Argo Blockchain shares crashed to fresh lows on Tuesday after the bitcoin miner issued an operational update for September.

The Argo Blockchain share price fell over 25% to 16.5p in early trade on Tuesday, the lowest level since December 2020. Argo Blockchain shares are now down 83% in 2022 and trade at just a fraction of their all-time high around 330p.

Argo’s fall from grace is inextricably linked to waning interest in cryptocurrencies with the most popular coins losing a large proportion of their value this year.

However, today’s decline follows an operational update that showed Argo mined less Bitcoins in September than the prior month, and said they were curtailing their operations due to high energy prices.

Argo mined 215 Bitcoin or Bitcoin Equivalents in September, down from 235 in August. It is difficult to see a favourable scenario for increased mining activity in the near-term with high energy prices set to persist.

Mining revenue diminished significantly falling to $4.27 million in September from $5.23 million in August. Although revenue fell, Argo saw their mining margin increase to 25% from 20%.

Argo recently announced a scramble to raise capital by selling mining machines and issuing equity.

“As another month of high energy prices and uncertain market conditions ended, Argo continues to execute on its plans to grow operations at Helios,” said Peter Wall, Chief Executive Officer at Argo Blockchain.

“We are nearing completion of the installation of our new Bitmain S19J Pro machines, which will increase our total hashrate capacity to 2.9 EH/s by the end of the month. This will represent a 81% increase in total hashrate capacity since Q1 2022. I continue to be proud of our team for its efforts to deliver long-term growth in the interest of our shareholders.”

An appalling close to US markets on Friday spilled over to the European open on Monday with most major European indices starting the week off in the red.

A slightly better than expected Non-Farm Payroll figure on Friday almost guaranteed the Federal Reserve would kick on with a 75bps point hike at their next meeting, and were a long way off pivoting to a slower pace of rate hikes.

The NASDAQ closed down nearly 4% on Friday and saw the FTSE 100 open well below 7,000 while the DAX fell back towards 12,000.

However, after touching lows of 6,922 in early trade on Monday, the FTSE 100 recovered some losses to trade at 6,971 at the time of writing.

Stronger dollar and UK uncertainty

The dollar gained on the back of the robust jobs data sent GBP/USD back below 1.1100 for the first time in over a week.

The pound had enjoyed a relief rally but looked set to resume declines with pressure on the UK government mounting and no remedy to sterling’s woes in sight.

Investors will also be concerned the doubling of Bank of England bond purchases failed to support the pound or FTSE 100 on Monday.

“Also leaving investors on edge is the news that the Bank of England has doubled the amount of government bonds it is prepared to buy each day under a support initiative. While this programme is designed to provide calm to the markets following concerns about pension funds dumping gilts on the market, the fact it has doubled the previous limit of £5 billion also acts as a reminder that we’re living in unsettled times,” said Russ Mould, investment director at AJ Bell.

There was a slight reprieve for the pound after Kwasi Kwartneg said the government would bring forward the release of their economic projections to 31st October.

The pound typically has an inverse relationship with the FTSE 100 and investors will be looking to see if this holds and provides support for the index this week.

However, the FTSE 100’s largest overseas earners were weaker on Monday with AstraZeneca down 1.7%, Diageo 3% and BP off 1.5%. Shell was down 0.6% after announcing refining margins are declining last week.

DS Smith

Some of the changes the global economy underwent due to the pandemic are here to stay. One of these is the shift towards online shopping and DS Smith’s packaging business is a major beneficiary.

In a world where retailers are issuing profit warnings, the seller of the spades in the gold rush is proving to be a winner.

DS Smith shares were 11% higher at the time of writing after announcing operating profit would exceed prior guidance.

Members of my family are, but I am not, particularly concerned with sustainability – but then I can defend my stance (if I have to) by noting my senior years, meaning I have not got many still left to go, compared to them.

However, I have to say that I was impressed by the Superdry (LON:SDRY) commitment to sustainability and driving it through its product lines by significant contact with its suppliers as it urges them to be organic.

A very strong commitment to sustainability

Last Friday’s announcement of the final results for the year to end April noted very clearly that:

“Our mission is ‘To be the #1 sustainable style destination’ through our distinct collections, defined by consumer style choices. We design affordable, premium quality clothing, accessories and footwear which are sold around the world. We have a clear strategy for delivering continued growth via a multi-channel approach combining Stores, Ecommerce, and Wholesale.”

Examples of the way it looks to drive its sustainability focus in “underpinning everything we do” are shown by the fact that 47% of the products that it bought for sale in its Autumn/Winter 2021 and Spring/Summer 2022 collections were made of sustainable product, compared to just 33% for the previous year.

Of the products that it sold in the 2022 full year, sustainables were some 46% against 35% previously.

For Superdry sustainability continued to sit at the heart of its business, especially in its sourcing. 

Cotton seeds and recycled bottles

It has a target of converting 20,000 farmers in India to organic practices and using 100% organic cotton in its garments by 2025. 

As at the end of FY22, it had invested in training to convert 7,508 farmers, up from 5,684 last year and in the process donated over 65m organic cotton seeds. 

For its Spring/Summer 2022 collection 99% of its swimwear was converted to recycled materials, with50.4m recycled bottles having been used to produce both its Spring/Summer 2022 swimwear and also in the company’s Autumn/Winter 2021 and Spring/Summer 2022 range of outerwear jacket fill.

City Reaction – is it sustainable?

After the £93m capitalised group’s results were published there were many observers who commented upon whether the company itself had any sustainability.

Even so the group’s shares responded with an 11% jump in its share price to close at 114p.

In the last year or so the group’s shares saw a peak last November at 330p but they subsequently traded down to a 96p low, just two weeks ago.

Not a straight line

Like businesses everywhere Superdry has had its ups and downs. 

Julian Dunkerton built the business up from a Cheltenham market stall to getting his stores group quoted in 2010. The bubble was burst with a profit warning in 2012 alongside a suspension of its store opening programme.

Dunkerton left the board in late 2014 and two years later sold 4m shares at £12 each, then leaving him as the biggest holder with a 27% stake in the business.

By 2019 he declared openly that he did not like the way the group was being run, without him on the board. 

He won his seat back on the board while fellow directors resigned.

His mission was ‘to reset the brand’s focus on design and quality’.

From an interim CEO position, he was six months later promoted to that post permanently, but sales were falling due to his decision to minimise promotions, dropping in-store discounts while focussing upon full-price sales.

Then Covid-19 happened in Spring 2020 and the severe fall in sales revenues needed drastic action.

The 2021 trading year saw takings fall 21% to £556m, but with the group going into a smaller loss of £36.7m (loss £166.9m in 2020).

Overall, the group’s mission today is ‘to inspire and engage style-obsessed consumers, while leaving a positive environmental legacy.’

The recent results – still a going concern

The full year to end April saw sales up 9.6% at £609.6m, with the adjusted pre-tax loss of £12.6m in 2021 being replaced by a much healthier £21.9m profit, boosting earnings from a loss of 19.4p to a plus 36.3p per share.

The group’s asset backed lending facility runs out in January next year, so there are ongoing discussions to refine and renew the position.

Thoughts that it may have problems continuing as a ‘going concern’ resurfaced but have been subsequently played down.

CEO Julian Dunkerton, stated that:

“These are exceptional times for retail and for the economy more generally, and like all brands we’re having to work harder than ever to drive performance. Against that backdrop, I am pleased that we managed to return the business to full-year profit, driven by increased full price sales, whilst also making strong strategic progress. I’m proud of the strides our team has made, delivering great product while also making a step-change in our social and digital capabilities and real progress towards our sustainability objectives.

“Superdry is a premium, affordable, brand, which should mean we are well-positioned as customers think more carefully about their purchases. That said, given the current challenging conditions, we continue to run the business prudently while remaining focused on delivering our strategic goals.”

With the results the group posted details of the 22-week period to 1 October showing sales had improved another 7%, while also noting that there were sector-wide trends of traffic slowly moving away from online back to store. Encouragingly the group’s wholesale revenue has increased year-on-year.

Despite the sales increase, it is apparent that margins are a lot tighter, so the group may only make between £10m to £20m for the adjusted pre-tax profits to end April 2023.

Analysts Opinion – 500p Target Price

At Liberum Capital, broker to the group, their analyst Wayne Brown is rating the shares as a Buy, with a Target Price of 500p a share.

His estimates for the current year to end April 2023 are for sales of £652m (£610m) a dip in profits to £16.3m (£21.9m), generating earnings of 15.1p (36.3p) and paying a resumed dividend of 5.0p per share (nil).

Already his figures suggest sales of £698m next year, with £26.3m profits, 24.5p earnings and a useful 8.2p per share in dividend.

Further out he is anticipating £748m sales, £41.1m profits, 38.2p earnings and a 12.7p dividend.

His Target Price, based upon his estimates, does not look so outlandish.

Conclusion – a potential doubling of price?

Last week’s results clearly show that Julian Dunkerton has got firmer control of Superdry’s reins and is determined to return the group to trade around its former glories.

The iconic brand, which is sold to 157 countries globally, is known the world over and with ‘sustainability’ as its mantra going forward it is a fair bet, facility permitting, that he will deliver again, which will be glorious news for its shares, now at just 114p.

The AGM is due at the end of October, while the pre-close trading Update for the first half-year will be declared in November, giving a few more weeks of cheap buying of the group’s shares.

A 500p Target Price may be too far away for most investors but a doubling in price over the next year is quite feasible.

In a brief statement released on Monday, DS Smith said they expected full year performance would be above their prior expectations.

The packaging and recycling company said operating profit would be at least £400m and saw strong cash generation.

Miles Roberts, DS Smith, Group Chief Executive, was upbeat and confident about navigating the current macro environment.

“I am very pleased with the performance in the year to date and the momentum in our business. We remain focussed on delivering for our customers and managing our costs in an inflationary environment. While the macro-economic outlook remains uncertain, performance this year is ahead of our previous expectations and we look forward to the remainder of the year with confidence,” said Miles Roberts.

DS Smith shares were 10% higher at the time of writing.

Just as Lloyds shares were starting to build some momentum on the back of higher interest rates, Liz Truss and her new government stopped the bank’s rally in its tracks.

Recent declines in Lloyds share price were a result of Kwarteng and Truss’s failed attempt to be fiscally radical, and a massive vote of no confidence by the markets. 

The pound has been the main barometer of the markets’ views on their fiscal, but underlying gilts yields have sent waves through the UK’s financial system, and damaged the value of FTSE 100 asset managers and banks.

Today, we consider three reasons why Lloyds shares on particular could be a buy after the recent sell off. 

Lloyds dividend

The promise of an attractive dividend to compensate for a wait for capital appreciation will almost always secure the interest of income investors.

With a dividend yield of 4.7% and dividend cover of 3.9x, Lloyds shares have both a strong yield and the capability of increasing dividends in the future.

Interest rates are set to rise

Disruption in the mortgage market will likely mean Lloyds sets aside provisions for bad debt in their next trading statement.

However, this is probably now largely priced in and investors may see a welcome uptick in Net Interest Margin (NIM) as a result of higher mortgages rates.

A key profitability metric for UK banks, Lloyds NIM will enjoy favourable upside pressures in the near term. Higher interest rates will also mean the future value of Lloyds loan book is worth more today.

Lloyds Price-to-Book valuation 

Banks saw the importance of their earnings as valuation metric diminish during the recovery from the financial crisis.

Ongoing litigation costs and changes to capital requirements meant profits were no longer the most appropriate measure of a bank’s financial health or future prospects.

Instead, the market shifted their attention to the bank’s assets and the potential change in book value of their assets. Thus, for some investors, price-to-book has a become the most scrutinised valuation metric for banks in recent years. 

Lloyds now trades at 0.6x book value, largely in the with the sector, but slightly below Lloyds average over the past few years.

There are still risks attached to Lloyds, including uncertainty around the housing market and general health of the UK economy, which has been reflected in the move down from 49p to 42p

Yet, with the Lloyds share price at 42p, and taking consideration the three points above, long term investors may take a cautiously optimistic approach to Lloyds shares, especially those with an appetite for income.