Next shares have fallen almost 30% YTD: should you buy the dip?

Natasha Doris
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Next shares have fallen almost 30% YTD: should you buy the dip?

Next shares have fallen 28.6% year-to-date to 5,814p, which might prompt investors to ask if now is a good time to buy the dip on the FTSE 100 stock.

Next is a consumer-focused group, placing the blue chip retail company squarely in the line of fire as UK customers trim the fat (and the fashion) off their budgets in anticipation of soaring energy and food prices.

While inflation currently stands at 10.1% and is expected to hit 13% this October according to the Bank of England’s latest estimates, if you are not afraid to hold a stock over the long term, Next shares could be one to consider.

Next shares

Next shares look set for increased earnings, despite the soaring rate of inflation, with a PE ratio of 11 and a forward PE ratio of 10.4.

The company also has a pretty good dividend yield of 2.2%, and a remarkably encouraging dividend cover of 4.2, assuring shareholders of dividend payouts and value return even if Next suffers a couple of blows in the volatile market environment.

Next Financials

Next reported a strong Q2 trading statement in August 2022, increasing its FY profit guidance by £10 million to £860 million, representing a 4.5% growth year-on-year.

The company’s retail segment climbed in sales past pre-Covid levels in 2019, with a Q2 performance 4.7% ahead of its results three years ago.

Next warned it did not expect to outperform expectations again in HY2 2022, due to inflation concerns as the cost of living crisis deepens.

However, the fashion group reiterated strong guidance for FY 2022-2023 despite wider inflationary concerns.

Next reported a central guidance of a 1% rise in HY2 full price sales, alongside an EPS growth of 7.2% to 568.1p compared to FY 2021-2022.

Next Dividends

The retailer reintroduced dividends after suspending payments over the Covid pandemic, and returned value to shareholders via two special dividends in 2022 of 110p and 160p per share in 2022.

Next also distributed an ordinary dividend of 127p per share on 1 August 2022, and confirmed a return to its regular dividend cycle this year.

Next shares further benefited from £224 million spent by the firm on share buybacks over 2022, with 3.5 million shares repurchased at an average price of £63.85 per share.

If profits are in line with management guidance, the Equivalent Rate of Return (ERR) on the buybacks will be 10.6%.

Next seems to be in good hands heading into the autumn and winter seasons, and appears fairly confident it will weather the market storm without too huge a battering in the coming year.

Rio Tinto secures full Turquoise Hill ownership for $3.3bn

Natasha Doris
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0
Rio Tinto secures full Turquoise Hill ownership for $3.3bn

Rio Tinto shares fell 3% to 4,625.7p in early morning trading on Thursday after the mining giant announced its acquisition of the remainder of Turquoise Hill for $3.3 billion.

The commodities group is set to acquire 49% of the issued and outstanding common shares of Turquoise Hill that it does not currently own for C$43 per share in cash.

Rio Tinto said the agreement had the unanimous approval of the independent special committee of Turquoise Hill’s board of directors.

The offer represents a premium of 67% to Turquoise Hill’s closing price of C$25.68 per share on 11 March 2022, being the day before Rio Tinto’s initial public non-binding proposal to acquire the firm.

It also represents a 125% premium on Turquoise Hill’s closing price of C$19.12 per share on 24 January 2022, the day prior to Rio Tinto, Turquoise Hill and the Mongolian Government’s agreement towards the commencement of the Oyu Tolgoi underground mine.

“The transaction simplifies the ownership structure of Oyu Tolgoi and enables Rio Tinto to focus on working in partnership directly with Erdenes Oyu Tolgoi and the Government of Mongolia to create long-term value for all stakeholders,” said Rio Tinto CEO Bold Baatar.

“Turquoise Hill minority shareholders will realise a significant and immediate cash premium for their shares at a time when uncertainties inherent in the development of the underground operations remain.”

The transaction will require the approval of 66.67% of votes cast by Turquoise Hill shareholders and the approval of a simple majority of the votes cast by minority shareholders of Turquoise Hill.

The deal is scheduled for a shareholder vote at a special meeting in Q4 2022, with the agreement expected to close shortly after if approved.

“Rio Tinto is committed to moving Oyu Tolgoi forward in direct partnership with the Government of Mongolia to realise its full potential for all stakeholders,” said Rio Tinto CEO Jakob Stausholm.

“This agreement represents another significant step following the recent commencement of the underground operations, and will simplify governance, improve efficiency and create greater certainty of funding for the long-term success of the Oyu Tolgoi project.”

WPP acquires Dutch ecommerce consultancy Newcraft

Natasha Doris
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0
WPP acquires Dutch ecommerce consultancy Newcraft

WPP shares dipped 1.9% to 729.5p in early morning trading on Thursday, after the group announced its acquisition of Dutch ecommerce consultancy company Newcraft for an unspecified price.

The creative transformation firm said the acquisition would provide access to business opportunities for its global clients, including Ahold Delhaize, Pon Holdings, Yakult and JDE Peet’s.

According to WPP, Newcraft “supports organisations in realising change, reaching growth targets and mastering digital capabilities.”

The business employs 155 staff, and will join the Wunderman Thompson global network to complement its commerce and marketing services in Northern Europe.

“We are very excited to start this new chapter. When we look back at the past 15 years, we’re extremely proud of the strong company we’ve created: we’ve built very talented teams; a dynamic and open culture; and an impressive track record with our clients,” said Newcraft director and founder Martijn Haanappel.

“By joining WPP and the Wunderman Thompson network we have found the perfect match to start the next phase of our growth ambition. Combining our digital acceleration capabilities with Wunderman Thompson’s market-leading commerce expertise will undoubtedly lead to amazing opportunities for both our people and clients.”  

WPP confirmed the acquisition would strengthen its digital commerce capabilities as part of its ongoing growth strategy, reflecting the company’s investments into its commerce offer for clients to evolve with consumer needs.

“With consumer behaviours and use of new ecommerce channels continuing to change at a rapid pace, brands need innovative solutions to reach customers and new audiences,” said WPP CEO Mark Read.

“As we continue to invest in growth areas, Newcraft’s extensive experience of transforming the digital offering of some of Europe’s leading companies will further strengthen our global commerce proposition and drive results for clients.”

The marketing group currently manages $40 billion in direct and $20 billion in marketplace GMV for clients, and employs 13,500 commerce specialists across its agencies.

House price growth slows to 10% in August as energy prices spike

Natasha Doris
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0
House price growth slows to 10% in August as energy prices spike

Annual house price growth slowed to 10% in August from 11% in July, according to the latest report from Nationwide.

The average house in the UK rose to £273,751 against £271,209 month-on-month, representing an almost £50,000 price growth in the past two years.

There were early signs the housing market is losing steam, with surveyors confirming a drop in new buyer enquiries in recent months and the level of mortgage approvals sliding below pre-Covid numbers.

Nationwide noted the slowdown had been rather minor, keeping housing price growth robust in combination with a short supply of properties for sale on the market.

However, the organisation said the combination of rising interest rates and the cost of living crisis would probably throw cold water on housing demand in the coming months.

“We expect the market to slow further as pressure on household budgets intensifies in the coming quarters, with inflation set remain in double digits into next year,” said Nationwide chief economist Robert Gardner.

“Moreover, the Bank of England is widely expected to continue raising interest rates, which will also exert a cooling impact on the market if this feeds through to mortgage rates, which have already increased noticeably in recent months.”

Energy price cap adds pressure

The 80% rise in the energy price cap is set to devour consumer budgets as winter approaches, however even the average £3,545 per year energy bill might not keep the housing market suppressed for long.

“The energy cap rise will eat into disposable income, making it harder for buyers to save for a deposit – and fast-rising rents are not offering any relief and could keep some buyers in the hunt for a home for longer than they would like,” said interactive investor senior personal finance analyst Myron Jobson.

“But even though the housing market is slowing, it is nowhere near a crash.  Strong demand for homes far outstripping available housing inventory means the housing market remains a difficult one for wannabe homeowners and those looking to climb up the property ladder.”

“After a period of stratospheric growth, it could be some time before we see steep declines in house prices. The supply-and-demand imbalance isn’t going away, even though the red-hot housing market has cooled in recent months.”

Dalata Hotel Group swings back to €52m profit on post-Covid recovery

Natasha Doris
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0
Dalata Hotel Group swings back to €52m profit on post-Covid recovery

Dalata Hotel Group shares increased 3.2% to 305p in late afternoon trading on Wednesday, after the company reported a revenue surge to €220.2 million in HY1 2022 against €39.6 million the last year.

The hotel firm announced an adjusted EBITDA of €83.5 million from €1.4 million linked to the reopening of the hotel industry following Covid-19 lockdown restrictions.

Dalata Hotel Group confirmed a pre-tax profit of €52 million compared to a loss of €37.8 million year-on-year, alongside a post-tax profit of €46.7 million from a loss of €30.4 million the year before.

“Irish hotelier Dalata is back in profit amid a recovery in tourism following the pandemic. More impressive was the fact it had comfortably outmatched its pre-pandemic performance back in 2019,” said AJ Bell investment director Russ Mould.

“The concern will be that this is just a short-term respite given rising costs and a cost of living crisis hitting discretionary spend.”

“Dalata is doing what it can over the things it can control, fixing its energy costs for the second half of the year and ensuring its procurement and operating systems are working as efficiently as possible.”

The company noted a basic EPS of 13.1c against a loss per share of 14.5c in HY1 2021.

The group highlighted owned assets of €1.3 billion, with a portfolio of leased assets which historically contributed strong cash flow for reinvestment.

“The first half of 2022 was a period of strong recovery after the lifting of Covid related restrictions at the end of January. The year to date has also been very busy on the development front with the addition of six hotels (1,600 rooms) across four cities. This includes our first exciting step into continental Europe as we entered the lease for Hotel Nikko Düsseldorf. Despite a challenging start to the year, we delivered revenues of €220.2 million for the period, exceeding the levels achieved in the first half of 2019,” said Dalata Hotel Group CEO Dermot Crowley.

“Over the last two years, financial stability has been a key focus for our team. I am especially happy to report that our Balance Sheet has significantly strengthened since the start of the year which ensures we have the capability to exploit opportunities to expand the portfolio further.”

“We continue to explore innovative and new ways in which we operate our hotels for the benefit of all stakeholders and are conscious of the need to mitigate the impact of inflation on our cost base. While technology will play a crucial role in managing costs going forward, the interest rate on our term debt to October 2024 is fixed and 60% of our rent is fixed until 2026, which will support us in the period ahead.”

Dalata Hotel Group did not declare a dividend for the interim financial term.

US regulators to vet Chinese firms’ audits, Reuters reports

Natasha Doris
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0
US regulators to vet Chinese firms’ audits, Reuters reports

US regulators have selected e-commerce companies Alibaba Group Holding and JD.com among its selection of US-listed Chinese firms for audit inspection starting from September, according to an exclusive report from Reuters.

The news organisation cited people with information of the situation. The report follows a landmark audit agreement between Beijing and Washington last Friday, which allows US regulators to vet accounting firms based in mainland China and Hong Kong.

The move marks a significant step towards ending a long-running disagreement that threatened to kick over 200 Chinese companies off the US stock exchanges.

Companies included in the initial slate of Chinese companies to have their audits inspected by US public watchdog the Public Company Accounting Oversight Board (PCAOB) apparently include Chinese KFC and Pizza Hut restaurant owners Yum China Holdings.

Reuters confirmed their unidentified source noted the respective accounting firms of Alibaba, JD.com and Yum China have been alerted to the inspection.

Alibaba currently stands as the most valuable Chinese company listed on the US market, with a value of $248 billion.

The new agreement comes after more than a decade of US regulators hammering on China’s door for access to audit the papers of US-listed Chinese companies, however Chinese authorities have previously denied any access to national accounting firms by US regulators, citing security concerns.

US regulations state any Chinese companies which fail compliance with audit working papers requests will be suspended from trading in the US from early 2024.

Reuters said it could not confirm how many and which other Chinese firms were scheduled in the first selection of US inspections at the time of writing.

FTSE 100 sinks into the red as oil prices fall

Natasha Doris
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0
FTSE 100 sinks into the red as oil prices fall

The FTSE 100 was impacted by falling oil prices on Wednesday, sending the blue chip index deep into the red.

Brent crude fell 3.6% to $95 per barrel on rising recession concerns, with oil giants spiralling to the bottom of the index.

Shell shares slid 3.5% to 2,257.5p and BP shares dropped 3.5% to 433.2p.

Utilities companies took a hit, with National Grid shares falling 4.1% to 1,077.5p, Centrica decreasing 2.3% to 74.7p and SSE decreasing 2.5% to 1,668p.

Food prices accelerate

Food prices continued to accelerate at alarming rates, exacerbating cost of living fears as households across the UK faced the horrible decision between heating and eating as grocery and energy prices crushed consumer budgets from all sides.

“Food price inflation continues to be an accompanying problem to soaring energy bills with the latest data revealing, somewhat alarmingly, that prices for fresh food are rising at their fastest level since the Great Financial Crisis,” said Mould.

Tesco shares fell 0.8% to 248.9p, Sainsbury’s slid 0.8% to 204p and Associated British Foods dropped 1.8% to 1,513.7p.

US Futures Steady

Meanwhile, US futures seemed steady despite US Fed chair Jerome Powell’s hawkish stance at the Jackson Hole convention last week, with aggressive interest rate hikes looming on the horizon.

“The big economic announcements later this week come from the US and include PMI figures and the latest jobs report,” said Mould.

“While both are typically influential on markets, this time round the firmness of Federal Reserve chair Jerome Powell’s hawkish stance at Jackson Hole means it could take a real surprise to alter the market’s trajectory.”

The Dow Jones was flat at 31,777 in pre-open trading, with the S&P 500 gaining 0.1% to 3,994.7 and the NASDAQ climbing 0.6% to 12,437.7.

European Markets

European markets opened to a rough day of trading after Russian energy group Gazprom turned off the tap for Nord Stream 1 to Germany.

The shutdown was announced earlier in August, with the company citing maintenance works as its reason for gas flow suspension. The move sent markets into decline as Europe braced for three days without gas supplies from Russia.

The German DAX dropped 0.6% to 12,882.6, the French CAC fell 0.9% to 6,153.7 and the Italian FTSE MIB slid 0.8% to 21,644.7.

However, some good news arrived as analysts noted European countries were stockpiling energy for winter ahead of schedule, easing some pressure from the continent ahead of a difficult season.

“A fall in wholesale gas prices yesterday, as European storage targets were met early, provided some hope that the current energy crisis might ease slightly,” said AJ Bell investment director Russ Mould.

“However, as we move out of the summer period into autumn and winter the pressures here are only likely to get more acute.”

AIM movers: Positive erectile dysfunction news from Futura and Shoe Zone continues to surprise

Andrew Hore
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AIM movers: Positive erectile dysfunction news from Futura and Shoe Zone continues to surprise

Futura Medical (LON: FUM) says that the clinical study for the MED3000 topical gel erectile dysfunction treatment has met its primary and secondary endpoints. They showed an improvement in erectile function and a highly statistic improvement in the onset of action at 10 minutes. There were limited side effects with 4.3% of patient suffering headaches and a further 4.3% nausea, which is much better than rival treatment tadalafil. The next move is submitting MED3000 for FDA review as a De Novo medical device for the over-the-counter treatment of erectile dysfunction. This could lead to marketing authorisation by the first quarter of 2023. MED3000 has received the UKCA mark. Cooper Consumer Health has the exclusive licence for the commercialisation of MED3000 in the UK and the EU. The share price has fallen back from its high for the day, but it is still 16.2% higher at 43p.

Footwear retailer Shoe Zone (LON: SHOE) has made another positive trading update thanks to its focus on affordable shoes and raised 2021-22 pre-tax profit guidance from £9.5m to £10.5m. Strong trading in August, helped by the return to school, and cost management have improved the expected profit. Zeus estimates earnings of 16.8p a share. That leaves the 6.8p a share dividend forecast well covered. The share price rose 5.17% to 152.5p.

Alien Metals (LON: UFO) has granted Anglo American an exclusive right to negotiate and agree terms for up to $15m in funding and 100% of the offtake from the Hancock iron ore project in Western Australia. Anglo American will receive a royalty for 24 months. The terms are indicative. Conditions include that Alien Metals has to raise $5m in new equity. Alien Metals shares have jumped 17.4% to 0.675p.  

Nanosynth Group (LON: NNN) shares are higher for the second day running following successful trail results with Volz Holdings concerning the use of the company’s antiviral technology in heating, ventilation and air conditioning units. UK regulatory approval will enable production of up to 100 tonnes of copper oxide nano material a year. The share price rose 16.5% to 0.6p.

Egg-free cakes retailer Cake Box (LON: CBOX) says trading is becoming more difficult and only part of the cost increases are being passed to franchisees. Sales are also under pressure with a like-for-like decline of 2.8% so far in this financial year. This means that full year profit will be much lower than the £7.2m expected. There is £6.7m in cash, although the £2m dividend will be paid in September. Cake Box is the worst performer of the say with a 40.2% slump to 107p.

AxisBiotix-PS revenues remain modest and SkinBioTherapeutics (LON: SBTX) shares have declined by 13.8% to 18.75p. A global partner is being sought for AxisBiotix-PS. The psoriasis treatment generated £75,000 in eight months. That is not doing much to reduce the cash outflow of the business. There was £1.8m in cash at the end of June 2022, down from £4.6m 12 months earlier. A cash raising is inevitable. There is positive news about the company’s oral health product and the optimal bacteria/lysate mix is being assessed prior to human studies. There could be good news to come from Croda, which is SkinBioTherapeutics’ partner in the cosmetics sector.

ECO Animal Health (LON: EAH) had already warned that it made a slow start to the current financial year and that it would have to provide for a potential sales tax liability on exports. Yet the share price fell another 6.95%% to 87p when the 2021-22 results were released. The share price has fallen by one-third since the original profit warning. The results themselves were not a great surprise because the 22% decline in revenues and slump in profit was expected. Low Chinese hog prices are hampering demand for antibiotics, such as Aivlosin. The business is growing outside of China.

Independent directors of market research firm System1 Group (LON: SYS1) are conducting a strategic review. This will assess whether the company can grow faster if partners or external investor are brought in. The proposed tender offer is being postponed. The share price has fallen 12% to 220p

Cancer diagnostics developer Oncimmune Holdings (LON: ONC) is delaying its 12-month results. The year end is being changed from ay to August, so the full financial period will be 15 months. The shares declined by 8% to 88.9p.

Co-op sells petrol stations to Asda for £600m

Natasha Doris
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0
Co-op sells petrol stations to Asda for £600m

The Co-operative Group has agreed to sell a selection of locations including its petrol stations to Asda for £600 million.

The transaction will see Asda acquire 132 locations from the Co-op for a cash value of £438 million and an additional expense of £162 million for IFRS16 lease liabilities.

The deal comes as part of Asda’s growth strategy to move into the convenience market, which includes 129 established sites with a grocery store between 1,500 and 3,000 square feet and an attached petrol station.

Asda confirmed the agreement would be financed through a combination of existing cash resources and bank finance.

The stores included in the deal delivered net sales of £863 million and pro forma EBITDA of £53 million for the 12 months to June 2022.

“We have always been clear in our ambition to grow Asda and are hugely excited to create this new and distinct part of our business, giving us the opportunity to bring Asda value in fuel and groceries to even more customers and communities across the UK,” said Asda co-owner Mohsin Issa.

“We see convenience as a significant growth opportunity for the business. This acquisition accelerates our strategy in this area and forms part of our long-term ambition to become the UK’s second largest supermarket.”

“We look forward to welcoming the Co-op colleagues to this new part of our business after we complete the transaction and due processes in the coming months.”

Polarean Imaging operational loss widens to $6.6m on product launch costs

Natasha Doris
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0
Polarean Imaging operational loss widens to $6.6m on product launch costs

Polarean Imaging shares dropped 2.6% to 60.8p in late morning trading on Wednesday, after the firm announced a gross profit decrease to $294,840 in HY1 2022 from $298,689 in the previous year.

The company reported a revenue growth to $834,087 against $621,874, as a result of its polariser systems sales to McMaster University in Ontario, Canada and the Cincinnati Children’s Medical Centre.

Polarean Imaging confirmed a rise in administrative expenses to $1.4 million from $1.2 million due to infrastructure building expenses to support the launch of its product, along with a cost of sales climb to $539,247 compared to $323,185.

The firm highlighted a loss from operations climb to $6.6 million from $5.2 million last year, and a loss on ordinary activities before tax of $6.9 million against $4.8 million.

Operating expenses rose to $7 million against $5.5 million on the back of higher regulatory costs to support the resubmission of its New Drug Application (NDA) for the firm’s drug-device combination.

The group mentioned net cash of $22.7 million as of 30 June 2022, which Polarean Imaging said could finance the company into 2024 “based on strategic decisions.”

Polarean Imaging noted a basic and fully diluted loss per share of 3.3c from 2.6c year-on-year.

“During the first half of this year, we have focused on the approval process of our NDA, and addressing the findings related to the CRL. The FDA processes are proceeding with question and answer and other interactions with the FDA as we approach our goal action date of 30 September 2022,” said Polarean Imaging CEO Richard Hullihen.

“We have also made appropriate progress on our commercialisation planning activities, which include medical engagement of pulmonology and radiology thought-leaders at scientific conferences, profiling of our target top-tier academic institutions, and reimbursement code investigation and applications.”

“We are excited to welcome our latest new researchers and sites, while renewing the capabilities of existing users, which continue to increase clinical research momentum.”

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