Christie Group shares were down 1.6% to 120.5p in late afternoon trading on Friday after the company reported the upcoming sale of its Trentham Estate, an iconic UK visitor attraction and leisure-based outlet retail and garden centre.
The Estate currently attracts approximately 3.2 million people per year, including 760,000 paid visitors, placing the venue in the top-five paid-for garden attractions across the UK.
Trentham’s business is underpinned by the substantial property investment business which incorporates 85 third-party leasehold occupiers, the majority of which are based in the Outlook Shopping Village, alongside restaurants and a Blue Diamond Garden Centre.
The Christie Group added that the Estate also features a Monkey Forest attraction, a Treetop Adventure high ropes course and a water sports centre which hosts Trentham Canoe and Trentham Boat Clubs.
“Trentham is a unique asset in that it combines a mix of very stable investment income, as well as revenue from the gardens and events, whilst delivering numerous opportunities for further development,” said Christie and Co head of leisure and development Jon Patrick.
“Having one of the busiest garden centres in the country, a vacancy rate of only 2% in the Outlet Shopping Village and an easily accessible location with 7.5 million people living within an hours’ drive-time, mark Trentham out as one of the most exciting assignments we’ve worked on in recent years.”
“We anticipate that the British public’s increasing interest in all things “outdoors” as well as investors’ focus on long income opportunities with further potential for development and exposure to operational real estate, will see interest in Trentham coming from a diverse buyer group.”
Access Intelligence shares were up 0.4% to 104.9p in late afternoon trading on Friday, following a projected 195% increase in HY1 2022 revenue to £32.7 million in its recent trading update.
The software company highlighted progress on its integration of media monitoring group Isentia, alongside the launch of audience intelligence and social listening platform Pulsar in the Australian and New Zealand market, which brought higher levels of customer engagement.
“The Company continues to make good progress on the integration of Isentia and has been assessing its current business operations to ensure that it can fully optimise its market positioning to capture the undoubted market opportunity,” said Access Intelligence non-executive chairman Christopher Satterthwaite.
“This includes a comprehensive analysis of the current market dynamics across its regional presence. The Board remains highly confident about realising the cost synergies identified at the time of the acquisition.”
“The launch of Pulsar in ANZ has been well received and we expect the integration of the Company’s global product suite to support further progress in APAC with continued new customer wins.”
The firm added that cash on 31 May 2022 was at least £9.2 million, exceeding board expectations as a result of better than anticipated working capital management.
The company mentioned growth across Europe, the Middle-East and Africa, with ARR at £28.1 million for the markets, representing a rise of £1.2 million. The board said it expected ARR growth to accelerate over HY2 2022 as its pipeline converted.
Access Intelligence also noted its recent global referral partnership arrangement with social media management platform Hootsuite, which it expects to introduce new business opportunities to the company, especially in North America.
New clients for the period included John Lewis, NHS Property Services, Procter and Gamble, Trustpilot, McCann-Erickson and Wateraid.
The group reported several challenges in the Asia-Pacific sector, with ARR sliding £500,000 to £31.5 million at the close of HY1 linked to continued socio-economic challenges in South-East Asia.
However, the company said the results marked a significant improvement from the last year. Its new clients in the sector included Chevron, Bulgari, Netflix, Nestle, Tiffany and Co, Estee Lauder, Lifeline Australia and Huawei.
“The first half of the year has seen the Group trade in line with expectations. We have delivered strong growth in the core business with a good performance being delivered by the Group’s EMEA and North America region including a significant number of blue-chip customers won in the period,” said Satterthwaite.
Thor Mining shares decreased 4.2% to 0.5p in early afternoon trading on Friday following the company’s recently completed electromagnetic geophysics survey over the nickel gossan at the Krona prospect.
The group confirmed that the survey identified a conductive anomaly at the group’s 100%-owned Ragged Range project in eastern Pilbara, western Australia.
Thor Mining said the shallow conductor beneath the nickel gossan was consistent with sulphides and warranted a drilling test to validate its findings.
According to the mining firm, the nickel gossan is located at the basal contact of the Dalton suite ultramafic unit in the classic location for nickel-copper sulphide mineralisation.
The company noted the shallow conductor would be drill tested including downhole EM as part of the upcoming reverse circulation drilling programme scheduled to start next week at the Sterling Gold prospect.
The electromagnetic geophysics survey over the #nickel gossan at $THR's Ragged Range Project identified a conductive anomaly. We look forward to testing it as part of our drilling program, scheduled to start at Sterling #Gold Prospect next week. Read more: https://t.co/Rtzi5HelTqpic.twitter.com/xy1usEOMGi
Thor Mining commented that its next steps would be to conduct an airborne magnetic/radiometric survey which is scheduled to be flown over the east region of the tenure including license areas E46/1340 and E46/1393 in the near term.
The firm said it would continue regional exploration with a focus on both lithium priority areas and copper-gold historic workings in the north-east sector.
“I am encouraged that the first ground geophysics survey at Ragged Range has identified a shallow electromagnetic conductor,” said Thor Mining managing director Nicole Galloway Warland.
“The target is modelled at around 100m below the surface, establishing it a clear drill target for the upcoming RC drilling program.”
“We look forward to drill testing this anomaly as part of our RC drilling program, scheduled to commence at Sterling Prospect next week.”
Wishbone Gold shares gained 5.8% to 12.1p in early afternoon trading on Friday, after the group announced the commencement of drilling at its Red Settler Gold-Copper project in the Patersons Range region in western Australia.
The Red Setter project is reportedly based on the 57.4 kilometre 100%-owned EL45/5297 exploration licence and is located 13 kilometres south-west of Newcrest’s gold-copper mine and 60 kilometres west of Newcrest and Greatland Gold’s Havieron gold-copper discovery.
Wishbone Gold commented that the first phase of drilling would be for 3,000 metres, with the second phase of the operation for an additional 7,000 metres of drilling split between the Red Settler project and the firm’s Cottlesloe project to the south.
The mining group added that the track-mounted multi-purpose drilling rig would be capable of 150 metres reverse circulation and diamond core to 1,200 metres.
— Wishbone Gold Plc (@WishboneGoldPlc) June 17, 2022
“We are very pleased for drilling to have started at Red Setter. It is exciting to be using DDSR’s multi-purpose rigs which should provide a much more efficient program. We will provide updates as the work progresses,” said Wishbone Gold chairman Richard Poulden.
The FTSE 100 is currently down 3.6% so far in 2022 and although the losses of the last month will be hard to stomach, those with a UK Blue Chip oriented portfolio will have fared better than those with a more global approach.
The strong weighting towards commodities has meant that the FTSE 100 has provided relative safety compared to overseas markets, especially the United States.
Indeed, the FTSE 100 is being seen a defensive play due to the exposure to miners, oil giants and pharmaceutical companies.
However, the FTSE’s outperformance doesn’t mean London’s leading index has been immune, or will be immune, to global monetary policy tightening with a backdrop of a cost of living crisis caused by soaring inflation.
How far could the FTSE 100 fall?
With equity markets in freefall this week, investors will be questioning just how far can the FTSE 100 fall? The basis of the question will depend on a combination of economic outlook, and both technical and fundamental analysis.
The economic outlook would suggest we have some way to go. Investor sentiment is souring with numerous predictions of recession and a Federal Reserve that seems intent on making sure the US gets there. A US recession will have global implications.
The Bank of England has been criticised for moving to slowly by not raising rates sharply enough to fight inflation, but they are walking a tightrope with deteriorating economic conditions caused by high prices on one side, and a recession induced by higher interest rates on the other.
The situation is similar in Europe while China is fighting COVID with economic lockdowns hampering global growth.
Company Earnings
How much of the bad economic news is already priced into market will become pronounced in the upcoming round of earnings from global companies.
The first signs of stress are visible in lay offs by US companies. US tech companies have been letting workers go at an alarming rate in recent months with Coinbase shedding 18% of their work force and Tesla cutting 10% of workers.
The problem is very different in the UK in that companies can’t secure the people they need. This is increasing wages and denting margins, adding to pressure from rising prices and supply chain disruption.
This was highlighted just this morning by Tesco CEO Ken Murphy as he said “we are seeing some early indications of changing customer behaviour as a result of the inflationary environment. Customers are facing unprecedented increases in the cost of living.”
How much is priced in?
Investors are quick to price negativity into markets and there is a school of thought that any upcoming economic contraction is already priced into stocks.
In addition, the FTSE 100 is dominated by commodity companies that are doing rather well in the current climate. BP and Shell posted bumper profits recently and the dynamics of oil and gas markets means the two are currently enjoying very favourable refining margins.
So while investors are dumping housebuilding shares for fear of a slowing UK economy and housing market caused by higher rates, London’s largest companies by capitalisation are likely set to produce significant profits in the coming months.
Shell’s market capitalisation is 8x the combined valuation of the FTSE 100’s house builders which will more the offset any downside in the UK housing market.
UK banks are also a major beneficiary of higher rates and will enjoy higher net interest margins.
As demonstrated in these examples, the FTSE 100 is not a representation of the UK economy, and the fundamentals for a large proportion of FTSE 100 companies will navigate any economic downturn just fine.
The FTSE 100’s inverse relationship with the pound will also provide support as GBP/USD trades near the lows of 2020.
Nonetheless, should general investor sentiment continue to worsen, we will likely see further short term downside in shares. This is where FTSE 100 technical analysis will come into play as equity prices are dictated by psychology and historical price action.
FTSE 100 key levels
The key levels to note are the major psychological level of 7,000. Should this be broken, traders will be eyeing 2022 lows around 6,800.
If we see a break of 6,800 the next major level is 6,685 and the 38.2% Fibonacci Retracement from the rally that began in 2020 after the COVID selloff. After this, bears will look for 6,361 then the next major psychological level of 6,000.
It is important to remember that markets can, and very often will , move a lot further than you think they will.
The group commented that the acquisition strengthened its position in the Women’s leading lifestyle vertical and provided the company with a larger scale and reach in North America to push its audience monetisation.
Future highlighted that Who What Wear would benefit from its proprietary technology stack and operating model to drive the platform effect.
The firm added that it had seen an encouraging start to HY2 2022 trading, which was supported by an anticipated return to audience growth as Covid-19 comparators were fully lapped and it showcased the resilience of its diversified business model.
“Media group Future pleasantly surprised the market by saying everything was going well with trading, triggering a big jump in the share price,” said AJ Bell investment director Russ Mould.
“The stock had previously been weak as investors feared its business model – making commission from product sales that originated from its online content – would suffer if consumers were cutting back on spending.”
Future noted that it continued to benefit from the effect of its diversified audiences and revenue streams, alongside its operating leverage, strong cash conversion and steady balance sheet. The group said it was on track to hit its FY 2022 financial guidance.
“I’m delighted that we have completed the acquisition of Who What Wear, which enhances our leadership position in the Women’s vertical, and delivers further scale and reach in North America, as we aim to reach 1 in 2 users online in the US,” said Future CEO Zillah Byng-Thorne.
“We continue to see positive momentum in trading with audiences back to growth. We remain confident our diversified strategy will continue to deliver and remain on track for another strong full-year of profitable growth.”
A sharp fall in the Next Fifteen Communications (LON:NFC) share price over the past month has led to the M&C Saatchi (LON: SAA) board withdrawing its recommendation of the bid by the marketing services company.
Next Fifteen is offering 0.1637 of one of its shares and 40p in cash for each Saatchi share. At a Next Fifteen share price of 1266p, the bid was valued at 247.2p a share.
Since then, the Next Fifteen share price has dropped to 892p and that values the bid at 186p a share.
The board is also still rejecting the rival bid by AdvancedAdvT (LON: ADVT), who along with its boss Vin Murria owns 22.3%. It is offering 2.53 of its shares for each M&C Saatchi share or 2.043 of its shares plus 40p for each share.
At 78p, this values the alternative bids by AdvancedAdvT at 197p a share and 199p a share respectively. If NAV of 96.4p a share is used, then the values are 243.9p a share and 236.9p a share.
AdvancedAdvT says that it will not increase its bid. Vin Murria will seek to be reappointed to the M&C Saatchi board if neither bid is successful.
Reaction
Next Fifteen says that it is disappointed that the recommendation has been withdrawn but it points out that the M&C Saatchi management still believes that the combination of the businesses makes strategic commercial sense.
Even though, the share price has fallen, M&C Saatchi shareholders would still own the same percentage of he enlarged group.
Next Fifteen has called a general meeting so that it can gain shareholder approval for the issue of shares required for the bid. This is held on 19 August, which is the same day as the M&C Saatchi meeting to vote on the takeover offer.
The acceptance date for the AdvancedAdvT bid is 13 August.
As 75% of the share capital is required for the bid it will be difficult for Next Fifteen to achieve that target. That means that M&C Saatchi is likely to remain independent unless another bid comes along.
Glencore shares were up 2.3% to 475p in late morning trading on Friday after the mining giant announced that its operating profit for its trading division was set to exceed $3.2 billion, hitting the top end of its FY 2022 guidance.
The revised profit expectations were sparked by surging prices on the back of supply disruptions, with the price of products such as thermal coal spiking as market volatility sends costs through the roof.
The mining firm said its expected its average FOC thermal cost unit for HY1 to hit $75 to $78 per tonnes from $59.3 as a result of inflationary pressures linked to soaring diesel and electricity costs.
Glencore mentioned it expected more normal market conditions in HY2 2022.
Tesco shares slid 0.4% to 248.6p in early morning trading on Friday after the supermarket announced a 1.5% fall in like-for-like UK sales for Q1 2022-2023 in its latest trading update.
The Big 4 grocer further mention that sales in the Republic of Ireland dropped 2.4% to £612 million year-on-year.
Tesco reported an overall group retail sales growth of 2% since the last year, however, on the strength of its Booker and central Europe sectors.
The supermarket confirmed a Booker sales rise of 19.4% to £2.1 billion, with catering sales up 57.4% on the addition of 13,000 new customers, and a retail like-for-like sales increase of 2.3%.
Meanwhile, sales in central Europe grew 9% to £976 million, with continued growth in market share across all three regions of 0.4% and the completion of 17 malls and one retail park driving proceeds of £200 million as mentioned in April 2022.
Tesco bank sales were up 38.8% due to the acquisition of Tesco Underwriting, alongside a recovery in card sales and travel money.
Aldi gains ground
Tesco announced a market share growth of 0.37% in the UK, with outperformance on value and volume, and raised its overall distribution of Aldi Price Match and Low Everyday Prices products by 19% since Q1 2021-2022.
However, the supermarket has lost 0.5% of its market share in the year-to-date, which seems to be getting picked up by discounters including Aldi, which has gained 1.3% market share since the start of the year.
“Aldi Price Match will become even more important as long as customers are forced into real discount mode… it’s clear that keeping its ranges wide and its prices low has to be the strategy now,” said Freetrade senior analyst Dan Lane.
“But that’s far easier said than done, and that changing customer behaviour is also revealing which tills they’re flocking to.”
“Make no mistake, inflation-induced belt tightening will have a few more households heading to a German discounter. All of the big four have bled market share this year while the challenger grocers have gained, this could only be the start too.”
Tesco CEO Ken Murphy added: “Whilst the market environment remains incredibly challenging, our laser focus on value, as well as the daily dedication and hard work of our colleagues, has helped us to outperform the market.”
“Our material and ongoing investment in the powerful combination of Aldi Price Match, Low Everyday Prices and Clubcard Prices is removing the need for customers to shop elsewhere.”
“Although difficult to separate from the significant impact of lapping last year’s lockdowns, we are seeing some early indications of changing customer behaviour as a result of the inflationary environment.”
Inflation bites
Murphy noted the impact of rising inflation, which is set to hit 11% in October, commenting: “Customers are facing unprecedented increases in the cost of living and it is therefore even more important that we work with our supplier partners to mitigate as much inflation as possible.”
“Tesco is attempting to be the last of the big UK supermarkets to pass on inflation costs to customers as it looks to gain market share and use its scale to manage costs. It is also expanding the number of lines in its successful Aldi price match campaign,” said Third Bridge retail research lead analyst Alex Smith.
“Tesco’s market leadership gives it more bargaining power to negotiate down prices with suppliers. However, its relatively limited product range and fragile reputation means it can’t push negotiations too far.”
The retailer added that its outlook for profits and cash remained unchanged at the current time.
Octopus Renewables Infrastructure Trust shares rose 1% to 107.1p in early morning trading on Friday, after the firm announced that its NAV per 1p ordinary share was 104p on 31 March 2022.
The company reported that it had fixed pricing on a significant portion of short term output as a result of higher prices in power over the last few months, with approximately 62% of revenues to be received by its current portfolio of assets in the two-year term to 31 March 2024 now fixed.
Octopus Renewable Infrastructure Trust confirmed that 54% of revenues to be received in the ten years to 32 March 2032 were now inflation-linked.
In addition, inflation forecasts for 2022 and 2023, and power price forwards for 2022 to 2025 have climbed across the markets where the group’s portfolio of assets is based since the close of Q1 2022.
The firm highlighted that its NAV per ordinary share was calculated based on recent UK inflation consensus forecasts from the treasury, inflation forecasts published by the European Commission, fixed prices entered into since 31 March 2022 on the group’s Finnish assets, the average power market forward prices since the start of June this year, and the application of an increased discount to forward prices of 20% to 30%.
Acquisitions and ongoing projects
Octopus Renewable Infrastructure Trust announced its acquisition of the 68MW ready-to-build solar PV project Breach Solar Farm in Cambridgeshire from AGR Renewables for approximately £50 million in acquisition and estimated construction expenses.
The acquisition will also grant the company the right to construct a battery storage project which is scheduled to be built later this year, with a capacity of 50MW to 100MW.
Octopus Renewables Infrastructure Trust further acquired a 50% stake in a 12MW to 24MW ready-to-build battery storage project in Bedfordshire from Gridsource.
The transaction will be completed alongside another Octopus-managed fund and is expected to close by Q3 2022 once the lease agreement for the project site comes into effect.
The group reported a consideration of £4 million in acquisition and future construction costs.
The energy trust entered into an agreement to acquire a 7.7% stake in the Lincs Offshore Wind Farm in late April 2022, which is operated and managed Danish energy company and wind farm developer Ørsted.
Octopus Renewables Infrastructure Trust added that construction on its onshore wind farms in France, Poland and the UK were currently on track, with seven of eight turbines installed at its 24MW project in Cerisou, France. The project is scheduled for commissioning in Q3 2022.
In addition, all 12 turbines at its 39.6MW Kuslin, west Poland site have been installed, with commissioning expected in the coming weeks.
The firm said the foundation works for its 50MW wind farm in Cumberhead, Scotland had commenced, with five of 12 bases poured so far and turbine installations scheduled to begin in early autumn.
Electricity generation is reportedly set for Q4 2022 and full commercial operations are planned for Q1 2023.
“We are pleased to announce a number of developments today, including investments into ready-to build solar PV and battery projects and an update on our construction projects,” said Octopus Renewables Infrastructure Trust chairman Phil Austin.
“Our Investment Manager continues to deliver both on asset management and pipeline, actively managing our revenue streams and inflation linkage, allowing us to provide the market with new renewable generation capacity and enabling our shareholders to benefit from a diversified portfolio of impactful investments.”
