Severn Trent shares were down 0.3% to 2,827p in late morning trading on Thursday following an announcement that the group expected at least £50 million in customer ODI outperformance payments in FY 2023 in its trading update.
The utilities company reported a rise in operating costs outlined in its technical guidance, in particular for its energy and chemical expenses.
Severn Trent said its environmental performance remained on track to match or exceed its target on 100% of its ODIs for the financial year.
The group also noted its was confident in retaining its four-star Environmental Performance Assessment Rating for 2021, and expected confirmation from the Environment Agency in the near term.
The firm mentioned it was benefiting from its decade of investment in renewable energy, with 145 GWh in green energy generated in Q1, equating to over 50% of its consumption and representing a 4% growth against Q1 2021.
Severn Trent commented it expected to release its updated Sustainable Financing Framework on its website in July, detailing its environmental, social and governance performance and targets, enabling the utilities company to raise financing for sustainable investment and expenditure.
Barratt Developments shares were down 0.9% to 460.9p in late morning trading on Thursday, after the company announced an underlying pre-tax profit slightly ahead of market expectations between £1.05 billion and £1.06 billion in its FY 2022 trading update.
The housing developer reported a return to pre-pandemic completion levels, with 17,908 completions over the financial term against 17,243 the previous year.
The company noted total completions were impacted by the deferral into FY 2023 of a London apartment block comprised of 221 homes, reflecting resource delays in the construction process.
Barratt Developments highlighted an average selling price for private homes up to £341,000, rising to £375,400 for houses sold in the forward order book.
“Another housebuilder, another set of results pointing to resilient housing demand. Completions were slightly lower than expected but came in ahead of pre-pandemic levels,” said Hargreaves Lansdown equity analyst Matt Britzman.
“More crucially though, demand looks to be holding up in the forward order book despite rising house prices.”
“Testament to the ongoing resilience of the private house buyer, seemingly undeterred by a drop in real income as inflation and a cost-of-living crisis start to take their toll.”
The firm also mentioned build cost inflation of 6% across the period, although the level is currently at 9% to 10%.
“It almost feels inevitable that a broader easing of demand is on the cards given the wider conditions and news that build costs are running 9-10% higher at the minute is a little hard to stomach,” said Britzman.
“Nonetheless, Barratt’s doing all it can to make hay while the sun shines, with a significant increase in the value of land buying last year – propped up by a very healthy net cash position on the balance sheet.”
“Not for the first time, planning delays are being called out as a headwind – not something housebuilders want to battle with given everything else that’s going on.”
Barratt Developments commented it intended to declare an ordinary dividend based on FY 2022 dividend cover of 2.25 times its adjusted net income.
Experian shares were up 1.5% in early morning trading on Thursday after the company reported a 7% revenue growth at actual exchange rates and a 9% rise in constant exchange rates in its Q1 2023 trading update.
“We grew strongly in Q1, in line with our expectations, underpinned by our portfolio diversity and growth initiatives,” said Experian CEO Brian Cassin.
“Total revenue growth was 7% at actual exchange rates and 9% at constant exchange rates. Organic revenue growth was 8%.”
Experian highlighted an 8% revenue climb in North America, 30% in Latin America, a 6% drop across the UK and Ireland, an 8% slide in Europe, the Middle-East, Africa and the Asia-Pacific, and a total global revenue growth of 7% at actual exchange rates.
The firm mentioned 65% of its revenue was linked to North America, with ongoing strength in bureau volumes, positive demand for analytics and software, expansion in health, targeting, automotive and verification services, alongside continued momentum from consumer services.
Experian noted 13% of its revenue came from Latin America and was driven by contributions from acquisitions in fraud and identity management, consumer services with an organic revenue of 42%, and from its new bureau in Chile.
It also reported strong performance in its Limpa Nome credit collection marketplace and credit comparison marketplace.
The company pointed out weakened macro-economic factors in its UK and Ireland business, yet drew attention to a 6% organic growth in its B2B operations reflecting new business traction and progress in consumer credit, business credit and fraud and identity management segments.
Meanwhile, Experian reported weak macro-economic conditions across the EMEA and Asia-Pacific regions, and commented it continued to focus on strategic markets where it could drive scale and enhance operating efficiency.
The information services group confirmed its expectations for FY 2022 remained unchanged, with an anticipated organic revenue increase of 7% to 9% and total revenue growth of 8% to 10% at constant exchange rates.
Anglo American shares were down 1% to 2,657p in early morning trading on Thursday following its announced partnership with Nippon Steel to decarbonise the steelmaking process.
The two companies reportedly signed a Memorandum of Understanding (MoU) in a move to research methods to optimise premium lump ore produced by Anglo American’s mines to decrease emissions created using the traditional blast furnace steelmaking process.
Anglo American commented the partnership would study the use of its iron ore in a more carbon-efficient direct reduction iron (DRI) steelmaking method.
The mining firm claimed the DRI method was estimated to generate significantly lower emissions than the established way of blast furnaces and basic oxygen furnaces.
The partnership follows Anglo American’s October 2021 Climate Change Report, which included an aim to reduce Scope 3 emissions by 50% by 2040, building on previous commitments made earlier in the year.
The company said it recognised the steel value chain as key to hitting its goals due to the bulk of its Scope 3 emissions coming from the process.
Anglo American noted its report outlined a holistic approach to achieving its target, and involved working with customers to accelerate the decarbonisation programme across multiple layers to develop high quality products to lower rates of emissions.
“This agreement is an important component of Anglo American’s approach to collaborating with our customers and helping to shape a greener future for the backbone of global infrastructure – steel,” said Anglo American marketing business CEO Puter Whitcutt.
“By working together, we can drive towards system-level decarbonisation and pave the way for sustainable steelmaking, underpinning the steel industry’s full potential as an enabler of society’s wider economic prosperity and social development.”
“We look forward to collaborating on this important work with Nippon Steel, with whom we have a relationship that spans more than five decades, combining our expertise for more efficient and less carbon intensive production processes.”
Cancer treatments developer ValiRx (LON: VAL) says that it wants to in-licence a triple negative breast cancer project undertaken by King’s College London following a successful evaluation.
The share price jumped by 20.9% to 13p, although the share price is still 64.1% lower than at the start of the year. At the turn of the month, ValiRx raised £2.5m at 10p a share.
The evaluation confirmed the impact of a peptide drug candidate against triple negative breast cancer. This took nine months and “there is good evidence of biological activity. There are also signs that it could work for ovarian cancer cells.
Commercial terms have been pre-negotiated, and the project will be put into a new subsidiary. The evaluation cost around £75,000. Pre-clinical work on the project could cost around £500,000.
Cenkos expected ValiRx to have net cash of £817,000 at the end of 2022, but that was before an additional £1m was raised. That should be enough to fund the pre-clinical trial and to finance the rest of the business well into 2023. Although, it may depend on how other projects progress.
There are three potential treatments for cancer and sepsis that have partners or where one is being sought. A potential endometriosis treatment (VAL301) will be starting pre-clinical studies. This is a re-purposed version of the molecule used in the VAL201 potential prostate cancer treatment, where there is a letter of intent with TheoremRx.
There are two other potential assets. There is an agreement with the University of Barcelona concerning the investigation of drugs that can be used against Kirsten Rat Sarcoma Virus dependent cancers, such as uterine or pancreatic. There is around eight months to go on this programme and it will cost up to £100,000. There is also an agreement with Hokkaido University in Japan to evaluate a drug candidate for endometrial, pancreatic and bile duct cancers. There is another six months to go and it will also cost up to £100,000.
Loungers shares gained 3.2% to 188.5p in late afternoon trading on Wednesday after the group announced a record revenue surge of 203% to £237.2 million compared to £78.3 million in FY 2022.
The company reported an adjusted EBITDA rise to £53.6 million against £13.9 million, along with an adjusted EBITDA margin of 22.6% from 17.8%.
Loungers swung back to an operating profit £28.4 million compared to a loss of £7.7 million and an adjusted operating profit of £34 million from a loss of £3.9 million in the previous year.
The group further highlighted cash generated from operating activities of £69.6 million from £12 million.
The firm also reduced its non-property debt by £33.2 million to £1 million, significantly shoring up its balance sheet.
The company opened a new record of 27 sites across the UK, with its 200th site recently opened for the public.
Loungers grew its build teams to five, marking the capacity to open approximately 32 sites per year.
The company added it was optimistic regarding its outlook, with no observed change in customer behaviour despite macro-economic headwinds, and the group said it was on track to hold at least 500 sites across the UK, alongside its strong pipeline of developments in the future.
“These results demonstrate the extent to which Loungers has thrived over the past year, achieving a record number of openings, record underlying like for like sales growth and a record level of profits,” said Lounger CEO Nick Collins.
“We are benefitting from changes in consumer behaviour, with more people staying local, working from home, and supporting their local community and high street. We are delighted to have just opened our 200th site, and to be announcing today that we are increasing our roll-out target for site openings to 30 for this year.”
“Whilst the short-term economic outlook is challenging, we are in an excellent position to weather the storm and to take advantage of growth opportunities coming out of it. We have a strong balance sheet, a very capable and highly motivated team and an affordable, value for money all-day offer with enormous scope for further expansion across the UK.”
Loungers mentioned an EPS of 17p after a loss per share of 10.9p in FY 2021.
The FTSE 100 was down going into the close Wednesday despite a reported 0.5% growth in the UK economy over May, according to figures released by the ONS today.
However, the real driver of markets of Wednesday was the higher than expected US CPI reading that rose to 9.1%.
“If anyone had been harbouring hopes that US inflation had topped out at 8.6% those hopes have been dashed today. A potent mix of soaring prices both at the pump and at food stores has created a situation that no-one can hide from,” said Danni Hewson AJ Bell financial analyst.
“Markets will now have to lock in the expectation that the Fed will deal out another 75 basis point hike later this month as it seeks to push the lid down on the pot that just keeps bubbling over. There’s been plenty of volatility as investors consider how fast the economy will slow once the brakes are tapped again.”
UK economy grows 0.5% in May on GP appointments, retail sector shrinkshttps://t.co/iufH67ZAVk
— UK Investor Magazine (@UKInvestorMAG) July 13, 2022
US Inflation hits 9.1%
The spike marked the highest yearly gain in inflation since 1981 and the highest monthly gain since 2005.
The NASDAQ fell 0.6% to 11,189, the Dow Jones dropped 0.7% to 30,739.6 and the S&P 500 was down 0.7% to 3,790.
UK economy
Despite the positive news after two consecutive months of GDP contraction in March and April, the sectors behind the growth displayed less reason for optimism.
The GDP climb was predominantly on the back of a 0.4% rise in services, linked to a 1.2% increase in human health and social activities due to a higher level of GP appointments.
Meanwhile, output in consumer-facing services dropped by 0.1% as a result of a 0.5% fall in the retail sector, demonstrating a lack of household retail spending and sending recession alarms ringing.
“Households are strategically cutting back on their spending, which is a particular blow to the consumer services which still haven’t been able to get anywhere near their pre-pandemic glory days,” said AJ Bell financial analyst Danni Hewson.
Fashion groups felt the cold chill of the cost of living crisis, with JD Sports Fashion falling 1.9% to 122.8p and Next dipping 0.1% to 6,296p as consumers cut back on retail expenses.
Supermarkets also felt the effects of consumers paring back on shopping, with Tesco dropping 0.9% to 257.3p, Ocado falling 4.5% to 793.6p and Sainsbury’s sliding 0.1% to 214.9p.
The Dollar was worth 0.997 Euro at the time of reporting, marking the first time since 2002 that the Dollar was listed as the stronger currency against the Euro.
European markets fell across the board, with the German DAX down 1.2% to 12,740, the French CAC 40 sliding 1% to 5,980.2 and the Italian FTSE MIB dropping 1.1% to 21,241.3.
Renold shares were down 3.1% to 27.2p in late afternoon trading on Wednesday following a reported revenue of £195.2 million in FY 2022 against £160.8 million in FY 2021.
The industrial components company announced an adjusted operating profit of £15.3 million compared to £10.9 million the last year, alongside a 7.8% return on sales from 6.8%.
Renold lowered its net debt over the financial term to £13.8 million from £18.4 million after the group rebounded from the Covid-19 pandemic.
The firm highlighted a 31.7% growth in order intake to £223.9 million compared to £170 million and a closing order book increase of 57% to £84.1 million.
Renold also mentioned a £11 million long-term military contract among its operational highlights and a successful bolt-on acquisition in its chain sector, with payback of less than two years.
The firm noted an adjusted EPS rise of 87% to 4.3p compared to 2.3p year-on-year and a basic EPS of 4.7p against 2p.
Renolds added it believed the company would remain in a good position going forward in FY 2023, despite macro-economic headwinds and supply chain problems.
“Throughout the reported period the business performance has been on an improving trend and our order books have continued to grow in the early part of the new financial year,” said Renold CEO Robert Purcell.
“We are cognisant that there remain considerable Covid-19-related challenges in some parts of the world; supply chain issues are still prevalent and inflation is high.”
“However, we have entered the new financial year with good momentum and a belief in the excellent fundamentals of the Renold business upon which we are building.”
Computacenter shares were down 2.4% to 2,432p in late afternoon trading on Wednesday after the group announced its acquisition of US value-added reseller Business IT Source for an unspecified figure.
Computacenter confirmed Business IT Source listed a revenue of $245 million with an EBIT of $8.9 million in FY 2021
The company reportedly employs approximately 100 workers and is based in Buffalo, Illinois.
Computacenter said the existing Business IT Source team would remain in the US as a separate operating unit within Computacenter United States in a bid to maximise the growth opportunity.
“Our US business continues to grow organically but we will take additional opportunities to improve our positioning,” said Computacenter Group CEO Mike Norris.
“BITS gives us a much stronger presence in the Midwest of the United States and brings some great people, customers and leadership to our business. The Buffalo Grove Integration Center will allow us to serve more of our Midwest regional customers locally over time, helping us to meet our sustainability goals.”
“I am confident that the BITS leadership will seize the opportunity to continue their current growth momentum.”
“We are excited to become part of the Computacenter family. This gives us the opportunity to provide a much broader range of capabilities to our customers and growth opportunities for our people,” said CEO & Co-Founder of BITS Bob Frauenheim
“Operating as a separate business unit will allow us to continue our personalized service while leveraging Computacenter’s capabilities to best serve customers and associates.”
Battery technology developer Ilika (LON: IKA) has commissioned its manufacturing plant for Stereax batteries and there is significant interest from medical technology companies, but it will be another year until sales start to ramp up so investors will have to be patient.
Process optimisation and product qualification continues at the facility and then initial products can be sold for pre-clinical studies for medical technology products. Management has decided to focus on this sector rather than the sensors market. Sales will be slower building up, but the medical markets could be much bigger.
It could take five years to go from pre-clinical studies to mass production. The potential products include implanted medical devices, smart orthodontics and cardiac sensors. The potential pipeline is much larger than the capacity of the manufacturing facility. Licensing the technology could become a possibility in three years. A US supplier would be useful given the potential customer base.
Liberum is expecting a rise in Stereax revenues from £31,000 to £200,000 this year before a jump to £6m in 2023-24. That is slower than previously expected.
Meanwhile, the development of the larger Goliath battery for luxury electric cars continues. Ilika would be one of the few European producers of solid state batteries. Goliath batteries could achieve a level of performance in excess of existing technology by 2024. A pilot plant could be started next year with a larger scale plant likely at the UK Battery Industrialisation Centre later.
Cash
There is plenty of cash in the bank to undertake the investment required in both Stereax and Goliath battery technologies thanks to the £24.7m raised at 140p a share last July. Net cash is £22.6m and that could fall to £12.2m by April 2023 after which the cash outflows from operations and investment should start to reduce.
This year the loss is expected to fall slightly from £8.15m to £7.79m on revenues improving from £496,000 £1m – mainly due to greater grant income.
At 45.5p, down 10.8%, the share price is not much more than one-third of the placing and open offer price last year, which itself was a significant discount to the then market price.
The focus for Stereax on medical technology has slowed initial sales growth, but there are still enormous prospects for Stereax and Goliath. Investors got overexcited a few years ago and pushed up the share price but there appears an opposite overreaction in the current share price.
