ITV revenue grows 8%, investment in ITVX climbs

Natasha Doris
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ITV revenue grows 8%, investment in ITVX climbs

ITV shares rose 2.5% to 73.2p in early morning trading on Thursday following a reported an 8% revenue growth to £1.6 billion, with a 16% total ITV Studios revenue climb to £927.

The entertainment firm announced a 4% uptick in Media and Entertainment revenue to £1 billion, along with a 5% total advertising revenue increase and a 20% rise in digital advertising revenue.

However, its rising revenue was offset by scaled-up investment in ITV’s new ambitious streaming platform ITVX, which is projected to deliver at least £750 million in digital revenues by 2026.

ITV mentioned a group adjusted EBITA of £228 £318 million from £327 million, alongside a pre-tax profit of £219 million against £133 million year-on-year.

“Profitability is being supported by costs cuts, which can’t continue forever. Increased health and safety protocols from Covid are looking pretty permanent, and sets are clunky and expensive places to run at the best of times,” said Hargreaves Lansdown equity analyst Sophie Lund-Yates.

“The ambition is an admirable one, so now the scrutiny turns to one of execution. The division is likely to enjoy growth, but profits are less likely to shoot the lights out.”

The group commented it was “mindful of macroeconomic and geopolitical uncertainty”, and anticipated a total advertising revenue drop of 9% in July and 18% in August from the last year, in line with management expecations.

ITV confirmed the fall reflected the tough comparisons with the year before, when the firm broadcast the Euros.

“While grandiose ideas are churning over in the background, ITV is still reliant on traditional advertising revenue in its broadcast business,” said Lund-Yates.

“Supercharged efforts to boost digital TV is helping here, but old-school real-time TV ads still play a big part.”

“The group’s responsible for smash hits like Love Island and also sees marketing teams queuing up when it broadcasts headline sport. But demand is bumpy at best, that’s unlikely to change.”

The company noted a statutory EPS of 4.8p from 2.4p the year before.

ITV reported a dividend of 1.7p per share for the interim term, and reiterated its commitment to a minimum total dividend of 5p for FY 2022.

Shell profits hit $11.5bn, announces $6bn share buyback programme

Natasha Doris
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0
Shell profits hit $11.5bn, announces $6bn share buyback programme

Shell shares rose 1.8% to 2,156.5p in early morning trading on Thursday after the oil giant announced a bumper $11.5 billion profit in Q2 2022, representing a 26% rise against its shattering $9.1 billion intake in Q1 2022.

Shell reported an adjusted EBITDA of $23.1 billion, marking a 22% leap over its $19 billion figure in the prior quarter.

The company attributed its surging income to higher realised prices, higher refining margins and climbing gas and power trading and optimisation results.

However, its skyrocketing intake was partially offset by lower LNG trading and optimisation results.

The energy group’s operating expenses remained almost flat at $9.5 billion compared to $9.4 billion from the last financial term.

Meanwhile, cashflow from operating activities grew 26% to $18.6 billion against $14.8 billion quarter-on-quarter.

The energy firm linked its cashflow to working capital outflow of $4.2 billion, $3.2 billion in tax payments and net derivative outflows of $700 million.

Its working capital outflow was driven by a climb in inventory due to price and volume increases of $6.8 billion, alongside a rise in current receivables, partially offset by an increase in current payables.

Additionally, Shell’s basic EPS shot up to $2.40 against 94c, along with an adjusted EPS of $1.54 compared to $1.20.

Share buyback programme and dividend

Shell confirmed its $8.5 billion share buyback scheme for HY1 2022 was closed on 5 July 2022.

However, the oil and gas firm announced the launch of a $6 billion share buyback programme which is scheduled for completion by Q3 2022.

Shell added that shareholder distributions were expected to remain in excess of 30% of cashflow from operating activities, pending board approval and the current energy sector outlook.

“Shell’s accelerating its share buybacks after another quarter of bumper profit growth as the energy sector continues to ride high on the supply and demand imbalance caused by the crisis in Ukraine,” said Hargreaves Lansdown equity analyst Laura Hoy.

“Strong oil prices are driving Shell’s bumper performance and the group’s pledged to share more than 30% of the windfall with investors.”

The company announced a Q2 dividend of 25c per share.

Tekcapital NAV growth highlights value in share price

UK Investor Magazine
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3
Tekcapital NAV growth highlights value in share price

Tekcapital, the university technology group, have released half year results and highlighted the current value in the Tekcapital share price, when compared to their portfolio’s net asset value.

Tekcapital has built a portfolio of companies based on university technologies that have the potential to make a positive impact on a large number of people’s lives, including foodtech, smart eyewear, and autonomous vehicles.

The increase in book value of their portfolio companies were again the main component of Tekcapital’s total income which was $8m for the six months to 31st May.

The value of Tekcapital’s portfolio increased by 16% to $74.3m in the period as the group prepares to unlock further value from the portfolio through the IPOs of MicroSalt owner, Salarius, and smart eyewear company Lucyd.

Tekcapital CEO, Cliff Gross, outlined Tekcapital’s portfolio companies in their recent presentation at the July UK Investor Magazine Virtual Conference.

Tekcapital’s Discount to Net Asset Value

Tekcapital’s Net Asset Value per share rose to $0.51, a 6% increase from the $0.48 recorded in November last year. This further highlights the current Tekcapital share price discount to their NAV which stands at 33.2% with the GBP/USD rate at 1.21681 and Tekcapital shares at 28p.

With the prospect of the Salarius IPO on the horizon, investors can look forward to another possible boost to the NAV, should the IPO value the MicroSalt owner at a premium to the $7.0m valuation of their 97.2% stake in Salarius Ltd.

From a operational perspective, the Tekcapital CEO pointed to all of their portfolio companies being revenue generating with MicroSalt securing the first bulk order for their SaltMe™ products and the distribution through 3,000 retail stores in the US. This supports the case for a MicroSalt IPO and will likely help secure higher valuations.

Portfolio Progress

Elsewhere in the portfolio, London-listed oxygen device provider, Belluscura, was awarded a distribution and pricing agreement from the US Defense Logistics Agency. Tekcapital notes the agency is one one of the largest buyers in the world, suggesting we could soon see large orders for the X-PLO2R® portable oxygen device. The X-PLOR devices are designed to assist suffers of Chronic Obstructive Pulmonary Disease (COPD).

Tekcapital’s smart eye wear brand, Lucyd, has filed for an IPO on the NASDAQ and has secured distribution from a number of retailers in the US.

Autonomous vehicle safety company Guident has secured a plethora of agreements to roll out their monitoring and safety technology in trials and the testing of autonomous vehicles across the states.

US Federal Reserve hikes interest rates 0.75% as recession alarms ring

Natasha Doris
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US Federal Reserve hikes interest rates 0.75% as recession alarms ring

The US Federal Reserve hiked interest rates 0.75% on Wednesday, hitting a target range between 2.25% to 2.5% in a bid to tackle soaring inflation.

US inflation reached a record height of 9.1% in June this year, ahead of analyst expectations and sparking renewed fears of a recession.

Meanwhile, some market analysts expect the US to announce its second quarterly economic contraction this week.

Federal Reserve chairman Jerome Powell highlighted the institution would potentially confirm another large interest rates rise at its next meeting if inflation showed insufficient evidence of slowing down.

“While another unusually large increase could be appropriate at our next meeting, that is a decision that will depend on the data we get between now and then,” said Federal Reserve chair Jerome Powell.

“My colleagues and I are acutely aware that high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials like food, housing, and transportation.”

“We are highly attentive to the risks high inflation poses to both sides of our mandate, and we are strongly committed to returning inflation to our 2 percent objective.”

Consumer confidence has spiralled in recent months as the war in Ukraine and the aftermath of the Covid-19 pandemic cripple supply chains place resources such as wheat and oil under pressure.

“Although prices for some commodities have turned down recently, the earlier surge in prices of crude oil and other commodities that resulted from Russia’s war on Ukraine has boosted prices for gasoline and food, creating additional upward pressure on inflation,” said Powell.

Dollar lower ahead of US Fed interest rates decision

Natasha Doris
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0
Dollar lower ahead of US Fed interest rates decision

The US Dollar declined from its 20-year record high in advance of the US Federal Reserve’s interest rates decision, which is predicted to see a 0.75% rise in a bid to combat soaring 9.4% inflation across the Atlantic.

According to Reuters, traders are betting on a 0.75% increase with an outside chance of a more extreme move to 1%. Expectations are set for interest rates as high as 3.45 by the end of 2022.

It was the outside bets on extreme rate hikes that drove the Dollar to its 20-year high, at which point it reached parity with the Euro earlier in July.

The Dollar index fell 0.2% to 106.93 at 10:55 GMT. Meanwhile, the Euro gained 0.33% to 1.0149, clawing back some ground from its 1% drop on Tuesday after Russia’s threats to lower gas exports through Nord Stream 1 to 20% saw panic flash across Europe.

FTSE 100 rises on promising earnings from the US and Europe

Natasha Doris
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0
FTSE 100 rises on promising earnings from the US and Europe

The FTSE 100 gained 0.5% to 7,343.8 in early afternoon trading on Wednesday as upbeat earning from the US and Europe helped improve sentiment.

“The FTSE 100 was higher on Wednesday morning, buoyed by some positive corporate results and news from the US overnight as Microsoft and Alphabet reported numbers which were not as bad as some may have feared,” said AJ Bell investment director Russ Mould.

“US stocks had fallen ahead of the tech giants’ earnings thanks to Walmart’s profit warning. Although Microsoft and Google-owner Alphabet were behind expectations, it turned out to be only modestly so.”

US markets were in optimistic territory ahead of the US Federal Reserve’s interest rates decision, with the Dow Jones climbing 0.4% to 31,869 in pre-open trading, the S&P 500 rising 0.8% to 3,956.5 and the NASDAQ gaining 1.3% to 12,276.2.

“All the focus tonight will be on the US Federal Reserve and whether it does or says anything to upset what remains a rather jittery market,” said Mould.

FTSE 100 companies

In the UK, FTSE 100 companies had a strong midweek showing of results, including Smurfit Kappa, Reckitt Benckiser and Lloyds.

Smurfit Kapa shares soared 4.5% to 2,834p after the group reported a double-digit revenue rise in HY1 2022 and a pre-tax profit growth of 86% to €6.3 billion against €4.6 billion the year before.

“Our strong performance is a result of the many actions we have taken over a number of years,” said Smurfit Kappa CEO Tony Smurfit.

“These actions include significant customer-focused investments to meet growth, providing paper-based packaging in the marketplace and selective acquisitions ensuring security of supply to our customers.”

Reckitt Benkiser shares climbed 4.2% to 6,644p following a swing to a pre-tax profit of £1.6 billion in HY1 2022 from a pre-tax loss of £1.9 billion last year, on the back of lower operating costs.

Meanwhile, net operating expenses fell 60% to £2.2 billion compared to £5.6 billion and revenues rose 4.4% to £6.8 billion against £6.6 billion year-on-year linked to rising demand for US Nutrition products due to the infant formula shortages suffered across the Atlantic.

“A short-term boost from a shortage of baby formula in the US, after a shutdown at a competitor, has undoubtedly contributed to the impressive results but there were other positive signs too,” said Mould.

“Sales of cold and flu remedies did well as Covid becomes endemic in many populations. And, in any case, demand for cleaning products and medicines should remain pretty resilient whatever the economic backdrop.”

However, Mould pointed out that the cost of living crisis might see the company’s branded products take a hit as customers weigh up the justification of branded products at a time when household budgets are shrinking.

“The concern for Reckitt will be that squeezed consumers realise they don’t need to pay a few pounds for a box of Nurofen when they can buy unbranded ibuprofen for a fraction of the cost. Or that supermarket-own bleach can do much the same job of cleaning a toilet as Dettol can,” said Mould.

“This will be a significant test for the business and it will be intriguing to see how it responds in the latter half of the year.”

Lloyds shares increased 3.9% to 45.2p as the banking group announced a net income rise of 11% to £8.4 billion for HY1 2022, benefiting from higher interest rates as its mortgage book grew.

However, the company’s pre-tax profit fell 6.4% to £3.6 billion from £3.9 billion year-on-year.

Lloyds reported £377 million set aside to cover a possible rise in loan defaults, reversing a release of £734 million in the previous year.

“Lloyds may have set aside some extra cash to cover the risks associated with bad debts, reflecting a bleaker economic outlook, but on the whole it delivered an excellent set of first half results,” said Mould.

“Lloyds and the other banks have much stronger balance sheets than they did 15 years ago and it still looks well placed to pay out to shareholders through dividends and share buybacks.”

“All Lloyds can do it keep plugging away, making the business more efficient, and hope to see the share price rewarded in time for the progress made.”

In mining results, Rio Tinto shares declined 3.3% to 4,660.2p after the firm decreased its dividend in HY1 2022 to 267c per share, representing a 29% drop.

However, the dividend still marked the company’s second-highest payment on record, despite its otherwise underwhelming financial term.

The group blamed higher operating costs and falling iron demand for its lower returns, with a 10% slide in revenue to $29.7 billion and a pre-tax profit fall of 32% to $12.3 billion.

XLMedia – very positive first-half Trading Update should spur a lot more investor interest, especially with a ‘fair value’ of 98p

Mark Watson-Mitchell
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XLMedia – very positive first-half Trading Update should spur a lot more investor interest, especially with a ‘fair value’ of 98p

This morning XLMedia (LON:XLM) issued a very positive Interim Trading Update for the six months to end June.

Having undergone a quite significant reorganisation of its websites and corporate structure, the group is starting to show through impressively.

This £79m capitalised group, which is a leading global digital publisher, owns and operates websites across a wide variety of industry verticals, including sports betting, gambling, personal finance and more.

It attracts players through online marketing techniques and directs them to gambling operators.

In return the company receives a share of the revenue generated by such players, a fee per player acquired, fixed fees or a mixture of these three income streams.

Obviously, this business model is predominantly performance-based and it aligns itself with the interest and success of the gambling operators.

The company, which is based in Henley-on-Thames, uses a variety of business intelligence tools, in order to track the flow of traffic to its customers and in seeking to identify and target high value consumers for platform operators.

It also uses these tools to analyse the quality and conversion of such traffic into revenue, in order to improve the group’s return on investment, as well as providing high quality services to its affiliates.

The group’s assets, technology, and data are the three components that helps it to continuously deliver highly valuable, engaging, timely, and relevant content to hundreds of millions of customers worldwide.

Examples of some of its websites

The group owns content-rich websites in 18 languages, which alongside its in-house technology and exclusive data makes it one of the strongest players in the industry. 

Each one of the group’s top-ranked websites features an array of informative, premium content.

‘Money Under 30’ is a personal finance portal specializing in financial advice for young adults to make informed decisions about money management.

‘The Dough Roller’ is a leading personal finance site dedicated to guiding users in their investments and securing financial independence.

‘Investor Junkie’ is a leading popular investment education website providing information and reviews of various investment channels and financial products.

‘Young and Thrifty’ is a personal finance site assisting Canadians with their earnings and savings by giving users the tools for easy budget management and investing.

‘Greedyrates’ is one of Canada’s most popular credit card comparison and personal finance site, offering users rich and broad financial information.

‘WhichBingo.co.uk’ is the largest independent online bingo review site in the UK.

‘Nettikasinot.com’ is one of the largest casino review sites that the group operates.

‘Freebets.com’ is one of the leading and trusted UK sports betting affiliate sites, giving users access to bookmakers’ free bet offers and promotions. The team behind the site have significant experience in the online and offline betting industry.

‘101 Great Goals’ is a global football media news publisher with updates on live streaming information, football news, and betting tips.

Excellent client list

The Group has a very impressive and diverse list of global clients, such as 888 Holdings, mr green, Ladbrokes, Paddypower, betway, Unibet, betsson, William Hill, netmarble, souq.com, traveloka, and product madness amongst hundreds of others.

Interesting international shareholders

There are some 262.59m shares in issue, which at last night’s closing price of 30p values the group at £78.78m.

The group’s biggest shareholder is Moise Mitterand, boss of Les Nouveaux Constructeurs, the real estate development business, with 73.48m shares, representing 27.98% of the XLMedia equity.

Grupo Bethia SA, based in Chile, has a 15.16m share stake in the group, some 5.77%. Bethia provides investor and management services, focussing upon the retail, transportation, agriculture, finance, wine real estate and equestrian business sectors.

Larger institutional investors include BlackRock, Henderson Global, Canaccord Genuity Wealth, Fidelity, River & Mercantile, and Santander Asset amongst many others.

Just one of the group’s founder directors, Ory Weihs, has a meaningful stake, with 8.14m shares, 3.10% of the equity.

Today’s Interim Trading Update

For the six months to end June the group expects to report a 38% jump in revenues to $44.5m ($32.2m), while its EBITDA could leap 59% to $10.5m ($6.6m).

Following a quite significant reorganisation of the group and boosted by its newest vertical, US Sports, it has traded very well in the first half year.

US Sports accounted for a substantial 68% of revenue, some $30.2m.

The Group’s European Sports vertical was solid, with a revenue of $3.8m.

While the restructured gaming and bingo vertical saw revenues drop to just $8.4m ($12.5m), at which level it is now stabilising on its reduced cost base, but still continuing to generate cash,

The group’s personal finance vertical saw a severe fall in revenues to $0.8m ($6.6m). This side of the business is now being reorganised to improve performance and revenues.

Analysts View

Simon Strong, analysts at the company’s broker Cenkos Securities, has rated the group’s shares as a Buy.

He stated that the first half results were substantially ahead of expectations, with the strength of the sports betting revenues more than offsetting weaknes elsewhere within the Group.

For the current year to end December his estimates are out there for $69.8m ($66.5m) revenues, with a $16.7m ($11.0m) adjusted pre-tax profits, that would generate 5.6c (5.0c) of earnings per share.

For the coming year he sees a good lift-upwards in revenues to $78.4m, with $19.5m profits and 5.7c per share in earnings.

Conclusion – DCF model shows a 98p ‘fair value’

There has been a great deal of mergers and acquisitions activity in the US sports betting sector over the last couple of years. 

As sports makes up 68% of the group’s revenues it should do extremely well from the growth potential as more States legalise sports betting. 

The group, which now operates in 21 US States and one in Canada, will spread its net even wider. 

Ohio, which is the seventh most populated state, is now expected to permit sports betting from January next year. 

That just has to be good news for XLMedia.

That is when this group’s scalability will really start to show through, as the Cenkos estimates for the coming year clearly indicate.

The group’s earnings are expected to grow significantly over the next three years.

Certain discounted cash flow models indicate that the group’s shares are 68.4% undervalued, suggesting a 98p ‘fair value’, which is impressive.

Less than a year ago the group’s shares were trading at 66.5p, they have since dipped to a low in early March of 24.3p. 

At last night’s 29.5p they are looking ready to show an upward price push, especially after this morning’s Trading Update.

FireAngel Safety Technology Group – broker’s target price of 27p leaves significant upside after today’s Trading Update

Mark Watson-Mitchell
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0
FireAngel Safety Technology Group – broker’s target price of 27p leaves significant upside after today’s Trading Update

Smoke alarms may well be proving their worth during this summer heat period.

Also showing some heat is the FireAngel Safety Technology Group (LON:FA.) whose business is home safety products, such as smoke and carbon monoxide detectors and accessories.

The first-half year’s trading

The group, which sells its products through distributors and retailers to the retail, trade do-it-yourself, fire and rescue service and utilities markets, this morning announced its Trading Update for the six months to the end of June.

The company performed strongly in its first half, better than even its own Management expectations, despite the impact of additional inflationary costs showing through.

It is now looking to get back into profits, positive cash generation and greater sales.

Supply chain disruptions eased across the Period and in Q2 2022, the Company sold a total of approximately 1.4 million units, against a supply-constrained total of 1.0 million in Q1 2022, with 581k products sold in June 2022 alone. 

Furthermore, in Q1 2022, all standard freight from Asia was booked for the balance of the year offering greater certainty of supply.

The group, however, is expecting to better margins coming to the fore in the current quarter and then going forward, especially as the supply of components has eased in the latter part of the first half.

Executive Chairman John Conoley stated that:  

“I am pleased that the Company has delivered solid growth and ended the first half ahead of the Board’s expectations, thereby making good progress against our strategy for improved performance.

“Despite all challenges so far, management action has preserved Company progress in the half, and we are still on track to meet our full year market expectations. The Board continues to expect a materially positive EBITDA performance for FY2022, along with a cash generative second half, thanks to strong product demand driven in part by continued regulation.

Analyst’s estimates

The group’s joint broker, Singer Capital, is looking for the group to end the year at close to break-even, while expecting larger sales next year to push it into significant returns.

For the current year, after this Update, Singer’s analyst Greg Poulton, is estimating £55.7m (£43.5m) sales revenues, with an adjusted pre-tax break even (£3.5m loss), 

The year to end December 2023 is seen by Singer as bringing in £62.0m sales, £3.5m profits and 2.1p earnings per share. 

Poulton rates the group’s shares as a Buy, with a Target Price of 27p per share.

Now that we know that the group has both its component supply and its pricings in a better frame, it gives the market more confidence in how the company is seeing its prospects.

That will soon shine through onto its share price, which closed last night at 11.4p

Considering that Singer Capital is so positive and going for a 27p price aim, FireAngel’s shares look to be heading a great deal higher.

FCA confirms new Consumer Duty for financial services

Natasha Doris
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0
FCA confirms new Consumer Duty for financial services

The Financial Conduct Authority (FCA) announced the introduction of a new Consumer Duty on Wednesday, which is set to raise the standards for how financial firms treat customers.

The Duty will reportedly allocate higher and clearer standards of consumer protection across the financial services industry, with the move coming as part of the FCA’s transformation into a more assertive, data-led regulator.

According to the FCA, the new regulations will require financial firms to end rip-off charges and fees, make it as easy to cancel or switch products as it was to purchase them, and provide customer support in an acceptable timeframe so clients don’t give up and hang up on service representatives before receiving an answer to their question.

The Duty will also mandate that financial services provide timely and clear information for customers to understand products and offerings in full, rather than bury key information in long listings of terms and conditions that few consumers have the time to completely read.

In addition, the FCA confirmed businesses would need to focus on the diverse needs of their customers at every stage and interaction, including those in vulnerable circumstances.

Companies will reportedly have 12 months to implement the new regulations for products and services currently offered to customers, with an extension for closed book products 12 months later to give businesses time to bring older products up to the new rules.

“The current economic climate means it’s more important than ever that consumers are able to make good financial decisions. The financial services industry needs to give people the support and information they need and put their customers first,” said FCA executive director of consumers and competition Sheldon Mills.

“The Consumer Duty will lead to a major shift in financial services and will promote competition and growth based on high standards.”

“As the Duty raises the bar for the firms we regulate, it will prevent some harm from happening and will make it easier for us to act quickly and assertively when we spot new problems.”

Lloyds, Rio Tinto and the European Earnings Season with Alan Green

UK Investor Magazine
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Lloyds, Rio Tinto and the European Earnings Season with Alan Green

We record this Podcast in the midst of earnings season with updates from blue chips companies flooding in from Europe as well as across the pond.

The earnings picture has been mixed, but notably better than investor sentiment would suggest. We discuss upcoming rate hikes from the Fed and market positioning ahead of their decision tonight. 

In the current earnings season, US companies have consistently beaten on revenue but there have been misses on profitability. 

We focus on Lloyds and Rio Tinto who both provide attractive dividends, but are being impacted in different ways but the current macro environment.

We finish by providing updates on two junior resource companies in Power Metal Resources and GreenX.

Visit the UK Investor Magazine Video section here. 

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