will release more detailed information on Thursday, including breakdowns of the types of gains contributing to this record CGT haul.

“Capital Gains Tax speculation has intensified. As Rachel Reeves peers into the hole in the public finances and is set to reveal just how deep it goes, rumours are swirling as to whether CGT changes could be used to generate extra cash to help fill it,” said Sarah Coles, head of personal finance, Hargreaves Lansdown.

“One of the suggestions doing the rounds is that capital gains tax rates could rise to match income tax. It was one of the things the Office for Tax Simplification explored in 2020. This would see a shocking hike for UK investors. 

“As the OTS highlighted in 2020, in the long term it runs the risk of people hoarding their profits until they die. This would mean, for example, buy-to-let investors refusing to part with properties they don’t really want in an effort to avoid CGT, while first time buyers struggle to get on to the property ladder. 

“The tax system should be encouraging and rewarding long-term investing. This has been absent from the CGT system since taper relief was abolished in April 2008. Right now, investors face the double-whammy of a system that taxes investments that are simply keeping pace with inflation and allows for far lower gains to be realised tax-free each year. If the rates do end up rising, it would add insult to injury. We’d urge the Chancellor to reintroduce incentives that reward long-term investing.”

Filtronic – Low Earth Orbit Space Market Helps This Group To Really Take Off – Finals Tomorrow 

Mark Watson-Mitchell
-
3
Filtronic – Low Earth Orbit Space Market Helps This Group To Really Take Off – Finals Tomorrow 

There are not many companies quoted on the London markets that have nearly quadrupled in price this year alone – but the £157m-capitalised Filtronic (LON:FTC) is certainly one that has to date. 

Its shares have risen from 21.30p on 2nd January to a recent peak of 80p, before easing back to the current 72p. 

And I consider that there is even more to come yet. 

Tomorrow morning’s Final Results announcement should make some very good reading and give investors even more confidence that there will be more in store. 

The Business 

The Sedgefield-based group designs, develops, manufactures, and sells advanced radio frequency communications equipment for the telecommunications infrastructure, aerospace and defence, critical communications, and low earth orbit (LEO) space markets. 

The company not only operates in the UK, but also in the rest of Europe, the Americas, and internationally.  

It provides Morpheus II, an E-band transceiver module; Hades, an E-band active diplexer; Cerus, an E-brand power amplifier for long-range E-band communications; tower top amplifiers; Orpheus, an ultra-high-capacity turn-key solution for back-haul, front-haul, and mid-haul; switched filter banks; GaN amplifiers; custom filters products, including metal cavity, ceramic, combline, interdigital, lumped element, suspended substrate, waveguide, and thin-film filters; and custom combiner products.  

The company also offers interference mitigation filters; transmit and receive modules; microwave and mmWave transceivers; front-end modules, such as power amplifiers, low noise amplifiers, switches, filters, power detectors, baluns, and other products; ceramic, combline, lumped element, metal cavity, suspended substrate, thin film, and small cell filters; waveguide diplexers; and cross-band and in-band combiners.  

In addition, it provides contract design and microelectronic manufacturing, RF design and testing, and process engineering services.  

Recent Wins 

Earlier this month Filtronic announced that it had received a follow-on order from SpaceX worth $9m.  

This is the second order that the group has received since it signed a strategic partnership with SpaceX in April this year. 

On 24th April the company declared that it had secured a long-term partnership with SpaceX in the LEO space market, initially worth $19.7m. 

Space Exploration Technologies Corp. designs, manufactures, launches and operates the world’s most advanced rockets and spacecraft.  

The Strategic Partnership includes the ongoing supply of E-band Solid State Power Amplifiers, in addition to the development and supply of similar products at other frequency bands within SpaceX’s Starlink platform. 

The group has declared that recent success in the aerospace and defence markets with contract wins from BAE, QinetiQ and the UK Defence Science & Technology Laboratory, augmented by demand from the group’s long-established customer, gives it confidence for revenue growth in the outlook in this market. 

Western governments are now investing more in their defence capabilities from growing global threats, and with the need for a UK sovereign defence supply chain remaining critical, the group feels well placed to win more business with large defence primes actively seeking to engage with the SME market. 

Year-End Trading Update 

Towards the end of June, when giving out the end of May Trading Update, CEO Nat Edington stated that:  

“The space market continues to present significant growth potential for Filtronic.  

The recent Strategic Partnership we entered with SpaceX is exciting for all of our stakeholders.  

It gives a platform to develop the business and puts us in a stronger position to capitalise on the plentiful opportunities in the core markets we serve.  

We enter the new financial year with a very strong order book, a growing list of customers, including key strategic targets that we have secured in the year, and an opportunity pipeline that continues to grow and mature.” 

Analyst Views 

At Cavendish Capital Markets, its analysts Edward Stacey and Kimberley Carstens have a Price Objective of 91.9p on this group’s shares. 

They are anticipating further orders from SpaceX, which they reckon substantially de-risks the group’s ratings. 

For the year to end-April 2024 they have estimates out for £25.4m (£16.3m) revenues helping to significantly boost the group’s adjusted pre-tax profits from just £0.1m to £3.6m, jumping its earnings up 14 times to 1.4p (0.1p) per share. 

The benefit of greater orders in the current year could take turnover up to £36.0m worth £6.4m in profits and generating earnings of 2.7p per share. 

My View 

With the LEO part of the group’s business underwriting some 50% of the 2025 expected revenues, this company is on the cusp of really lifting off. 

Tomorrow’s results statement is awaited with great interest.  

I see at least 100p a share, against the current 72p, within the short-term. 

Helium One Global begins Tanzania well-testing

UK Investor Magazine
-
1
Helium One Global begins Tanzania well-testing

Helium One Global has issued a progress update on its Tanzanian operations announcing its commenced drilling operations at the Itumbula West-1 well late last week.

Helium One said it plans to conduct an extended well test on two intervals at the project: the fractured basement and faulted Karoo. This follows a successful drill stem test in February 2024 that yielded 4.7% helium flow to the surface.

Investors will be pleased that Geolog – the firm contracted to perform mudlogging and testing during drilling to monitor helium gas shows – has already noted back ground indications of helium and hydrogen. A portable mass spectrometer and field pressure-volume-temperature specialist are on site to measure and validate helium gas shows and downhole samples from the extended well test.

The company said it anticipates that this phase of operations, from spud to completion of the extended well test, will take approximately five weeks. The Itumbula West-1 well previously demonstrated success in February 2024, with a drill stem test flowing 4.7% helium and 2.2% hydrogen to the surface from the fractured Basement.

Director deals: Continued buying of Ocean Harvest Technology shares, but low revenues mean financial uncertainty

Andrew Hore
-
1
Director deals: Continued buying of Ocean Harvest Technology shares, but low revenues mean financial uncertainty

Seaweed-based animal feed producer Ocean Harvest Technology (LON: OHT) warned that interim revenues declined 46% to €950,000 and full year forecast revenues will be well below the previously expected level of €6.1m.

Non-executive director Stephen Walker acquired 45,000 shares at an average price of 8.4p each following this trading statement. He owns 545,000 shares. He has been a consistent buyer of the shares since June 2023, when he bought 54,835 shares at 21p each.

Business

AIM-quoted Ocean Harvest Technology produces ingredients for animal feed using seaweed. The brand name of the...

Aquis weekly movers: Good Life Plus plans deals with media partners

Andrew Hore
-
3
Aquis weekly movers: Good Life Plus plans deals with media partners

Gunsynd (LON: GUN) executive director Donald Strang bought one million shares at 0.1215p each. The share price moved up 8.7% to 0.125p.

Invinity Energy Systems (LON: IES) has opened its manufacturing facilities in Motherwell. This will increase capacity for its energy storage technology to more than 500Mwh/year. The share price rose 8.33% to 26p.

FALLERS

Rathbones has a 5.59% stake in Walls and Futures REIT (LON: WAFR) yet the share price has halved to 10p (5p/15p). There was share buying earlier in the week, but the share price has not held up.

Good Life Plus (LON: GDLF) reported its figures for the 16 months to January 2024. This includes a full contribution from the core luxury prize draw business and a few months of the shell it reversed into. Revenues were £2.39m and the loss was £3.98m, although that included costs of the reversal. The underlying business is losing money as it builds up the subscriber base. The recent £2m fundraising was after the balance sheet date, so there is plenty of cash to continue to add players. The number exceeds 30,000 and continue to rise. There are potential deals with media and mobile network partners that could reduce the costs of subscriber acquisition by providing access to new people and only paying if they sign up to the Good Life Plus prize draws. The share price dipped 19.1% to 1.9p.

Stephen Bamford has reduced his stake in SulNOx Group (LON: SNOX) to less than 3%, following a transfer of shares to his children. The share price fell 4.84% to 29.5p.  

Interim figures of Arbuthnot Banking (LON: ARBB) show a decline in interim profit as net interest rate margin was reduced from 6.1% to 5.2%. Pre-tax profit fell from £26.4m to £20.8m. Asset based lending profit did improve. Tangible NAV was 1396p/share. The share price declined 3.27% to 665p.

AIM weekly movers: UK Oil and Gas debt free

Andrew Hore
-
1
AIM weekly movers: UK Oil and Gas debt free

UK Oil and Gas (LON: UKOG) was the highest riser in the week following the ending of a convertible loan facility. Shore Capital has slightly reduced its stake to 12.8% The repayment of the convertible loan facility provided by RiverFort Global Opportunities and YA II PN means that the company is debt free. The share price jumped 80.6% to 0.028p.

Inspiration Healthcare (LON: IHC) has finally signed the £3.3m Middle East contract it has been waiting for. The equipment should be shipped in the period to year-end in January 2025. This covers the majority of the revenues needed to be gained to achieve the full year forecast revenues of £41m. Earlier in the week, BGF Investment Management increased its stake to more than 21%. The share price has rebounded 47.2% to 26.5p.

Hydrogen and fertiliser projects developer Atome (LON: ATOM) has signed heads of terms for a fertiliser offtake agreement with Yara. This covers the Villeta project in Paraguay. This will help to achieve full financing of the project by the end of 2024. The Villeta facility could produce 260,000tpa of fertiliser. Yara is the largest fertiliser and ammonia trader and the fertiliser produced at Villeta should be sold at a premium price. The share price is 41.4% higher at 82p.

Investors are pleased that there will be no more share dilution from conversions of the convertible bonds facility that SkinBioTherapeutics (LON: SBTX) had put in place. The skin treatments developer received the final conversion notice from Macquarie for £480,000 of bonds. There will be 5.85 million shares issued at 8.207064p/share. There will be no more drawings on this facility. The share price improved 37.8% to 12.4p.

FALLERS

Aptamer (LON: APTA) is raising £2.83m at 0.2p/share, which was a large discount to the market price. The share price slumped 54.8% to 0.26p. The cash is required to get the full potential from its Optimer binder technology. There are relationships with the top ten pharma companies and there is potential for licensing the technology in the next few years. The fixed cost base will be reduced from £3.5m to £2.9m.

Destiny Pharma (LON: DEST) and Sondrel (LON: SND) continue to fall ahead of their proposed departures from AIM. Destiny Pharma put out an announcement that a study shows cardiac surgery patients treated with its XF-73 nasal gel require fewer antibiotics. Even so, the share price fell an additional 52.1% to 2.25p. The notice of the Sondrel general meeting was sent out last Monday and the share price dipped a further 38.5% to 2p.

There was yet another fundraising from graphene technology developer Versarien (LON: VRS) and this generated £550,000 at 0.065p/share. This will finance the purchase of concrete and mortar testing equipment for the Cementine admixtures developed using 3D construction printing. The share price slipped 37.6% to 0.0675p.

A change in marketing strategy for its business to consumer business has not helped gambling firm Webis (LON: WEB) as much as it hoped. Bad weather caused cancelations of race meetings in the US. This means that the second half loss will be similar to the interim figure of $541,000. The share price dived 35.7% to 0.9p, having been 0.8p at one point, which is the lowest it has been since March 2020.

FTSE 100 bounces back as NatWest beats expectations

UK Investor Magazine
-
3
FTSE 100 bounces back as NatWest beats expectations

The FTSE 100 gained on Friday as bargain hunters stepped into beaten-down names after a week of heightened volatility, which was largely caused by a selloff in US technology shares.

London’s leading index was 0.9% higher at the time of writing and was actually set to close the week out higher.

The resilience of the FTSE 100 was apparent this week, as losses in UK stocks driven by concerns about a US technology selloff were mostly contained and were quickly bought into by traders seeking shelter in pharmaceutical names and commodities.

Earnings season is well underway, and the results kept coming on Friday with NatWest, SEGRO and Rightmove among the FTSE 100 companies reporting. Generally strong earnings from FTSE 100 firms this week helped the index outperform as US indices were hit by a rotation out of tech and mainland Europe was ravaged by a luxury rout.

NatWest was the FTSE 100’s best-performing stock of the session after the bank beat estimates and increased its dividend. NatWest’s report was very similar to Lloyd’s report yesterday in that half-year profits declined, and Q2 profits were much lower than last year. However, NatWest’s Q2 results showed a mild improvement on Q1, which sparked a 6% rally in the stock.

“NatWest’s long, long recovery from the financial crisis looks as meaningful as it has done at any point in the last 16 years or so with the company’s latest results including plenty to like from the point of view of shareholders,” said AJ Bell head of financial analysis Danni Hewson.

“Unlike Lloyds, whose own better than expected numbers received a muted response from the market, NatWest is not only benefitting from lower impairments but also higher than anticipated income and the company not only beat on the second quarter but it is lifting guidance for the full year too.

“Notably the company is feeling confident to go on the offensive – boosting its position in the UK mortgage market with the acquisition of a chunky portfolio from Metro Bank. This follows on from the recent purchase of Sainsbury’s Bank.”

Rightmove carved out a 0.4% gain after profits crept higher in the first half, but using underlying activity on the platform remained broadly flat.

SEGRO was firmly at the bottom of the leaderboard after the REIT said its NAV declined by 1.8%. SEGRO shares were down 2.2% at the time of writing.

AIM movers: Thalassa buys stake in Surgical Innovations and rain dampens Brighton Pier prospects

Andrew Hore
-
2
AIM movers: Thalassa buys stake in Surgical Innovations and rain dampens Brighton Pier prospects

Shore Capital holds 12.8% of UK Oil and Gas (LON: UKOG) and this follows the repayment of the convertible loan facility provided by RiverFort Global Opportunities and YA II PN. The share price jumped 69.4% to 0.0305p.

Fully listed Thalassa Holdings (LON: THAL) has taken a 9.94% stake in Surgical Innovations (LON: SUN) and the share price recovered 23.1% to 0.8p, which values the surgical instruments manufacturer at £7.5m. Earlier this year, Thalassa chairman Duncan Soukup made initial restitution payments due to a loss on an investment in Tappit Technologies and he will pay up to £1.5m more. This means that Thalassa has cash to invest. Thalassa had a book value of 116p/share at the end of 2023 and the share price is 26.5p.

Pathfinder Minerals has returned from suspension as Rome Resources (LON: RMR) following the acquisition of the Democratic Republic of Congo-focused tin project explorer and developer of the same name and the raising of £4m at 0.3p/share. The share price improved 18.2% to 0.325p.

Following the disposal of its energy management business, eEnergy (LON: EAAS) can concentrate on its energy services business with enough funding to take advantage of growth opportunities. Full year revenues are expected to be £25m-£26m. There will be some exceptional charges following the disposal and there could be an underlying loss this year before a rebound to a pre-tax profit of £2.2m next year.  The share price increased 4.87% to 5.6p.

FALLERS

A change in marketing strategy for its business to consumer business has not helped gambling firm Webis (LON: WEB) as much as it hoped. Bad weather caused cancelations of race meetings in the US. This means that the second half loss will be similar to the interim figure of $541,000. The share price dived 42.9% to 0.8p, which is the lowest it has been since March 2020.

Brighton Pier (LON: PIER) has also been hampered by poor weather. There was a 29% decline in footfall on Brighton Pier itself so this year’s revenues will be lower than expected. The other three leisure businesses are trading in line with expectations. Cavendish expects a 2024 loss after tax of £700,000. The share price declined 13.9% to 34p.

Echo Energy (LON: ECHO) has received a conversion notice for £40,000 of the conditional convertible loan note. The conversion price was calculated at 0.00288p and around 6% of the enlarged share capital was issued. The share price has fallen 5.71% to 0.0033p.

Power Metal Resources (LON: POW) says that the due diligence period for the uranium joint venture with ACAM has been extended until the 23 August because certain legal processes are outstanding. The share price slipped 2.78% to 17.5p.

hVIVO – Trading Update And Capital Markets Day Obviously Inspire Octopus To Significantly Increase Its Share Stake 

Mark Watson-Mitchell
-
3
hVIVO – Trading Update And Capital Markets Day Obviously Inspire Octopus To Significantly Increase Its Share Stake 

It was interesting to note that Octopus Investments has this week upped its stake in hVIVO (LON:HVO), the company that operates the world’s largest commercial human challenge trial unit. 

The investment group now holds 7.61% of the group’s equity, having increased its stake by 72% to a total of 51,804,020 shares. 

Last Tuesday some 49,372,402 shares were traded in the market, which was more than twenty times the daily average. 

Octopus has boosted its holdings in the company from 20,175,000 shares on the 4th July – so it is quite a confident signal for investors to follow closely. 

The Business 

The company is a rapidly growing specialist contract research organisation and the world leader in testing infectious and respiratory disease vaccines and therapeutics using human challenge clinical trials, providing end-to-end early clinical development services for our broad and longstanding global client base of biopharma companies. 

Capital Markets Day And Trading Update 

On Wednesday 17th July the group held a Capital Markets Day at which it invited analysts, institutional investors, and media to see its new state-of-the-art facility in Canary Wharf. 

hVIVO runs challenge trials at its new facilities, which were opened earlier this year, and it is the world’s largest commercial human challenge trial unit, with highly specialised on-site virology and immunology laboratories, and an outpatient unit. 

On the same day the company also announced a Trading Update for the six months ended 30 June 2024. 

It showed that revenues in the first half year to end June were 30.6% ahead at £35.6m, while the company expects that its EBITDA margins will be around 24% (19.1%). 

The end period cash balance was £37.1m (£31.3m). 

Its contracted order book was £71m at the end of the first half, with 100% of FY 2024 revenue guidance already contracted and showing good visibility into 2025. 

The group reaffirmed its full year revenue guidance of £62m and anticipates that EBITDA margins will be at the upper end of market expectations on the basis of the strong performance in the first half of 2024 and full visibility for the remainder of the year.  

The company stated that its organic growth strategy is also underpinning its medium-term revenue target of £100m by 2028, the majority of which is expected to be achieved through sustained organic growth complemented by small, strategic bolt-on acquisitions. 

CEO Yamin ‘Mo’ Khan stated that: 

“The results of H1 2024 reflect the hard work, flexibility and commitment of the team.  

During a period of significant activity including the build-out and move to a new facility, we have not only materially increased our revenue but also further improved our margins.  

The concurrent running of three different facilities helped to boost our revenues for H1 2024, creating an expected H1 2024 weighting. 

We have full visibility over our expected 2024 revenues and continue to deliver on our sustainable growth strategy.  

The orderbook remains strong in spite of record revenue delivery in H1 2024.  

The recent Omicron characterisation study contract and the award of our largest field study to date are two key sales highlights for H1 2024.  

In addition, the current sales pipeline includes several advanced stage opportunities that we expect to convert in the coming months.   

The outlook for hVIVO is positive as we welcomed our first volunteers into our new facility at Canary Wharf - the world’s largest human challenge trial unit. 

I believe we have laid the foundations for strong performance in the months and years ahead.” 

Analyst’s Views 

After the recent Capital Markets Day and Trading Update, analysts Stuart Harris and Chris Donellan at Cavendish Capital Markets, are a lot more positive about the group’s ability to reach its revenue target in due course. 

For the current year to end December they are looking for revenues to rise to £62.0m (£56.0m), with adjusted pre-tax profits of £12.2m (£11.9m) and earnings fractionally ahead at 1.4p (1.3p) a share. 

For next year they see £67.4m revenues, £14.0m profits and 1.6p of earnings per share. 

The brokers have a Price Objective of 42p on the company’s shares. 

My View 

The corporate progression of this £204m capitalised company has been steady and extremely focussed. 

The group’s shares, which touched 37.35p in April 2021 have since been down to a 10.25p low, before edging gradually better to the current 29.50p. 

I consider that the broker’s Price Objective is very achievable. 

Rightmove reports mediocre first-half growth

UK Investor Magazine
-
3
Rightmove reports mediocre first-half growth

Rightmove—the UK’s largest property portal—reported revenue increased by 7% to £192.1 million in the first half of 2024, up from £179.5 million in the same period last year.

The earnings uplift was helped by the UK housing market making a tentative recovery.

Operating profit rose by 2% to £131.6 million, whilst underlying operating profit saw a 1% increase to £135.1 million. Basic earnings per share grew by 2% to 12.4 pence, with underlying basic earnings per share also up 2% to 12.8 pence.

The results were Ok and there was a marginal 2% uptick in Rightmove shares on Friday.

“These are solid but uninspiring results from Rightmove,” said Wealthclub’s Charlie Huggins.

“Despite the significant challenges facing the housing market, it has again grown revenue and profit, underlining the resilience of its business model.

“However, underlying operating profit only grew by 1%. This reflected some one-off costs, but it also reflects the need for Rightmove to step-up investment in innovation.   

“CoStar’s acquisition of OnTheMarket means Rightmove now faces a highly credible and deep-pocketed rival. Innovation is becoming increasingly important and that comes at a cost. 

“Rightmove still retains a very dominant position, and it will be difficult for CoStar to make a significant dent. Even without much growth, Rightmove is still a cash cow. But with the competitive environment hotting up, Rightmove cannot afford to rest on its laurels.”

The company has declared an interim dividend of 3.7 pence per ordinary share, representing a 3% increase from the previous year.

In terms of operational highlights, Rightmove maintained its market leadership position with over 80% market share, although this may represent a step down from the peak of its dominance.

The platform saw resilient traffic, with users spending a total of 8.3 billion minutes on the site during the period, up from 8.2 billion minutes. Membership numbers remained stable, increasing by 1% since the start of the year to 19,061.

Average Revenue Per Advertiser (ARPA) grew by 6% to £1,497 per month, driven by increased product and package purchases and partner contract renewals. The company also reported positive progress in its Strategic Growth Areas, with revenue growth of 30% in these segments.

1...495051...1,564Page 50 of 1,564