US inflation fell to 8.3% in August, dropping from 8.5% in July in the latest report on Tuesday.
The figure marks the lowest reading in four months, however it still beat market forecasts of 8.1%.
The result sent US futures tumbling as the figure confirmed fears the US Federal Reserve was set to remain on course with aggressive rate hikes.
The Dow Jones slid 1% to 32,166 in pre-open trading, with the S&P 500 falling 1.4% to 4,067.5 and the NASDAQ dropping 2.1% to 12,546.
The US energy index climbed 23.8%, decreasing from 32.9% in July as a result of a huge slowdown in gasoline expenses and fuel oil to 25.6% against 44% and 68.8% compared to 75.6%, respectively.
Meanwhile, natural gas costs rose to 33% from 30.5% and electricity prices accelerated at their fastest rate since August 1981 by 15.8%.
Food inflation grew 11.4%, while shelter rose 6.2% from 5.7% and used cars and trucks inflation climbed 7.8% from 6.6%.
Consumer prices increased 0.1% since July following a flat reading the month before, exceeding analyst expectations of a 0.1% fall.
The UK Investor Magazine was thrilled to be joined by Alexandra Govorukha, Head of Global Affairs at Sigma Software, to discuss the Ukrainian tech sector and an upcoming ‘Hack for Peace’ Hackathon.
Alexandra is the driving force behind Hack for Peace, a Hackathon designed to develop anti-war tech solutions across five European countries; the UK, Ukraine, Poland, Portugal and Sweden.
The Hackathon was a response to the unprovoked aggression by Russia on Ukraine and is setting about creating solutions to help the problems caused by the war.
We discuss in detail how the Ukrainian tech sector has adapted to the war by utilising remote working and even providing services for clients from bomb shelters. Alexandra explains the assistance the sector is giving to the defence of Ukraine with the prepayment of taxes and developing cyber security solutions.
We finish by looking forward to Websummit and the Ukrainian Pavilion which will showcase the best of the Ukrainian tech sector in Lisbon this November.
Tungsten West (LON: TUN) has secured a term sheet for non-dilutive funding for the Hemerdon tungsten and tin mine in Devon and the final capital expenditure estimates are expected by the end of September. Royalty financing of $30m has been obtained at an initial rate of 4.75%, which drops to 2.375% after 7mmtu of tungsten is produced. There is also up to £10m of asset backed financing. Tungsten West had £17m in the bank at the end of August. The share price rose 20.8% to 29p.
Transense Technologies (LON: TRT) shares have bounced back after it announced that it was evaluating licencing opportunities for its surface acoustic wave sensor technology in the aerospace sector with Meggitt. This could lead to a licence agreement before the end of 2023. The shares are up 31.3% to 65p.
Mixer drinks supplier Fevertree Drinks (LON: FEVR) still believes it can achieve previous guidance even though costs are increasing. This helped the share price to recover some of its previous losses and rise 11.7% to 1060p, although it is still down by three-fifths this year. Revenues from sales to pubs and bars recovered from weak levels last year, but off-trade sales fell.
Energy supplier Yu Group (LON: YU.) says profit has significantly exceeded expectations and underlying EBITDA should be £4.7m. Interim figures will be announced on 27 September. The shares are 9.7% higher at 197.5p.
Bradda Head (LON: BHL) has intersected spodumene in its first hole at San Domingo in Arizona. Visible lithium-bearing minerals were identified, including spodumene and lepidolite. The shares rose 10.5% to 9.45p.
Union Jack Oil (LON: UJO) has fallen 18.1% to 41.75p after publishing an independent report that says that 40% owned Wressle oilfield could have a recoverable resource of 2.43 MMB barrels of oil. An illustrative production scenario shows a constrained production rate of 800 barrels of oil per day for five years. The Union Jack Oil share price is still higher than at the beginning of September. Egdon Resources (LON: EDR), which owns 30% of Wressle and is the operator, fell 10.3% to 7.8p. The other 30% is owned by Europa Oil & Gas (LON: EOG), which is 9.09% higher at 3p. Union Jack Oil is providing an 18 month, £1m loan facility with an annual interest rate of 11% to Europa Oil & Gas.
CleanTech Lithium (LON: CTL) shares fell 11.5% to 54.5p even though the JORC resource estimate was upgraded to 1.51 million tonnes of lithium carbonate equivalent at a grade of 206mg/L at the Laguna Verde project in Chile. That is effectively profit-taking after the strong gains earlier in the month.
Interim figures from Accesso Technology (LON: ACSO) sparked a 8.8% decline in the share price to 538p. The queueing and ticketing technology company reported a 26% increase in revenues to £63.7m and an improved pre-tax profit of £2.92m in what is the seasonally weaker half. Visitor levels are recovering and full year figures are likely to be in line with expectations.
TV and film production services provider Facilities by ADF (LON: ADF) had tough comparisons for its interim figures and reported pre-tax profit was lower. Revenues improved from £11.5m to £12.6m, but the lack of large productions and higher overheads since flotation mean that profit was lower. There will be more, and higher value, productions in the second half, so some of the profit shortfall should be offset. Flotation funds are being used to increase the size of the vehicle fleet.
All eyes were across the Atlantic ahead of the US inflation figures for August, with US futures rising as analysts anticipated positive news from the report.
“Rising prices will be in focus this lunchtime as the US posts its CPI reading for August,” said AJ Bell investment director Russ Mould.
“July’s figures were a key factor in driving a mid-August rally in stocks, before Federal Reserve chairman Jerome Powell poured cold water on hopes of a ‘dovish pivot’ on interest rates, so this latest update is likely to garner plenty of market attention.”
“Forecasts are for this measure of inflation to have dipped month-on-month and if instead prices have ticked higher once again it could knock markets off course.”
The Dow Jones was 0.4% higher at 32,641 in pre-open trading, with the S&P 500 rising 0.4% to 4,149 and the NASDAQ climbing 0.4% to 12,877.7.
Meanwhile, the FTSE 100 increased 0.3% to 7,497 in lunchtime trading, as the index failed to maintain its momentum from Monday’s strong gains.
Supermarkets
Supermarkets were in focus today, with the latest data from Kantar reporting bad news for Morrisons, which fell from its Big 4 grocer status to be replaced by budget retailer Aldi.
The cost of living crisis has seen customers turn to lower cost alternatives in higher numbers, with soaring food inflation driving consumers towards the cheaper German supermarkets in droves.
“The appeal of the German discounters continues to grow as household budgets are increasingly squeezed. This presents a challenge to Tesco and Sainsbury’s too,” said Mould.
“The fact that Aldi and Lidl offer not only bargain prices but also decent quality products and produce makes the established players jobs much harder.”
Tesco shares dipped 2.2% to 247.4p and Sainsbury’s shares slid 1.4% to 210.3p.
Ocado
However, the main disappointment in the supermarket sector came from Ocado, which reported concerning results in its pre-close trading update for FY 2022.
The online retailer announced lower sales despite a growth in customer numbers, with an expected minor sales decline over the financial term and close to break-even EBITDA.
Ocado reported the average customer basket had fallen to 6% to £116 as shoppers purchased value for money products in response to inflationary pressures.
Meanwhile, the company noted cost headwinds including £15-£20 million in additional dry ice costs and a 15% rise in fuel expenses, along with tripled energy costs projected to triple on an annual basis.
“We remain focussed on providing Ocado Retail customers with the best possible value to help them navigate the cost of living crisis, and are encouraged by the positive underlying trends in the business which underline the value of Ocado’s differentiated proposition to customers,” said Ocado Retail chairman Tim Steiner.
“As consumer spending stabilises, we expect Ocado Retail will again deliver attractive and accelerating growth in sales and a strong recovery in profitability.”
“For … these reasons, we are optimistic for the future even while recognising the challenges that higher energy bills and other inflationary pressures are creating for our customers today.”
However, the EU is currently seeking to introduce windfall taxes on energy company “surplus” profits.
The Guardian published a report on the EU’s draft regulation on the “electricity emergency tool”, which contained no Russian gas price cap after member states failed to agree on restrictions last week.
The EU is expected to levy windfall taxes on the record profits of fossil fuel companies, with a separate cap on the revenues of low-carbon electricity producers.
European Commission president Ursula von der Leyen is expected to publish the Union’s plan to tackle spiking electricity costs in her annual state of the union speech this Wednesday.
The present text of the draft revealed the Commission’s doubts over getting sufficient support for the preferred option of capping Russian gas in response to the country’s “weaponisation of supply.”
Vladimir Putin has threatened to turn off the tap to countries reliant on Russian gas should the cap be passed, with nations including Hungary, Austria and Slovakia all at risk of a recession if Moscow halts supplies.
Around a dozen countries support the price cap on imported gas, including France and Poland. However, the Commission is reportedly not on board with the concept, due to concerns the EU would lose out to states willing to pay more in the competitive market for liquified natural gas.
Despite the division, EU governments generally back capping the price of electricity from low carbon sources, such as renewables or nuclear, and using the funds to support vulnerable households and businesses.
Meanwhile, oil and gas companies would be introduced to a separate windfall tax, labelled a “solidarity contribution.”
The leaked document estimates there will be a fivefold climb in oil, gas and coal firm profits in 2022, with the “surplus” and “unexpected” profits not linked to economic or investment choices, but to “unpredictable developments in the energy markets following the ongoing illegal war in Ukraine.”
The proposal did not set a target level of windfall tax in the document.
EU member states are also requested to agree on a binding target to lower electricity use over peak hours, however no figure has been suggested.
Trustpilot shares soared 23.5% to 76.6p in late morning trading on Tuesday following an 18% total revenue growth to $73 million in HY1 2022 against $62 million in HY1 2021.
The company reported a 23% annual recurring revenue (ARR) climb to $149 million compared to $134 million the year before.
Trustpilot announced a 22% increase in bookings to $87 million against $75 million, with a 27% rise in UK, Europe and Rest of the World regions and an 8% growth in North America.
The firm noted a narrowed $9 million interim loss against a $17 million loss, with an adjusted EBITDA loss of $5 million from a $4 million profit year-on-year.
Meanwhile, Trustpilot mentioned an operating cash flow of negative $8 million compared to negative $12 million in the previous year.
The company also highlighted a balance sheet with $73 million in net cash against $93 million, including an $8 million FX translation effect, and commitment to breakeven adjusted EBITDA and underlying free cash flow for FY 2024.
“We are pleased by our half-year results which demonstrate the continued strength of our business, both financially and strategically,” said Trustpilot CEO Peter Holten Mühlmann.
“The momentum we are seeing in consumer and business engagement in each of the regions in which we operate has been particularly encouraging.”
“Our success is founded upon our focus on trust, and we continue to benefit from viral network effects as more and more consumers choose to share their experiences on Trustpilot.”
Ocado shares tumbled 11.8% to 700.6p in early morning trading on Tuesday, after the online retailer highlighted a 6% fall in the average customer basket to £116 in its pre-close trading update for FY 2022.
The company noted customer orders had risen, with a 23% active customer growth to 946,00 year-on-year and a 10.7% average weekly orders increase.
Ocado confirmed a 2.3% Q3 sales rise to £532 million quarter-on-quarter, representing a “significant improvement” against its Q2 decline, with stronger growth projected in Q4.
However, the group mentioned consumers tended to seek value-for-money items and buy smaller baskets in response to the cost of living crisis.
The company mentioned a greater decline in the quarter during the peak summer holiday season.
Meanwhile, the group commented cost headwinds including energy and dry ice were likely to eat into Q4 profitability, with the expense of dry ice expected to add £15-£20 million in annualised costs against FY 2021. Ocado said it was currently exploring alternatives to dry ice.
Energy costs were projected to triple year-on-year, alongside a 15% rise in fuel expenses, potentially adding £20-£25 million to the firm’s FY 2022 cost base year-on-year.
Ocado Retail highlighted a 23% active customer base rise to 946,000, with the firm projecting an “outsized benefit” if customer spending stabilises.
“We remain focussed on providing Ocado Retail customers with the best possible value to help them navigate the cost of living crisis, and are encouraged by the positive underlying trends in the business which underline the value of Ocado’s differentiated proposition to customers,” said Ocado Retail chairman Tim Steiner.
“Our online grocery model, which creates efficiency through advanced technology, offers customers a combination of competitive prices, the widest ranges, and industry-leading service. As we have seen in Q3, customer numbers are sharply up as consumers either switch from other providers or try online grocery for the first time; underlying productivity in fulfilment and the last mile continues to improve; and the new CEO of Ocado Retail, Hannah Gibson, brings fresh vision and energy to the business. As consumer spending stabilises, we expect Ocado Retail will again deliver attractive and accelerating growth in sales and a strong recovery in profitability.”
“For all these reasons, we are optimistic for the future even while recognising the challenges that higher energy bills and other inflationary pressures are creating for our customers today.”
Future shares gained 6.6% to 1,837p in early morning trading on Tuesday, after the firm announced its results were anticipated to hit the top end of management expectations in its pre-close trading update for FY 2022.
The media company confirmed a return to organic audience growth in HY1 as Covid comparators were fully lapped, along with continued digital advertising growth and an improving trend in affiliates.
Future noted its expansion underpinned the resilience of its diversified business model.
Meanwhile, the firm said operating leverage and cash conversion remained strong, with maintained deleveraging following its acquisition of Who What Wear.
Future highlighted a FY 2022 adjusted operating profit at the higher end of market expectations.
“We are pleased to be reporting another period of good progress. Against the backdrop of a challenging macro environment, our continued strong performance is a testament to the diversified nature of valuable audiences, specialist content verticals and monetisation routes coupled with a relentless focus on execution,” said Future CEO Zillah Byng-Thorne.
UK unemployment has fallen to the lowest rate since 1974, according to the Office of National Statistics (ONS).
The level of people out of work has been on a general decline since late 2013, until the Covid-19 pandemic, which saw it rise until the end of 2020.
However, unemployment has since returned to pre-Covid levels, with the last three-month period seeing the rate fall to its lowest figure since May to July 1974.
The latest three-month term saw the number of people unemployed for up to six months hit a record low, while the level of those unemployed between six and 12 months grew.
The figure for those unemployed for over 12 months continued to decrease.
A major driver behind the decrease in unemployment was linked to a 21.7% rise in the economically inactive, meaning those no longer looking for work.
Difficulties ahead
However, analysts warned the promising figures hid approaching strain on the jobs market.
Energy bills this winter will see many smaller businesses placed under immense strain, with employers set to face difficult decisions between recruitment levels and spiking heating and electricity costs.
“Some companies are freezing recruitment and smaller businesses in particular have been having to make tough decisions about staffing levels as they considered soaring energy bills,” said AJ Bell financial analyst Danni Hewson.
“Government intervention should help allay some fears, giving business owners a little breathing space, though six months will disappear in the blink of an eye and makes it difficult to plan for the future.”
Meanwhile, inflation has climbed into the double digits and is currently on track to hit 13% in October, according to the Bank of England. However, more pessimistic predictions from Citibank cite levels as high as 18%.
Real terms pay has fallen dramatically over the last year, and employers will struggle to pay staff their essential salaries along with all other heavy expenses.
“[Recruitment] is still tricky. With one vacancy for every person unemployed competition is still fierce and pay is often the ultimate bargaining tool. But despite the fact wages have been rising with regular pay up 5.2%, work simply isn’t paying enough,” said Hewson.
“Inflation is merciless and in real terms pay fell by 2.8%, a slower rate than the previous month but it just shows the strain on pay packets and reinforces the differences between the public and private sector.”
The headline figures display good news on the employment market, however it’s possible celebration might be short lived as winter reaches UK shores. It remains to be seen how businesses will weather the cold seasons ahead.
Trident Royalties shares climbed 5.3% to 48.7p in early morning trading on Tuesday, after the company announced $76 million in acquisitions over HY1 2022.
The mining royalty and streaming firm noted its largest transaction to date in its acquisition of gold offtake contracts for $69.7 million.
Trident Royalties confirmed royalty and offtake receipts of $7.8 million generated from its portfolio, inclusive of gold offtake assets, Mimbula copper royalty and Koolyanobbing iron ore royalty.
The group mentioned progress across its portfolio, with Koolyanobbing resuming iron ore sales, along with first gold poured at Ruby Hill and Santa Luz, and a “significant” resource update at its Rebecca gold project.
Meanwhile, Trident Royalties highlighted the continued advancement of Thacker Pass, with Lithium Americas confirming post-period end that it would commence early works production and release a defined feasibility study in 2022, pending a positive Court of Appeals ruling.
“Trident has continued to excel amid a difficult macro-economic environment. The portfolio is performing well, with solid progress made across a number of assets. I am pleased with the acquisitions we made during the period, most notably a portfolio of cash generative gold offtakes which range across a number of jurisdictions, assets and operators,” said Trident Royalties CEO Adam Davidson.
“Looking forward to the second half, Trident is well positioned to continue our record of consistent growth. Our strong balance sheet will enable us to execute more value accretive transactions and further reduce our cost of capital.”
“A final permit decision at the Thacker Pass lithium project is expected during H2, which will transform Trident’s anticipated future revenue profile and battery metals exposure. I look forward to updating the market on this and other developments over the coming months.”
