Lloyds shares: is now a wise time to buy?

Natasha Doris
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Lloyds shares: is now a wise time to buy?

Lloyds shares are never absent from the blue chip spotlight, however the collective market magnifying glass has intensified this week on the release of the latest UK inflation data, which revealed the economy had hit the dreaded double-digits at 10.1% nationwide inflation.

Interest rates are currently at 1.75% and set to rise further, if the speed of UK inflation is anything to go by. While higher interest rates mean higher returns on loans for Lloyds, it also means a slowing housing market, spelling a potential stumbling block for the UK’s biggest mortgage lender.

Meanwhile, sky high inflation means Lloyds has had to set aside some finance to absorb the impact of bad debts as the cost of living bites and credit card borrowing hits surging heights.

However, Lloyds currently has a net interest margin of 2.66% and a projected net interest margin of over 2.8% in FY 2022, reflecting positive news for Lloyds share price as higher interest income bolsters the bank’s income statement.

Lloyds shares

Lloyds shares have fallen 4.5% year-to-date, highlighting a potentially attractive opportunity to snap up a household favourite share.

The banking giant offers an attractive yield of 4.4% and a strong dividend cover of 3.9, giving investors adequate confidence in Lloyds’ ability to pay out its dividend even factoring in potential market shocks.

On that point, the bank has an enviable CET1 ratio of 14.7%, signalling adequate security in case of a huge market crash.

However, Lloyds has a current PE ratio of 5.9 and a forward PE ratio of 6.4, suggesting analysts expect a drop in earnings in the coming months as the cost of living squeeze hits consumer pockets, and consequently Lloyds’ profit margins. Fewer houses bought, more loans defaulted on, and potential trouble for the company ahead.

Regardless, Lloyds shares have benefited from the bank’s strong results, alongside its generous share buyback schedule, including its £2 billion buyback launched on February 2022. Lloyds had completed £1.3 billion in share buybacks by 30 June this year.

The coming times ahead are unlikely to be comfortable for most companies going forward, and with a recession looming on the horizon, stocks big and small are set to take a hit.

Lloyds shares appear to be in a decent position to manage the market turbulence, however, and still look like a solid income choice for the close of summer.

US initial jobless claims fall to 250,000 as labour market remains tight

Natasha Doris
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US initial jobless claims fall to 250,000 as labour market remains tight

US initial jobless claims fell by 2,000 to reach 250,000 in the last week as the American labour market remained tight, marking the first dip in three weeks.

The figures from the previous week were revised down by 10,000 to 252,000 from a prior estimate of 262,000.

The US Labour Department confirmed a four-week moving average of 246,750, representing a decline of 2,750 from the last week’s revised average, while the previous week’s average was revised down by 2,500 to 249,500 against 252,000.

AI prospects for Intelligent Ultrasound

Andrew Hore
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AI prospects for Intelligent Ultrasound

The ultrasound trading operations of Intelligent Ultrasound (LON: IUG) had a strong first half and artificial intelligence (AI) revenues are starting to build. Longer-term, the AI operations will become increasingly important and provide a route to profitable growth.
Intelligent Ultrasound has developed and sells ultrasound simulation training equipment. This has been a steadily growing revenue generator for the company and it should continue to grow, but the rpid growth will come from AI.
There are two core ScanNav AI platforms: Assist for automated image analysis and Anatomy for automated an...

FTSE 100 flat as ‘big names’ trade ex-dividend

Natasha Doris
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0
FTSE 100 flat as ‘big names’ trade ex-dividend

A quiet Thursday saw the FTSE 100 trade sideways as investors appeared subdued following shocking inflation figures yesterday, which saw UK inflation hit the dreaded double-digit level at 10.1% in July.

Meanwhile, a slate of blue chip companies traded ex-dividend, sending Anglo American shares falling 2.4% to 2,893.7p, GSK dipping 0.3% to 1,410.2p and Aviva down 4.1% to 439.6p.

Additionally, M&G shares decreased 2.6% to 208.1p, Hikma Pharmaceuticals fell 3% to 1,444.5p and Legal & General slid 3.8% to 271.3p.

“After yesterday’s UK inflation figure shock, it’s no wonder investors weren’t feeling too hungry for equities on Thursday. European markets didn’t want to get out of bed, with minimal movements across the main indices,” said AJ Bell financial analyst Danni Hewson.

“The FTSE 100 was dragged down by some big names trading without the rights to their next dividend.”

Inflation sparks potential interest rates hike

Yesterday’s inflation data also sparked speculation that the Bank of England would move with more aggression in its next interest rates decision.

The UK economy reached double-digits far ahead of spring estimates, which reported estimates of the bone-chilling mark by October this year. However, recent revisions hiked inflation predictions to 13% by October, with a potential recession looming on the horizon.

Unlike the US, which reported lowered inflation of 8.5% from 9.1% the month before on lower energy expenses, the UK has shown no sign of prices slowing down, with energy prices yanking the cost of living higher for consumers going forward into a cold, harsh winter.

“The inflation reading will only add to conviction that the Bank of England will hike rates a further 50 basis points at the next opportunity – providing consumers with a double whammy of rising food and energy bills as well as higher mortgage costs,” said Hewson following the inflation figures on Wednesday.

AIM movers: Angling Direct second quarter decline and ex-dividends

Andrew Hore
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AIM movers: Angling Direct second quarter decline and ex-dividends

Fishing equipment retailer Angling Direct (LON: ANG) increased interim revenues by 1% to £38.9m, but they weakened in the second quarter and management says that full year revenues will be lower than previous guidance of £82m. That will lead to a sharp reduction in expected EBITDA to between £3m and £3.4m. In the six months to July 2022, retail store sales grew by 10%, but online revenues declined by 8%. That is not a surprise because there were restrictions in the comparative period. European sales are growing following the opening of a new distribution centre, though. The share price slumped 17.8% to 30p.

Touch sensors manufacturer Zytronic (LON: ZYT) says that orders have been hit by availability and cost of materials and electronic components. Full year revenues are expected to be around £12.3m, compared with previous expectations of £13.8m. Pre-tax profit was expected to more than double from £453,000 to £1m and it is still expected to increase, but it will be much lower than previously expected. There should still be £6m in cash at the end of September 2022. The share price fell 8.77% to 130p.

Eyewear and lens manufacturer Inspecs (LON: SPEC) moved back into profit in the first half of 2022, but it is cautious about its UK and European markets even though order books are ahead of last year. Revenues improved from $125.7m to $138.4m and the reported pre-tax profit is £800,000. European sales were ahead of budget in the first half, but Inspecs reports in US dollars and the decline in the Euro lowered reported sales. There was a 8.75% fall in the shares to 219p.

Shares in Bens Creek (LON: BEN) have fallen 5.22% to 31.75p, after the coal miner raised £6m at 30p a share. There are plans for the company to undertake its own mining instead of using a contractor and increase production. The cash will pay deposits on new equipment.

Agricultural products supplier and retailer Wynnstay Group (LON: WYN) raised £10.5m in a placing at 560p a share, which was above the minimum price indicated of 550p a share. The share price has fallen 4.52% to 592p. The plan is to redevelop the Calne feeds site that came with an acquisition earlier this year. This can be developed into a feed mill with a 185,000 metric tonne capacity that produces poultry and ruminant feed. There are also opportunities for further acquisitions.

Invinity Energy Systems (LON: IES) has delivered and installed a 1.8MWh VS3 flow battery system at the European Marine Energy Centre hydrogen R&D facility in the Orkney Islands. This has 48 VS3 battery modules, which should be enough to power more than 210 UK households. The system will be combined with tidal generation. The share price continued its upward trajectory, rising 17.6% to 53.5p.

Events agency Aeorema Communications (LON: AEO) says its profit will be higher than expected on more than doubled revenues in the year to June 2022. A loss of £160,000 last year will be turned into a pre-tax profit of at least £830,000 – £700,000 was previously expected. A new office has been opened in Amsterdam. The shares jumped 17.2% to 78.5p.

Shares in Empire Metals Ltd (LON: EEE) have risen 9.76% to 1.125p on the back of the airborne magnetic survey at the Pitfield copper gold project in Western Australia. A significant structure has been interpreted that aligns with the surface anomaly previously identified in the 1990s. This will help to target areas with the highest exploration potential. The detailed analysis will be received in the next few weeks.

Pantheon Resources (LON: PANR) has successfully drilled the horizontal section of the Alkaid #2 well in Alaska, with the lateral section extending 5,300 feet. The well is now ready for fracking. There could be an increase in the pre-drill oil in place and recoverable oil estimate. The shares are 5.86% higher at 134.65p.

Ex-dividends

Atalaya Mining (LON: ATYM) is paying a dividend of 3p a share and the share price is 1p lower at 239p.

Eneraqua Technologies (LON: ETP) is paying a maiden dividend of 1p a share and the share price rose 3p to 300p.

Jarvis Securities (LON: JIM) is paying a quarterly dividend of 3p a share and the share price fell 1p to 164p.

Mincon Group (LON: MCON) is paying an interim dividend of 1.05 eurocents and the share price is unchanged at 95p.

Rotala (LON: ROL) is paying an interim dividend of 0.5p a share and the share price and the share price is unchanged at 34.5p.

UK government blocks Pulsic takeover by Super Orange HK on national security grounds

Natasha Doris
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UK government blocks Pulsic takeover by Super Orange HK on national security grounds

The UK government blocked the acquisition of UK group Pulsic by Hong Kong company Super Orange HK on national security concerns on Wednesday.

The announcement was made by the Secretary of State for Business, Energy and Industrial Strategy, who prevented the merger under section 26 of the National Security Investment Act 2021.

According to the statement, the Secretary considered the agreement a risk to national security due to “the application of the intellectual property, knowledge, processes and techniques for the software developed and owned by the Qualifying Entity for the electronic design automation (EDA) products, to facilitate the building of cutting-edge integrated circuits that could be used in a civilian or military supply chain.”

Additionally, the UK government reported concerns that the EDA tools could potentially be used to introduce new features into the design that could be used to build defence or technological capabilities automatically and without user authorisation.

“Those risks would arise on the transfer of the Qualifying Entity and the Asset to the Acquirer,” said the Secretary.

The government said it considered the final order against the transaction “necessary and proportionate” to mitigate the national security risk.

Made.com confirms possible equity capital raise

Natasha Doris
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Made.com confirms possible equity capital raise

Made.com shares fell 10.4% to 8.8p in late morning trading on Thursday after the furniture group confirmed speculation that it was considering a potential equity capital raise to “strengthen its balance sheet.”

“Turns out that selling on-trend but relatively pricey furniture is not a great model in the current economic environment,” said AJ Bell financial analyst Danni Hewson.

“Online furniture retailer Made.com looks like it is being forced to pursue an emergency fundraise, which had been euphemistically hinted at in a statement a month ago when it said it was ‘exploring ways to strengthen its financial position.'”

The company said it would be pursuing a range of possible options to return its finances to decent health, and would announce any further decisions or strategies to investors.

“Investors have seen the shares lose more than 90% of their value and may be reluctant to put good money after bad, although if they want to protect some continuing value in their investment they may have little choice,” said Hewson.

“In different times Made.com might have been a decent proposition, and it has continued to win market share, but now it faces a desperate scramble to reduce costs in order to keep the lights on. Made.com needs to sort out inventory issues – effectively clearing out excess stock by selling at a discount – and hope this doesn’t undermine the brand and make it difficult to sell at full price in the future.”

“The company has to make sure it gets the basics of retail – holding the right amount of stock while still having what customers want, when they want it – spot on in the future as it is likely to have very little margin for error.”

Rank Group swings to £82.1m pre-tax profit as venues reopen post-Covid

Natasha Doris
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0
Rank Group swings to £82.1m pre-tax profit as venues reopen post-Covid

Rank Group shares decreased 2.3% to 85.9p in late morning trading on Thursday after the gaming company revised its underlying operating profit lower to £40 million in FY 2022 following poor performance across its Grosvenor venues.

The company reached an underlying operating profit of £40.4 million, in line with its downward revised guidance.

Rank Group swung to a pre-tax profit of £82.1 million against a loss of £92.9 million the last year, alongside a post-tax profit of £66.2 million compared to loss of £72 million as venues reopened after Covid-19.

Meanwhile, the entertainment firm reduced its net debt to £162.6 million from £256.7 million.

The company reported an EPS of 14.2p against a loss per share of 16.5p the last year.

“It was a challenging year for our UK venues businesses, with unexpectedly softer trading across the Grosvenor estate in the second half of the year. Our nine London casinos, which account for over 38% of Grosvenor’s revenue in normal trading conditions, have seen very weak customer volumes with overseas visitors few in number, and only starting to return in the final few weeks of the year. The lower than expected Grosvenor trading in H2 led us to reset full year operating profit expectations as announced in Q4,” said Rank Group CEO John O’Reilly.

“Whilst we have been seeing improvements in London in recent weeks, the trading environment across the UK is likely to remain difficult in the months ahead with inflationary pressures squeezing consumer discretionary expenditure and cost increases, particularly in energy prices, putting pressure on profit margins.”

“However, we are taking actions to drive further efficiencies in the venues businesses, and we are seeing strong revenue growth in properties which have recently benefitted from our accelerated capital investment programme.”

Rank Group did not recommend a dividend for FY 2022.

B&M appoints Oliver Tant as non-executive director

Natasha Doris
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0
B&M appoints Oliver Tant as non-executive director

B&M announced the appointment of Oliver Tant as non-executive director to the company on Thursday.

Tant is set to take up the position on 1 November 2022, and will also succeed Ron McMillan as chair of the Audit & Risk Committee in July 2023 and join the Nomination Committee.

McMillan is scheduled to resign after nine years as a non-executive director from the B&M board.

Tant’s previous work experience includes a term as Imperial Brands CFO from 2013 to 2021, and his present role as non-executive director and Audit Committee chair designate of Redrow.

He is also currently positioned at Brookfield Asset Management as a financial consultant at portfolio company Modulaire Group.

“I am delighted that Oliver has agreed to join the Board of B&M. His previous roles at Imperial Brands and KPMG give the combined experience of a Big Four audit partner with eight years as CFO of a FTSE 100 business,” said B&M chairman Peter Bamford.

“I am sure that he will add a great deal of value both as a Non-Executive Director and in his future role as Audit & Risk Committee Chair.”

“Ron has been an outstanding Chair of the Audit & Risk Committee and has played a critical role in the successful transition of B&M from IPO in 2014 to a FTSE 100 company. However, it is now right that we plan for his succession. On behalf of the Board, I would like to thank Ron for his service to B&M and look forward to working with him over the remaining period of his directorship.” 

B&M shares fell 1% to 418.6 in early morning trading on Thursday.

Helios Towers revenue grows 25% on slate of African acquisitions

Natasha Doris
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0
Helios Towers revenue grows 25% on slate of African acquisitions

Helios Towers shares rose 1% to 136.5p in early morning trading on Thursday after the telecommunications firm reported an 25% revenue growth to $265.4 million from $212.4 million in HY1 2022.

Helios Towers said its revenue increase was driven by acquisitions in Senegal, Madagascar and Malawi, along with strong organic tenancy growth, CPI and climbing power prices.

The UK-based group announced a 19% adjusted EBITDA climb to $136.1 million against $114.2 million as a result of revenue growth and higher fuel costs in the DRC across Q2.

Meanwhile, Helios Towers noted a 48% operating profit surge to $39.8 million compared to $26.9 million on the back of increased revenue, offset by a rise in administrative expenses linked to the firm’s expansion.

However, pre-tax loss increased to $122.2 million compared to $83.8 million, on the back of year-on-year growth in non-cash expenses from fair value movements of the embedded derivatives in the company’s bond and foreign exchange movements on Euro and US dollar denominated intercompany borrowings.

The group confirmed a 38% net debt rise to $1 billion from $786 million the year before.

“We have delivered strong organic tenancy growth in the first half of the year, which combined with the successful integration of acquired assets in Senegal, Madagascar and Malawi has resulted in impressive year-on-year financial performance,” said Helios Towers CEO Tom Greenwood.

“Despite broader global macroeconomic uncertainty, our uniquely positioned platform, highly visible base of quality earnings and unparalleled structural growth continues to drive sustainable value creation for all of our stakeholders.”

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