Consumer confidence nosedives as recession alarm sounds

Natasha Doris
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Consumer confidence nosedives as recession alarm sounds

Consumer confidence hit a record low after dropping two points to minus-40 points in May, according Growth from Knowledge (GfK).

The GfK Consumer Confidence Barometer recorded its lowest score since records began in 1974, exceeding reports from the heights of the 2008 financial crash at minus-39 points, along with the effects of Brexit and the Covid-19 pandemic.

The report follows the lowest unemployment rate in 50 years, alongside 40-year record high inflation of 9.1% driven by skyrocketing food and fuel costs.

GfK confirmed consumer pessimism was strongest in depressed sub-measures on the general economy at minus-63 for the past year and minus-56 for the coming year.

In addition, the Major Purchase Index slid consecutively month-on-month for the last six months and is currently at minus-35 as a result of gloomy retail sales reports.

However, the sub-index for personal financial situation over the next 12 months rose by one point to minus-25.

Retail sales drop

The news comes in light of the latest retail sales volumes, which dropped by 0.5% in May after a 0.4% rise in April.

The Office of National Statistics (ONS) announced a 1.3% fall in sales volumes in the past three months against the three months before, continuing the downward trend from summer 2021.

The organisation reported the slide in sales volumes was linked to reduced spending in food stores, which fell by 1.6% on the back of rising food prices and the devastating cost of living crisis.

“The latest retail sales figures won’t tell anybody anything they don’t already know, but they do provide an interesting snapshot into how consumers are wrestling with inflation,” said AJ Bell financial analyst Danni Hewson.

“Quite simply they’re buying less of pretty much everything, from food to furniture. At supermarket checkouts people are setting limits, own brands are replacing big name favourites and shoppers are trading down in the hopes of getting a little more for a little less.”

Fuel costs

Vehicle fuel sales further rose by 1.1% as more employees moved back to the office in hybrid work schedules.

“Then there’s another hike in fuel sales. The price at the pump might trigger mild palpitations every time motorists fill up, but businesses have been pushing hard to get more people back in the office,” said Hewson.

“Hybrid working is undoubtedly here to stay and fuel sales haven’t returned to pre-covid levels, but they have been slowly creeping back up.”

“It will be interesting to see how recent train strikes, which have forced many people back to their kitchen tables, will impact the trend.”

Fashion stays in business

Meanwhile, non-food store sales remained flat and clothing sales grew by 2.2%, which was offset by a 2.3% fall in household goods such as furniture and department stores.

“There are a couple of notable exceptions. Those people who are managing to get away on holiday are updating their summer wardrobes— for many it’s been a couple of years since they’ve needed beach wear and the lipstick effect is very much in evidence,” said Hewson.

“Cutting back is hard work, it’s demoralising, so spending a little on something that makes you feel better about yourself, particularly when it’s combined with a much longed for vacation seems like a no-brainer.”

“And with a glut of postponed events clogging up the calendar, there will be a few people needing to adjust for lockdown habits.”

The ONS confirmed a slide in online retail sales to 26.6% from 27.1%, however sales remained significantly higher than the 19.7% rate in February 2020 before the Covid-19 pandemic.

“Consumers have also been spending less online, but habits have changed and even people who weren’t comfortable shopping from their sofas have been won over and will still reach for their tablets if life gets in the way of them hitting the high street,” said Hewson.

Overcast outlook on horizon

However, consumers have definitely started to take the rising cost of living into account, and the clock is ticking down the days until customers draw a line in the sand and cut back spending on the less essential retail products in life.

“But it is rising prices that will be troubling retailers the most as they look beyond the summer months and towards that crucial golden period,” said Hewson.

“Budgets don’t stretch, a pound can only be spent once and people are having to make tough choices.”

AIM movers: Trackwise Designs, Southern Energy, Premier African Minerals, Tasty

Andrew Hore
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AIM movers: Trackwise Designs, Southern Energy, Premier African Minerals, Tasty

Printed circuit technology developer and supplier Trackwise Designs (LON: TWD) warns that demand from electric vehicle manufacturers for Improved Harness Technology (IHT), a lighter alternative to copper wire, is lower than expected and that will hit 2022 revenues. However, contract terms mean that underlying pre-tax profit should still be £1.5m. Despite that reassurance, the share price has fallen 11p to 49.5p.

In the first five months revenues have been £3.3m, with only £500,000 coming from IHT. The group order book is worth £4.6m. finnCap previously expected 2022 revenues of £22m. The new Stonehouse facility is being finished and that will significantly increase capacity. There is also a minimum price undertaking.

North American focused gas producer Southern Energy Corp (LON: SOUC) raised $13.5m in the UK via a placing at 54.5p, having initially sought $12.5m, but despite the strong demand the share price has slumped 23.9% to 52.5p. Combined with an offer in Canada, Southern Energy has raised £25.2m before expenses. The cash will be used for drilling at Gwinville field in Mississippi and acquiring new assets.

Southern Energy, which is also traded on the TSX Venture Exchange, joined AIM last August at 6.5p – the equivalent of 52p, after a subsequent eight-for-one share consolidation.

News that Premier African Minerals (PREM) has signed a deal that can get the Zulu lithium project pilot plant up and running has boosted the share price by 6.1% to 0.35p. The pilot plant has target annual production of 50,000-ton SC6 and there are binding heads of terms with Suzhou TA&A Ultra Clean Technology to take all of this production from the first quarter of 2023. The pre-purchase price of $35m pays for the construction cost.

Restaurants operator Tasty (LON: TAST) continues to benefit from the repayment of its £1.1m bank loan, leaving it with net cash of £8.6m. Annualised interest rate savings will be £57,000 and there was no early repayment penalty. Yesterday the share price rose 0.4p to 4.25p and today it has jumped a further 0.8p to 5.05p. That values the company at £6m. There are plans to open five or six more restaurants this year.

Riverfort profits hit £1m on continued investment in junior companies

Natasha Doris
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Riverfort profits hit £1m on continued investment in junior companies

Riverfort shares were up 2.9% to 0.9p in late morning trading on Friday, after the group reported a total operating income of £2.4 million in FY 2021.

Riverfort announced a net profit of £1 million, alongside a net asset value climb of 27% to £11.7 million and a net asset value growth of 1.4p per share.

The firm mentioned it continued to generate attractive returns through primarily investing via structure financings to provide funding for junior companies, providing cash return and downside protection.

The company added the demand for its investment capital had been growing strongly on the back of recent developments in global equity markets.

Riverfort also highlighted investments made in pre-IPO opportunities in technology, including in cybersecurity.

The firm commented that pre-IPO opportunities provided an attractive area of investment focus with the potential to achieve positive returns between the pre-IPO stage and a listing or exit.

The investment group noted a debt and equity-linked debt investment portfolio valuation of £5.8 million, an equity and other investments portfolio valuation of £2.5 million, pre-IPO investments valuation of £2.7 million and cash resources at £2 million for the financial year.

Riverfort confirmed an expected dividend of 0.03p per share, representing a current gross yield of 4%.

Oracle Power narrows loss to £881k in FY 2021

Natasha Doris
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Oracle Power narrows loss to £881k in FY 2021

Oracle Power shares were down 5.6% to 0.2p in early morning trading on Friday following a narrowed pre-tax loss of £881,879 in FY 2021 against £1 million in FY 2020.

Oracle Power commented that its Thar Block VI project had made progress, with the original operation’s scheduled mine with an associated 1,320 MW power station to provide base load electricity for customers in Pakistan reported to include the production of coal and gas.

The company added it was also exploring the possibility of using lignite to make a humic or organic material to enhance soil health and turn barren land into fertile land, boosting interest in the Thar Block VI project.

Oracle Power said it received “encouraging” reports from the two gold prospects in western Australia it invested in, Jundee East and the Northern Zone, and the group has apparently been approached by other local mining companies seeking a potential joint-venture.

The energy firm also started work towards a green hydrogen production facility in Pakistan, and signed a non-exclusive co-operation agreement with PowerChina, followed by the formation of a Special Purpose Vehicle named Oracle Energy Limited to develop the project.

Oracle Power noted its funding position included £632,500 from the exercise of warrants, and £800,000 raised through an equity placing to finance the development of its green hydrogen project post year-end.

The company announced a loss per share of 0.04p compared to 0.05p year-on-year.

Barclays to acquire Kensington Mortgage Company for £2.3bn

Natasha Doris
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0
Barclays to acquire Kensington Mortgage Company for £2.3bn

Barclays shares were down 0.1% to 153.8p in early morning trading on Friday after the group announced its intended acquisition of Kensington Mortgage Company (KMC) for approximately £2.3 billion.

The banking giant is set to purchase the firm from companies controlled by funds managed by Blackstone Tactical Opportunities Advisors L.L.C. and funds linked to Sixth Street Partners.

KMC is a UK specialist mortgage provider that uses proprietary technology to lend mortgages through brokers to borrowers with complicated incomes, including clients who are self-employed or with multiple or variable incomes.

The company is based in Maidenhead and employs 600 staff, who also execute mortgages for alternative parties.

Barclays confirmed the acquisition would enable it to broaden its product offering across the UK mortgage market, expand its customer numbers and grow mortgage originations to optimise its UK funding base.

The banking firm said KMC would retain the majority of mortgages it originates, although historically it did not hold mortgages on its balance sheet. The company originated £1.6 billion of mortgages in FY ended 31 March 2022.

Barclays mentioned it had also agreed to acquire a portfolio of UK mortgages consisting mostly of mortgages originated by KMC by October 2021 to completion of the KMC acquisition.

The portfolio reportedly amounted to £1.2 billion on 31 May 2022, comprised of approximately 70% owner-occupied and 30% buy-to-let residential mortgages, with a weighted average LTV of 77% at origination.

The acquisition is scheduled to complete in late Q4 2022 or early Q1 2023, and is set to be financed using Barclays’ existing resources. The agreement is estimated to reduce the banking company’s CET1 ratio by approximately 12 basis points, assuming the deal closes in late Q4 2022.

“The Transaction reinforces our commitment to the UK residential mortgage market and presents an exciting opportunity to broaden our product range and capabilities,” said Barclays Banks UK CEO Matt Hammerstein.

“KMC is a best-in-class specialist mortgage lender with an established track record in the UK market, strong broker and customer relationships and data analytics capabilities.  KMC complements our existing UK mortgage business and broker relationships through the addition of a specialist prime mortgage originator and the utilisation of our strong UK funding base.”  

“The Transaction should generate attractive returns for Barclays over the medium term as the KMC Mortgage Portfolio increases in size through the ongoing origination of new mortgages.  We look forward to KMC management and employees becoming part of the Barclays group.”

ADM Energy shares down on £2.5m loss, revenue surges 125% on oil prices

Natasha Doris
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ADM Energy shares down on £2.5m loss, revenue surges 125% on oil prices

ADM Energy shares were down 10% to 0.6p in late afternoon trading on Thursday, after the company announced a loss of £2.5 million in FY 2021, narrowed from £6.9 million in FY 2020.

The energy firm reported a revenue surge of 125% to £1.8 million against £800,000 on the back of the recovering oil price and the company’s increased profit interest in the Aje field from 5% to 9.2% in December 2020.

ADM Energy also acquired an indirect interest in a Risk Sharing Agreement for the development of the Barracuda field, and commissioned a Competent Person’s Report (CPR) by Xodus on the operation.

The firm reported a CPR verdict on the Barracuda prospect with a 2U (P50) case, at an NPV10 above $99mm with an IRR of 45%.

ADM Energy mentioned a completed oversubscribed fundraising of £1.2 million in March 2021, along with an additional £475,000 raised in November 2021.

The group also noted a completed post-period fundraising of approximately £561,000 in January 2022.

The company further disposed of 188,778 shares in Superdielectrics Limited for a consideration of £849,501, providing a profit of £656,000 on the firm’s original investment.

“2021 was a good year of progress for ADM Energy. It was our first full year since almost doubling our interest in the Aje Field which helped achieve a significant increase in revenues over the previous year. We also completed an acquisition giving us indirect interest in the Barracuda field, strengthening our foothold in West Africa,” said ADM Energy CEO Osamede Okhomina.

“In parallel to Aje and Barracuda, we continue to target the acquisition of undervalued 2P reserves that can be added to our investment portfolio and have had encouraging discussions with potential partners regarding various opportunities.”

“It remains a buyers’ market as majors look to divest non-core projects presenting opportunities for companies such as ADM who have the network, expertise, and access to capital to progress projects that can potentially bring significant value creation for shareholders.”

Dekel Agri-Vision revenues climb 66.2% to €37.4m as company ramps up cashew operations

Natasha Doris
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0
Dekel Agri-Vision revenues climb 66.2% to €37.4m as company ramps up cashew operations

Dekel Agri-Vision shares fell 1.4% to 3.3p in late afternoon trading on Thursday following a reported 66.2% climb in revenue to €37.4 million against €22.5 million in FY 2021, including the sale of Crude Palm Oil (CPO), Palm Kernel Oil, Palm Kernel Cake and Nursery Plants.

The agriculture firm announced a gross margin increase of 70.6% to 17.4% from 10.2% the last year, with post period end margins further rising towards historical rates.

Dekel Agri-Vision mentioned a 333.3% growth in EBITDA to €5.2 million compared to €1.2 million, alongside a net post-tax profit of €1 million against a loss of €2.2 million year-on-year.

The company noted its cashew processing plant at Tiebissou in Côte d’Ivoire recorded a net loss of €400,000 over the financial year during its construction phase, and entered the commissioning phase in December last year.

The group confirmed pilot production and sales commenced in early January after the close of FY 2021.

“It was a significant year for Dekel with our Palm Oil Operation delivering record breaking operating and financial results and our Cashew Operation moving materially towards first production, albeit with unprecedented macro conditions impacting the timing of delivery of full capacity,” said Dekel Agri-Vision executive director Lincoln Moore.

“Whilst macro conditions are challenging, CPO prices continue to remain strong, underpinning the profitability of the Palm Oil Operation despite a period of weaker fresh fruit bunches (‘FFB’) volumes in H1 2022 and, together with the imminent ramp-up phase of the Cashew Operation, Dekel is well positioned to deliver a period of transformational operating and financial growth.”

Volex shares fall on $95.3m debt, launches 5-year plan to hit $1.2bn revenue

Natasha Doris
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0
Volex shares fall on $95.3m debt, launches 5-year plan to hit $1.2bn revenue

Volex shares slid 4% to 230.8p in late afternoon trading on Thursday after the group announced a rise in net debt to $95.3 million compared to $27.3 million in FY 2022.

Volex reported a revenue growth of 38.6% to $614.6 million from $443.3 million as a result of strong organic growth and acquisitions, with revenue momentum driven by efficiencies and vertical integration in growth sectors.

“Our intention, when we set about the transformation of Volex, was to create a resilient and dynamic business capable of delivering strong margins and revenue growth,” said Nat Rothschild.

“Our record performance and revenue progression, demonstrated against the backdrop of a challenging manufacturing environment, is testament to what we have achieved.”

The firm completed four acquisitions and strengthened its engineering and sales team to support further growth going forward.

“We continue to see significant opportunities across our market. The infrastructure and acquisition investments we have made in FY2022 are focused on our pursuit of further growth, capitalising on the leading position we have in attractive sectors. With an exciting acquisition pipeline and access to funding, we will continue this successful strategy,” said Rothschild.

The group maintained an operating margin of 9.1% despite inflationary challenges as it passed through cost increases.

Volex also mentioned a statutory operating profit increase of 33.6% to $41 million against $30.7 million, along with a statutory pre-tax profit climb of 23.6% to $36.2 million compared to $29.4 million year-on-year.

The firm added that it had launched a five-year plan to deliver $1.2 billion in revenue by the end of FY 2027 with an underlying profit margin in the range of 9-10%.

“With our financial performance significantly ahead of our existing strategic plan, we are today setting out a new, ambitious plan to increase our revenues to $1.2 billion by the end of FY2027, with underlying operating margins in the range of 9-10%,” said Rothschild.

“This underlines the confidence we have in the clear growth opportunities created by our combination of excellent customer relationships, exceptional assets and an agile operating model.”

The company highlighted a final dividend per share growth of 9.1% to 2.4p against 2.2p the last year.

Uranium, IPOs and Mining Cyclicality with Power Metal Resources’ Paul Johnson

UK Investor Magazine
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Uranium, IPOs and Mining Cyclicality with Power Metal Resources’ Paul Johnson

Paul Johnson, CEO at Power Metal Resources, joins the UK Investor Magazine Podcast for a broad discussion around Paul’s feelings on current market conditions and recent developments at Power Metals.

Register for the UK Investor Magazine Summer Investor Evening

We start with an overview of the current macro picture and how Paul sees metal prices moving through 2022.

Our next focus is the Power Metal spinout strategy and we look at some of the individual companies set for an IPO this year.

We explore the most important factors in the decision-making process when selecting which assets would be held in the new entities, and those retained in-house by Power Metal Resources.

Given the nature of their strategy, we ask Paul if investors should view Power Metal Resources as an investment company managing a portfolio of assets, or one that’s targeting long term production?

We finish by asking Paul which one project, and one metal, excites him the most?

Paul will be presenting at the UK Investor Magazine Summer Investor Evening 30th June.

Register for the UK Investor Magazine Summer Investor Evening

iEngergizer Limited revenues grow 32.4% on higher margins

Natasha Doris
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0
iEngergizer Limited revenues grow 32.4% on higher margins

iEngergizer Limited shares rose 8.2% to 487p in early afternoon trading on Thursday after the firm exceeded market expectations with a revenue growth of 32.4% to $265.2 million against £200.3 million in FY 2022.

The digital solutions group confirmed revenue and profitability was driven by significant growth in higher margin International BPO business, and financial reporting and compliance services in its content services division.

Additionally, iEnergizer Limited highlighted increased revenue from the majority of its international clients operating across verticals of media and entertainment, BSFI, publishing services and online training and education.

“We are delighted to report another strong performance by iEnergizer, achieving significant growth in revenue and exceeding market expectations for EBITDA, due to the significant progress made by colleagues across all divisions, focusing on high margin revenue,” said iEnergizer chairman Marc Vassanelli.

The firm also added several new clients to its e-commerce, telecom and e-learning industry sectors.

“Importantly, we have secured several new customers across each of our divisions, as well as maintaining and deepening relationships with our existing key customers,” said Vassanelli.

“The business has maintained a successful focus on recurring revenue streams, by capitalizing on iEnergizer’s advantageous position to service existing and new customers’ needs in the evolving digital technology landscape.”

iEnergizer Limited reported a service revenue increase of 32.8% to $260.3 million compared to $196 million, alongside an EBITDA climb of 51.3% to $97.3 million from $64.3 million, representing an EBITDA margin of 36.8% against 32.1% the last year.

The company announced an operating profit rise of 58.5% to $91.3 million compared to $57.6 million, and a pre-tax profit boost of 55.5% to $83.2 million against $53.5 million.

The firm also mentioned a post-tax profit climb of 52.3% to $74.5 million compared to $48.9 million year-on-year.

The company said its first three months of FY 2023 had started on a positive note, with its growth continued on the back of existing contract extensions.

iEnergizer Limited noted an EPS increase of 50% to 39c against 26c, alongside a total dividend of 21.9p per ordinary share compared to 14.1p for the financial term.

“Reflecting the Group’s strong balance sheet and the cash generative nature of the business, coupled with the Board’s confidence in the business strategy and growth prospects, we are pleased to announce a final dividend of 13.8p for fiscal 2022, in line with our progressive dividend policy adopted in 2019,” said Vassanelli.

“With iEnergizer’s solid foundation, its proven strength in operational execution, new sales initiatives, differentiated offerings, healthy balance sheet, and with substantial opportunities for further growth identified, the Board is confident in the Company’s continued growth path as a unique, end-to-end digital solution enabler.”

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