The owner of a number of leading homeware brands reported a record financial performance for the year to end July.

According to its market research, nearly 80% of UK households own at least one of the group’s products.

It was a year of exceptional financial and operational progress, made more notable against a backdrop of global supply chain and economic hassles.

Revenues were up 13% to a record £154.2m (£136.4m), while adjusted pre-tax profits were 42% better at £15.8m (£11.2m), taking adjusted earnings up 32% to 14.7p (11.1p), with a 42% improved dividend of 7.12p (5.02p) per share.

Whilst the current cost of living crisis represents a substantial challenge to all consumer-facing businesses, the group is well placed to respond to this given its relentless focus on delivering value and growth. 

Energy efficient air fryers are doing very well

The UP Global Sourcing Holdings (LON:UPGS) group, which owns the Salter and Beldray brands, expects that current year profit performance will be in line with current market expectations.

The £128m capitalised company sells to over 300 retailers across 38 countries specialising in five product categories: Small Domestic Appliances; Housewares; Laundry; Audio; and Heating and Cooling. 

Other brands include Progress (cookware and bakeware), Kleeneze (laundry and floorcare), Petra (small domestic appliances) and Intempo (audio).

It has recently renewed its licence with Russell Hobbs for non-electrical products.

Analyst Opinions – attractive 5.5% yield

Darren Shirley and Clive Black at Shore Capital Markets consider that the group “is very well positioned to deliver sustained growth across its four growth pillars, supported by ongoing investment in systems and human capabilities.”

Noting the current attractive yield for the shares at 5.5%, the brokers rate the equity as attractively priced.

Their estimates are for revenues for the year to end July 2023 are for £169.1m (£154.2m) and EBITDA of £20.0m (£18.8m) and adjusted earnings of 14.5p (13.8p) and a 7.2p (6.9p) dividend per share.

Conclusion – after a 50% two-week gain shares going higher yet

Having pushed this group’s shares two weeks ago (24 October) at just 95p, where we stated that they were far too cheap, it is very pleasing to note the market’s reaction on the results.

After hitting 147.52p at on time, they have since slipped back to 142.5p, but still showing a very useful gain in such a short time.

After allowing for some short-term profit taking, I see these shares going even higher yet.

Rolls Royce issued trading statement for the third quarter on Thursday which highlighted the struggles the company are facing in the current environment.

Despite strong demand in the defence unit, the Civil Aerospace business recorded flight hours at just 65% of 2019 levels.

The economic environment and rising costs were the main focus and are set to threaten margins through the rest of 2022.

“Rolls Royce is doing all it can within its control. Costs are being managed by inflation-linked clauses in its customer contracts, debt’s being repaid, and crucial Engine Flying Hours are edging upwards,” said Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown.

“The trouble is, and which has been the case since the pandemic struck, the group’s grappling against a multitude of headwinds from external forces.”

Having completed disposals in the quarter, Rolls Royce paid down £2bn debt but still had £4bn of drawn debt outstanding.

Rolls Royce shares were trading down 5% to 79p at the time of writing.

The Abu Dhabi based provider of advanced self-propelled self-elevating support vessels has announced another two contracts and an extension of another.

Together with the major contract announcement a month ago for a six-year contract with a National Oil company in the MENA region, these awards are really quite significant for the £58.5m capitalised group. 

These contract awards for Gulf Marine Services (LON:GMS), with improved day rates, equate to seventy-eight months of utilisation, substantially increasing its overall fleet backlog and secured revenue.

The group’s fleet of 13 SESV’s serves the oil, gas and renewable energy industries in the Middle East, West Africa, Europe, South-East Asia, the Gulf of Mexico and North America.

GMS Executive Chairman Mansour Al Alami stated that:

“These contract awards solidify our financial position going into 2023 and again reflects positively on the already favourable market conditions”.

Analyst Opinion

Daniel Slater at Arden Capital rates the group’s shares as a Buy, looking for a 20p Target Price compared to the current 5.7p.

His estimates for the current year to end December suggest $135.4m of revenues ($115.1m), while adjusted pre-tax profits could come in at $32.8m ($20.7m), with earnings of 2.5c (2.7c) per share.

The coming year figures look like $143.6m sales, $39.6m profits and 3.1c earnings per share.

Conclusion – could easily double

The market is missing out on the real potential for this stock.

Greatly improving rates and long-term contracts give the group very healthy prospects for growth.

At only 5.7p this group’s shares have an easy potential for doubling in price and still looking cheap.

Sainsbury’s are engaging in all out war with the discount supermarkets to maintain their market shares in an increasingly gloomy economic environment.

Indeed, Sainsbury’s are gaining ground on the discounters, but at a significant cost to their bottom line. The price war between the supermarkets is a war of attrition with margins sacrificed at the expensive of revenue and market share.

“Sainsbury’s margins are under incredible pressure because they cannot pass on the full costs of inflation to their customers. They are also facing intense competition from discounters,” said Orwa Mohamad, analyst at Third Bridge.

Supermarkets are also fighting a war on two fronts. On one front they face price competition from other supermarkets, and on the other, rising food input prices.

The result for Sainsbury’s in the 28 weeks ended 17 September 2022 was an 8% drop in underlying profit before tax.

“With fresh food prices increasing by a scorching 13.3% over the year according to the British Retail Consortium, it’s a super-tough time to be a grocer and that’s reflected in an 8% fall in first half profit at Sainsbury’s,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

Despite the fall in profits, Sainsbury’s update was met with a positive market reaction as shares gained over 3.5% in early trade on Thursday.

Revenue rose 4.4% in the period due to an increasing market share achieved by an ever greater number of discount lines.

“As hard-pressed shoppers shift from branded products to cheaper alternatives this should benefit Sainsbury’s thanks to the strength and depth of their own-label assortment,” said Orwa Mohamad.

The FTSE 100, along with global equity markets, were in wait and see mode on Wednesday as investors prepared for the latest instalment of commentary and decisions on monetary policy.

The Federal Reserve is expected to hike rates by 75 bps to a 3.75%-4% Federal Funds rates while economists are forecasting the Bank of England raises rates 75 bps to 3%.

“After a positive couple of days, the FTSE 100 was in consolidation mode on Wednesday,” said AJ Bell investment director Russ Mould.

“All eyes will be on central banks on both sides of the Atlantic as both the US Federal Reserve and Bank of England get ready to deliver their rate decisions over the next 24 hours or so.

“While we have a good idea of the quantum of increase both parties will deliver, it will be all about the mood music. Investors are like thirsty travellers in the desert, hoping for even the tiniest drop of comfort to suggest the rate cycle may have run its course.”

Fed Pivot

The Fed pivot, or hopes of a Fed pivot, is an integral driving force behind risk appetite and demand for equities. The Federal Reserve is set to hike rates by 75 bps for the fourth time in a row and markets will be keenly watching to see if this pace is set to be continued.

Investors have been accessing economic conditions in an attempt to gauge the Fed’s next move and there has been little to suggest to major economic slowdown warranting a change in pace. Inflation rates remain stubbornly high and unless there are signs of economic deterioration, the Fed has no reason to even think about cutting rates.

The language used in statements accompany the Federal Reserve and Bank of England’s decisions could set the tone for equities going into the end of 2022.

Corporate updates

While markets are fixated on central banks today, a number of FTSE 100 constituents have provided relatively positive updates.

Next maintained their full year guidance after a promising third quarter update punctuated by seasonal swings in sales likely due to warmer weather.

GlaxoSmithKline’s third quarter was robust with sales rising 18% £7.8 billion helped by bumper increases in speciality medicine revenue.