FTSE 100 perks up on Truss’ £130bn energy relief plan

Natasha Doris
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FTSE 100 perks up on Truss’ £130bn energy relief plan

Markets perked up in late morning trading on Tuesday, after entering Prime Minister Liz Truss finalised a £130 billion energy bills relief plan for struggling UK households, according to Bloomberg.

The FTSE 100 increased 0.3% to 7,312.6 after enduring a tough start to the week before Truss’ appointment to the UK’s highest office.

The Pound picked up after falling to a 37-year low yesterday, after news of the energy plan sent the currency rising to 1.1586 from its bottom of 1.1474.

“After yesterday sinking to a 37-year low against the dollar, the pound perked up on Tuesday, rising 0.2% to $1.1586 as the UK prepared for the changing of the guard at number 10,” said AJ Bell investment director Russ Mould.

“Reports so far suggest energy providers will be able to use government-backed loans to subsidise bills, meaning there could be some near-term relief on energy costs for consumers and businesses.”

“While not expected to be confirmed until Thursday, the messages clearly being fed in from Liz Truss’ team do help to remove some uncertainty and that has translated into a stronger day for UK stocks.”

Berkeley Group

Good news from housebuilder Berkeley sent the company to the top of the blue chip index.

The company’s shares gained 4.6% to 3,605.5p after it announced trading on track to meet its FY 2023 profit guidance of £600 million and FY 2024 guidance of £625 million.

Berkeley Group credited the strong housing market for its high performance, with persistent demand covering rising 5% to 10% cost inflation.

“Berkeley Group has put in a resilient showing, despite soaring cost inflation which is marring the entire sector. The reason profits have been left without too much bruising is because sale prices are high enough to offset the housebuilder’s fatter bills,” said Hargreaves Lansdown lead equity analyst Sophie Lund-Yates.

Taylor Wimpey, Barratt Developments and Persimmon rode the wave of renewed optimism across the housing market, with shares rising 3.8% to 108p, 3.6% to 423.5p and 3.7% to 1,505.7p, respectively.

Consumer Stocks

Consumer stocks rose as the prospect of an energy price cap freeze helped assuage fears of atrophied consumer spending over the winter season.

Investors fled consumer stocks in recent weeks on fears of lower spending due to spiking energy prices.

Next shares gained 4% to 6,280p and JD Sports Fashion shares climbed 4.3% to 128.1p.

Meanwhile, Kingfisher shares rose 3.9% to 249p and Howden Joinery picked up 3.9% to 575.1p.

“Some of the top risers on the blue-chip stock index included retailers Next and JD Sports, kitchens seller Howden Joinery and DIY store chain owner Kingfisher,” said Mould.

“These stocks have all suffered this year as earnings expectations were cut and investors priced in the likelihood of a recession. Now we might be at the stage where investors take the view that shares in retailers have been oversold, hence the big recovery rally today.”

“How long it will last is another matter, as the general cost of living crisis is still punishing for households, whether energy bills go up further or not.”

DS Smith

DS Smith shares climbed 3.1% to 271.4p after the packaging firm reported trading in line with expectations, with its savvy cost control measures mitigating rising cost inflation.

The company said it expected a “significant improvement” in business performance during FY 2023.

“We have started the financial year very strongly, despite the current macro-economic conditions,” said DS Smith CEO Miles Roberts.

“We are focusing on ensuring the highest levels of security of supply and customer service and are very pleased with the ongoing support we receive from both our customer and supplier base.”

“Whilst the industrial sector is showing some weakness, our FMCG business remains resilient.”

Oil falls

Shell and BP shares tumbled to the bottom of the FTSE 100, dropping 2.1% to 2,297.5p and 1.8% to 454.6p, respectively, after oil prices fell following demand fears on the US Fed’s aggressive stance to interest rate hikes.

Lockdowns in Chinese city Chengdu and continued lockdown measures in tech hub Shenzhen spurred further fears of lowered demand across the sector.

The price of benchmark Brent crude dropped 3.1% to $92 per barrel, despite a surge in prices yesterday after OPEC+ cut production by 100,000 bpd to calm market price volatility. However, the essentially symbolic move did little to stem falling prices.

Ashtead

Ashtead Group shares slid 1.4% to 4,250p after the rental equipment company announced its Q1 2022 outperformance was mitigated by rising interest costs.

The firm noted a 25% revenue growth to $2.2 billion and a 22% EBITDA climb to $1 billion, with trading confirmed in line with management expectations.

“Very strong levels of growth in sales and profits weren’t enough to drive Ashtead’s shares forward,” said Mould.

“The construction equipment rental group hit a sour note with the market by saying that better than expected performance is being offset by higher interest costs, which means there isn’t an upgrade to earnings forecasts today.”

Sterling picks up on Truss’ potential £130bn energy plan

Natasha Doris
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Sterling picks up on Truss’ potential £130bn energy plan

The Pound Sterling picked up in early morning trading on Tuesday following Bloomberg’s report that new Prime Minister Liz Truss had shored up plans for a £130 billion energy relief package for struggling UK households.

The Pound rose from 1.15646 just after 06:00 to 1.15894 after Bloomberg broke the scoop, with the Sterling trading at 1.16027 in late morning trading.

Truss is apparently set to eradicate the looming 80% price cap rise to £3,548 in October, instead either freezing the current price cap of £1,971 or reducing energy costs to families across the country.

The entering Conservative leader is also set to provide a £40 billion relief package for businesses, with many small business owners likely breathing a sigh of relief, after facing an approaching winter of skyrocketing energy prices.

The Pound regained ground after its 37-year low tumble on Monday before the Prime Minister’s appointment, reaching depths of 1.1443 in morning trading due to the joint strains of a weakening UK economic outlook and a strengthened dollar.

The Pound has been picking up speed over Tuesday, however, with the potential price cap freeze providing the first light among a gloomy horizon for the country.

Liz Truss to announce £130bn energy relief plan, Bloomberg reports

Natasha Doris
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Liz Truss to announce £130bn energy relief plan, Bloomberg reports

Liz Truss is set to announce a new £130 billion plan to freeze energy bills for UK households as the cost of living crisis sends costs soaring for families across the country.

Bloomberg reported the price tag would be spread over the next 18 months, which would see a new price cap set either at or below the current price cap of £1,971.

The energy price cap had been scheduled to rise 80% to £3,548 in October, snowing families under thousands of pounds in spiking costs.

However, the new proposal would apparently see the price cap alteration ditched.

Funding now stands as the next issue, with the Financial Times reporting that Truss is attempting to persuade nuclear and renewable energy generators to accept new 15-year contracts at fixed prices on a voluntary basis below the current rates, which tie their profits to surging gas prices.

Business secretary Kwasi Kwarteng, who has been the favourite to take on the chancellor role under the Truss administration, is allegedly seeking to fund the initiative via general tax or a future consumer bills levy.

Meanwhile, Truss is also said to be eyeing a £40 billion business relief plan to assist struggling businesses with rising energy costs.

Bloomberg said the new Prime Minister was undecided between a guaranteed unit price for companies to pay, or a percentage or unit price reduction for energy suppliers to offer firms.

Ashtead Group revenues grow 25% to $2.2bn in Q1 2022

Natasha Doris
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Ashtead Group revenues grow 25% to $2.2bn in Q1 2022

Ashtead Group shares dropped 3.3% to 4,169p in early morning trading on Tuesday after its outperformance in Q1 2022 was mitigated by rising interest costs, resulting in a pre-tax profit projection in line with previous expectations.

The firm reported a 25% revenue growth to $2.2 billion from $1.8 billion the year before, alongside a 26% rental revenue increase to $2 billion against $1.6 billion.

“Our end markets remain strong and we continue to execute well across all actionable components of our strategic growth plan, Sunbelt 3.0. In the quarter, we invested $699m in capital across existing locations and greenfields and $337m on 12 bolt-on acquisitions, adding a combined 33 locations in North America,” said Ashtead CEO Brendan Horgan.

“This significant investment is enabling us to take advantage of the substantial structural growth opportunities that we see for the business as we deliver our strategic priorities to grow our general tool and specialty businesses and advance our clusters.”  

“We are achieving all this while maintaining a strong and flexible balance sheet with leverage near the bottom of our target range.”

Ashtead Group confirmed a 22% EBITDA rise to $1 billion compared to $860 million, and a 26% operating profit climb to $594 million against $477 million.

The rental company highlighted a 29% adjusted pre-tax profit growth to $555 million from $437 million and a 28% pre-tax profit climb to $527 million against $416 million.

The firm noted a 33% adjusted EPS rise to 94.4c compared to 71.5c and a 33% reported EPS growth to 89.7c from 68c the last year.

“Our business is performing well with clear momentum in supportive end markets.  We are in a position of strength and have the experience to navigate the challenges and capitalise on the opportunities arising from the market circumstances we face, including supply chain constraints, inflation, labour scarcity and economic uncertainty, all factors which we are convinced are drivers of ongoing structural change,” said Horgan.

“The business is performing strongly, with revenue and operating profit ahead of our previous expectations. This performance is offset by increasing interest costs and therefore, we expect adjusted profit before taxation for the year to be in line with our previous expectations and the Board looks to the future with confidence.”

DS Smith trading in line with expectations, company mitigates energy cost inflation

Natasha Doris
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0
DS Smith trading in line with expectations, company mitigates energy cost inflation

DS Smith shares gained 3.1% to 271.4p in early morning trading on Tuesday following confirmation the firm was trading in line with expectations in its Q1 2022 trading statement.

The packaging products company highlighted pricing momentum and strong cost control as drivers behind its solid trading.

DS Smith reported corrugated box volumes slid marginally in Q1 on a like-for-like basis, as projected against 13% comparative year growth. The group noted an expected 2% increase for the FY.

The group noted the concerning hike in all input costs, including energy across its operations. However, its energy cost rises were “substantially mitigated” by efficiency initiatives and its long-term hedging programme.

The company reported over 90% of its natural gas costs were hedged for FY 2023 and 80% for FY 2024, with expenses currently recovered via increased packaging pricing.

DS Smith commented its long term supplier relationships and other costs management programmes remained ongoing to mitigate inflation.

Meanwhile, the group confirmed maintained strong cashflow generation, alongside an unchanged outlook for FY 2023 with expected “significant improvement” in business performance.

“We have started the financial year very strongly, despite the current macro-economic conditions. We are focusing on ensuring the highest levels of security of supply and customer service and are very pleased with the ongoing support we receive from both our customer and supplier base. Whilst the industrial sector is showing some weakness, our FMCG business remains resilient,” said DS Smith CEO Miles Roberts.

“The increased profitability and cash generation is being driven by improving efficiency and cost increase mitigation as well as successfully continuing to raise packaging prices. Overall returns on capital remain within our medium term target.”

“As we enter the second quarter, we are very mindful of the challenging economic environment in which we operate and the impact it has on both our customers and colleagues. However, our operating plans and progress to date continue to give us confidence in our outlook for FY23.”

Berkeley Group on track to meet FY 2023 profit guidance on strong housing market

Natasha Doris
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0
Berkeley Group on track to meet FY 2023 profit guidance on strong housing market

Berkeley Group shares soared 5.5% to 3,639p in early morning trading on Tuesday, after the company announced it was on track to meet its FY 2023 profit guidance of £600 million and £625 million for FY 2024.

The housing firm said it expected profits for the current financial year to be 55% weighted to HY2, in line with production scheduling.

“Berkeley has continued to trade well during the first four months of the new financial year, with the value of underlying sales ahead of the financial year ended 30 April 2022,” said Berkeley Group in a statement.

Berkeley Group reported strong demand continued to support pricing above business plan levels, providing sufficient cover of cost increases on a blended basis across the company’s developments.

The properties group noted forward sales were anticipated at marginally over the £2.1 billion held at 30 April 2022, with net cash expected to result in a level similar to the £269 million held at the most recent financial year end.

The company confirmed it was still aiming to become working capital neutral over the current and next financial year, in line with year-end guidance.

Berkeley Group highlighted the volatile market environment and cost inflation of 5% to 10% per year, and mentioned new land would only be added to land holdings on a very selective basis.

“Berkeley Group has put in a resilient showing, despite soaring cost inflation which is marring the entire sector. The reason profits have been left without too much bruising is because sale prices are high enough to offset the housebuilder’s fatter bills,” said Hargreaves Lansdown lead equity analyst Sophie Lund-Yates.

“This is a dynamic being seen almost across the board, but the longevity of the pattern is a question mark for Berkeley. It’s south-east focus, and more premium product, means starting prices for a Berkeley home are significantly more than for run of the mill developers.”

“On one hand, this makes the group more vulnerable to a prolonged recession, as a £700,000 family home in the commuter belt is precisely the sort of thing people put off committing to when things are rocky. At the same time, these higher earners are less likely to feel the worst of the affects of a crisis, so may well prove to be a more reliable customer base. There should be cautious optimism in the latter scenario, but the market is clearly concerned, with the shares changing hands for a bit less than the longer-term average.”

Shareholder returns

The housing firm reiterated a dividend of £23.3 million, representing 21.25p per share, to be paid to shareholders on 9 September 2022.

The group reported the remaining £141.1 million for the six months to 30 September 2022 have already been satisfied via share buybacks.

Berkeley Group added the next £141.1 million shareholder return would be issued by 31 March 2023 through a combination of dividends and share buybacks.

The scheduled annual shareholder return of £282 million represents £2.59 per share.

Surface Transforms: Brakes Coming Off

Jon Levinson
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Surface Transforms: Brakes Coming Off

Surface Transforms (AIM: SCE) are unchanged at 47p where the Mkt Cap is £92m, after reporting Interims to June. Its revenues improved 137% to £2.9m and reported an increased loss of £2.5m although its capital expenditure increased to £2.8m as capacity is build to handle strong  demand. SCE manufacture carbon fibre reinforced ceramic automotive brake discs which are in strong demand for electric vehicles. These brakes are used on high spec cars and OME clients include as Bentley, Maclaren, Ferrari, Land Rover, Aston Martin and Tesla. All are looking for security of supply as well...

Why companies left AIM in August

Andrew Hore
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Why companies left AIM in August

There were two cancellations during August with one company in the process of being wound up and the other merging with a TSX-V company and ditching its AIM quotation. There were no new admissions during the month, so these were the only changes on AIM during August.
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4 August 2022
Cambium Global Timberland Ltd
Cambium Global Timberland is selling off its assets and returning cash to shareholders. Shareholders voted 99.99% to 0.01% to approve the AIM exit and it happened the day after the general meeting. They also approved the solvent winding up of the company.
All of Cambium Global’s fo...

Samarkand fundraising to cover losses

Andrew Hore
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0
Samarkand fundraising to cover losses

Things have not gone to plan at Samarkand (LON: SMK) since it joined Aquis 18 months ago. The large cash outflow means that the China-focused e-commerce technology and brands retailer requires a cash injection of up to £3m via an open offer.

Covid lockdowns in China have delayed progress and hampered the ability to supply products.

Overheads were increased to cope with expected growth that did not arrive. That caused a sharp jump in the loss last year. These costs have been reduced and the full impact of the reduction will show through this year.

In the year to March 2022, revenues fell from £20.6m to £16.6m, although if one-off revenues in the previous period are excluded then there was a 12% improvement. There was an initial contribution from the Zita West supplements brand acquired last year.

The main underlying growth is coming from the Nomad software platform where revenues were 18% ahead at £7.5m. These revenues should accelerate as more companies sign up and the existing clients grow their business.

First quarter trading this year has been stronger and the loss is reducing. A full year loss is still expected for 2022-23.

Cash

There was a cash outflow from operating activities of more than £8m and a further £1.2m of capitalised investment in software development.

In March 2021, Samarkand raised £17m at 115p a share. In May, United Win Asia invested a further £3.15m at 115p. The one-for-ten open offer is at 55p a share. The share price fell 2p to 60.5p.

Major shareholder Global Smollan Holdings is taking up its entitlement of £445,000 and is applying for an additional £755,000 under the excess option. Executive directors are taking up £300,000 worth of shares. That means a minimum of £1.5m will be raised.

Without the cash injection Samarkand would have been expected to fall into a net debt position by March 2023. Revenues are expected to be £17m, rising to £22.5m in 2023-24 – cash could be generated at that level although not enough to cover capitalised development.

If £3m is raised, then this should be enough to cover working capital for the next two years. Additional funding would be required if further brands are acquired.  

Pound stays lower against dollar after Truss appointment

Natasha Doris
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0
Pound stays lower against dollar after Truss appointment

The Pound remained lower against the dollar after Liz Truss was announced as the next UK Prime Minister on Monday, replacing departing Conservative leader Boris Johnson.

The Sterling was 1.1508 against the dollar in late afternoon trading, after falling to its lowest level since 1985 of 1.1474 in advance of the announcement over Monday morning.

Truss had been the favourite to win among analysts for the last couple of weeks, and secured a victory over former chancellor Rishi Sunak with 81,326 votes against Sunak’s 60,399.

“Foreign Secretary Liz Truss is expected to take over at the helm,” said City Index senior markets analyst Fiona Cincotta.

“However, the pound trading at its lowest level since March 2020 suggests that the market is worried about her strategy of cutting taxes to turbocharge the economy.”

“This could easily backfire and send inflation higher still.”

The Pound has taken a battering over recent weeks as the cost of living crisis deepens and the impact of the Ukraine war continues to spark recession concerns.

The currency fell to its lowest level since 2016 last week after the Resolution Foundation reported the UK was heading into its steepest living standards decline in a century.

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