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

Natasha Doris
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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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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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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.

OPEC+ cuts oil output by 100k bpd on weak oil prices

Natasha Doris
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OPEC+ cuts oil output by 100k bpd on weak oil prices

OPEC+ announced its intention to cut oil output by 100,000 bpd in its meeting on Monday.

The organisation confirmed the reduction, which translates to 0.1% of international demand, for October this year, essentially rolling back its earlier adjustment of 100,000 for September.

“The OPEC and Non-OPEC Ministerial Meeting noted the adverse impact of volatility and the decline in liquidity on the current oil market and the need to support the market’s stability and its efficient functioning,” said the cartel in a statement.

“The Meeting noted that higher volatility and increased uncertainties require continuous assessment of market conditions and readiness to make immediate adjustment to production in different forms, if needed, and that OPEC+ has the commitment, the flexibility, and the means within the existing mechanisms of the Declaration of Cooperation to deal with these challenges and provide guidance to the market.”

The minor change still sent oil prices higher, with Brent crude rising 4% to $96 per barrel after the OPEC+ meeting.

Prices have been fluctuating on the back of the Ukraine war and fears of a recession, with continued lockdowns in China fanning production slowdown fears and Chinese city Chengdu going into lockdown last week.

“OPEC+ is wary of protracted price volatility generated by weak macro sentiment, thin liquidity and renewed China lockdowns, as well as uncertainty over a potential U.S.–Iran deal and efforts to create a Russian oil price cap,” said Matthew Holland at Energy Aspects.

The news comes on the heels of Russia’s announcement that it would not supply oil to countries in support of a price cap for the country’s energy supplies due to its invasion of Ukraine.

“An output cut won’t make them any friends at a time when the world is facing a cost-of-living crisis,” said Oanda analyst Craig Erlam.

FTSE 100: Stocks dip as Truss confirmed as PM and Euro hits 20-year low

Natasha Doris
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FTSE 100: Stocks dip as Truss confirmed as PM and Euro hits 20-year low

The energy crisis took a sharp turn over the weekend, after Russian energy giant Gazprom shut down the Nord Stream 1 pipeline after three days of maintenance works.

The company cited oil leaks in the pipeline as its reason for closing the supply line, however European leaders have accused Moscow of using Nord Stream 1 as a weapon in its war against Ukraine, a claim which the administration has denied.

Markets dipped across the board, with the FTSE 100 down 0.5% to 7,243.3 in early afternoon trading on Monday.

“The FTSE 100 started the week lower as Russia’s decision to turn off Europe’s gas hangs over the continent like a grim shadow ahead of winter,” said AJ Bell investment director Russ Mould.

“The US is in the enviable position of having relatively high levels of energy independence which insulate it from Putin’s proxy battle in the energy market as he looks to punish Europe for its support for Ukraine in the current conflict.”

“This step was not entirely unexpected and everyone will be looking for answers to the current crisis, however it seems unlikely investments in new sources of energy will bear much fruit in the short term.”

European markets sank, with the German DAX suffering the hardest blow as the index fell 2.3% to 12,744.6. The French CAC slid 1.5% to 6,070.9 and the Italian FTSE MIB dropped 2.1% to 21,455.5.

The Euro tumbled to a 20-year low, falling to 0.9930 dollars as the energy crisis ravaged Europe.

“Predictably, wholesale gas prices are soaring, raising the prospect of even higher energy bills for businesses and consumers and sending the pound and the euro to new multi-year lows against the dollar,” said Mould.

Liz Truss appointed Prime Minister

Analysts were vindicated after Liz Truss was appointed Prime Minister at lunchtime today, with the former trade secretary set to replace Boris Johnson instead of former chancellor Rishi Sunak.

The entering Prime Minister will have a tough term ahead of her, to say the least, with the war in Ukraine, the energy crisis and the dual hangovers of Covid and Brexit set to bring a challenging year for Johnson’s successor.

“Top of the agenda will have to be some kind of answer to the current energy crisis, with the protracted process of appointing a new leader leaving companies and consumers hanging for weeks after the alarming outlook for energy costs became clear,” said Mould.

The Pound fell against the dollar following the announcement, dropping to 1.14926 at 14:00 on Monday.

Oil companies rise as OPEC+ cuts output targets

Shell and BP shares gained 1.4% to 2,358.5p and 2.1% to 463.3p, respectively, after oil prices rose. The price of benchmark Brent Crude climbed 3.5% to $96 per barrel after OPEC+ announced plans to cut oil output targets by 100,000 bpd.

The organisation is expected to cut output, bringing further strength to the black gold’s prices.

Asian markets sink

Asian markets sank after China announced an extended lockdown in Sichuan Province capital Chengdu, keeping its 21 million population under quarantine. The city commenced a new round of testing, which is scheduled to take place from Monday to Wednesday this week. The Hang Seng slid 1.1% to 19,225.7.

Investment Theme: The Digital Economy

HANetf
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Investment Theme: The Digital Economy

The digital economy is defined as the intersection of technology, digital assets, and finance. Investing in this theme correlates to the opportunity of investing in the Internet in the early 2000s.

The digital economy is defined as the intersection of technology, digital assets, and finance – these are its three pillars. The first, technology solutions: the leading-edge developments in technology that continue to shape how we live, work, and play. The second, digital asset infrastructure: an emerging and growing ecosystem supporting blockchain and cryptocurrencies. The third, financial foundations: the players and platforms that underpin the digital economy, a new generation of financial institutions. 

From an investment perspective, investing in the digital economy is an infrastructure play, not unlike investing in the Internet during the late 1990s and early 2000s. At the time, it was clear the Internet was growing and that it would be transformational, but no one knew how it would evolve and what that transformation would ultimately look like. That same initial uncertainty currently applies to the digital economy, so rather than invest in the uncertainty of its future, invest instead in the certainty of its emergence, its growth, and the fact that it is already re-shaping the future.

Michael Sonnenshein, CEO of Grayscale Investments, an asset manager with a product focused on capturing the digital economy, said “the digital economy represents a fundamental reimagining of the global financial system to a new paradigm that harnesses the speed, convenience and capabilities of modern financial technology. Our own Grayscale Future of Finance UCITS ETF (GFOF) is one product that aims to capture these themes in a single convenient fund, but there are many ways for investors to receive exposure to this global megatrend.”

Examples of companies that fall under the digital economy theme include digital asset miners, hardware providers, exchanges, asset managers, brokerages, payment platforms, and others. Together, these firms are creating greater utility for consumers, reshaping business models, reorganizing competitive dynamics, and redistributing value across industries. Digital assets, as perhaps the most ‘unfamiliar’ group within the three pillars, is disrupting technology and finance in ways that are generating immense social and economic improvements in the realm of payments, privacy, data, and more.

Every investment theme should be considered within the context of the macroeconomic environment, and the reality of today’s rising interest rates combined with inflationary pressures has resulted in global growth coming under pressure. Global equity markets experienced a broad-based downturn that began around the start of 2022 as we continue to face an ongoing battle with COVID, geopolitical conflicts, and supply chain issues. The companies building the digital economy have been affected and suffered in performance as well. However, it’s important to remember that this theme is new, and it is this ‘early’ quality that represents an unique opportunity for investors. In fact, research has shown that the adoption curve of digital assets makes it the fastest rate of technology adoption in human history (vs. TVs, computers, and even the Internet). Investors should consider how companies and projects building this transition to the digital economy could positively impact a diversified, long-term investment portfolio.

Truss triumphant: ‘I will deliver’, says new PM

Natasha Doris
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Truss triumphant: ‘I will deliver’, says new PM

Liz Truss has been announced as the new Prime Minister and leader of the Conservative party.

Truss was elected after weeks of campaigning against former chancellor Rishi Sunak for the position, and was voted in with 81,326 votes against Sunak’s 60,399.

The vote reported an 82.6% turnout from an electorate of 172,437 Conservative party members.

“I know that our beliefs resonate with the British people. Our beliefs in freedom, the ability to control your own life, in low taxes, in personal responsibility. And I know that’s why people voted for us in such number in 2019,” said Truss in a speech.

“As your party leader, I intend to deliver what we promised those voters right across our great country.”

“I will deliver a bold plan to cut taxes and grow our economy. I will deliver on the energy crisis, dealing with peoples’ energy bills, but also dealing with the long-term issues we have on energy supply.”

Truss congratulated Sunak on his campaign and expressed admiration for former Prime Minister Boris Johnson during his tenure in the position.

“Boris, you got Brexit done. You crushed Jeremy Corbyn, you rolled out the vaccine, and you stood up to Vladimir Putin. You were admired from Kyiv to Carlisle.”

Truss promised to deliver on her campaign selling points, including assistance with the energy crisis, as well as the NHS and taxation initiatives.

The new Prime Minister faces a challenging situation, including the war in Ukraine, the raging energy crisis, and the double headache of Covid and Brexit left in the wake of her preceding administrations.

Belvoir lettings and financial services income grows

Andrew Hore
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Belvoir lettings and financial services income grows

Property income has held up relatively well in the first half at franchised lettings and estate agency business Belvoir Group (LON: BLV) and financial services continue to grow.
The removal of incentives for property buyers has reduced activity in the property market, but it is still at similar levels to the past. There was a decline in like-for-like income from property sales. This was offset by like-for-like growth in lettings income as rents increase, plus acquisitions.
Financial services accounts for 50% of revenues, although margins are lower, so the main profit still comes from property....

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