FTSE 100 finishes turbulent week in the red

Natasha Doris
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FTSE 100 finishes turbulent week in the red

The FTSE 100 closed down 0.4% to 7,014 in Friday trading, as the market continued to lose ground after a week of central bank action.

UK interest rates were hiked to 1.25%, which the market had been pricing in for weeks, however the Bank’s revised inflation estimate of 11% in Q4 this year threw investors for a loop as stocks plummeted on the back of the nauseating report.

“The sun is shining bright, the weekend is here, yet all investors can think about is medicine to calm the motion sickness after one of the most chaotic five days for stocks and shares in a long time,” said AJ Bell investment director Russ Mould.

“Rising inflation, rising interest rates and a rising chance of a recession have all served to turn stomachs in equity-land.”

The markets have been through the wringer, with the current volatility shaking up indexes across the board in the year-to-date.

“Year-to-date that means the FTSE 100 has fallen approximately 6%, the S&P down 24%, and the Nasdaq 33% lower,” said Mould.

“This is a shock to the system for many investors who are relatively new to the game and haven’t seen a proper market correction before.”

The US markets recovered a slight amount of ground, with the S&P 500 up 0.5% to 3,686 and the NASDAQ up 1.4% to 10,796.5.

Meanwhile, European markets recovered slightly, with the German DAX closing up by 0.5% to 13,108.8, the French CAC gaining 0.1% to 5,891.9 and the Italian FTSE MIB rising 0.6% to 21,869.6.

Tesco

Tesco shares were up 0.8% to 251.7p as the supermarket struggled to fight off encroaching competition from Aldi as the cost of living continued to bite.

With inflation speeding towards 11% and food inflation set to hit 15% this summer, Tesco is rapidly finding itself backed into a corner as it struggles to withhold passing on inflationary costs to customers.

“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,” said Tesco CEO Ken Murphy.

UK sales fell by 1.5%, however overall group retail sales rose by 2% year-on-year.

“Overall sales figures enjoyed a positive contribution from inflation, but volumes seem to be falling as habits start to shift in the face of challenged household budgets,” said Mould.

“The cost of living crisis is largely out of Tesco’s hands and when it comes to the things it can control it is doing well.”

“The Aldi Price Match and Low Everyday Prices initiative is helping to hold off the challenge of the German discounter and by offering lower prices on lots of products exclusively to Clubcard members it is helping foster loyalty among its customer base.”

Oil Stocks Fall

The price of oil plummeted to $113 per barrel mark for Brent Crude, serving to drag down the oil giants on the market.

The US Federal Reserve’s 0.75% interest rates hike and the Bank of England’s 0.25% hike also hit prospects for the energy majors going forward, as Shell shares dropped 4.6% to 2,044p and BP shares slid 6.1% to 379.4p.

Glencore

Glencore shares fell 0.6% to 461.2p after the mining company reported its operating profits were estimated to exceed its top-range guidance at $3.2 billion for FY 2022.

Aquis weekly movers: Psych Capital back above placing price

Andrew Hore
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Aquis weekly movers: Psych Capital back above placing price

Recent Aquis admission Psych Capital (LON: PSY) was the best performing company during the week. The investment company is focused on early-stage psychedelic medicines businesses, and it has subsidiaries that can offer investee companies services, such as marketing and data collection.

Psych Capital raised £810,000 at 5p a share and it ended the first day of trading on 9 June at 4p share, reaching 4.75p at the end of the week. This week the share price recovered to 5.5p (5p/6p). Chris Akers took a 4.96% stake. There were ten trades during the week, and all were on Thursday and Friday.

Valereum (LON: VLRM) announced that it intends to launch a global open marketplace platform for Non-Fungible tokens (NFTs). It has also appointed Z/Yen Group Ltd as strategic adviser to provide a commercial review of the business plans for the Gibraltar Stock Exchange. It will also help to prepare a prospectus for a listing for Valereum on a major stock exchange. The share price 14.3% to 24p (23p/25p).

Quantum technology investment company Quantum Exponential Group (LON: QBIT) shares rose 4.1% to 2.55p (2.3p/2.8p). Quantum Exponential floated last November at 5p a share, although the pro forma NAV at the time was 1.65p a share. Quantum Exponential has made three investments at a total cost of £1.16m since it floated. There are plans to set up a quantum computing focused fund.

A fall in market capitalisation means that Coinsilium Group Ltd (LON: COIN) will move from the Apex segment to the Access segment. However, the share price rose 1.4% on the week to 2.81p (2.74p/2.88p).

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Fallers

Investment company Hot Rocks Investments (LON: HRIP) was the worst performer on the week falling by 23.1% to 0.5p (0.4p/0.6p). Not far behind was Goodbody Health Inc (LON: GDBY), which declined 22.9% to 1.35p (1.2p/1.5p), having fallen to 1.15p at one point during the week. Last week, the CBD products supplier and diagnostics testing company said that it was cancelling its quotation on the Canadian Neo exchange and moving its domicile from Canada to Guernsey. The Care Quality Commission has granted registration to the company’s diagnostic and screening activities.

Energy storage technology developer Invinity Energy Services (LON: IES) shares dipped 22.5% to 46.5p(45p/48p). This reflects a general weakness in the share price of cleantech companies.

KR1 (LON: KR1) has put money in a range of blockchain and cryptocurrency investments. The downward trend in many cryptocurrencies has hampered the share price of KR1, which fell 22.1% to 26.5p (25p/28p).

NFT Investments (LON: NFT) slumped 15% to 1.275p (1.25p/1.3p). There is no news from the company, but it has invested some of the cash it raised in cryptocurrencies.

AIM movers: Providence Resources, Directa Plus

Andrew Hore
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AIM movers: Providence Resources, Directa Plus

Oil and gas explorer Providence Resources (LON: PVR) shares slumped 0.5p to 1.8p when it announced a proposed fundraising at a 35% discount to the previous day’s closing price. Providence is raising $1.8m at 1.5p a unit (one ordinary share and one warrant exercisable at 1.5p). The cash will be spent on working capital and fund Providence’s lease undertaking application for Barryroe, which is an offshore field south of Cork. The Ireland government has delayed its decision. There should be cash left to fund an appraisal well at Barryroe. However, the Providence share of the cost of an appraisal well and pre-development studies is $65m after which a final investment decision will be made.

An AGM statement from Directa Plus (LON: DCTA) says that trading has accelerated in the past two months. The share price rose 9p to 106p. The graphite technology commercialisation company has generated revenues of €4.6m by the end of May. Last year’s revenues were €8.6m. There is still a good chance that a large remediation services contract can be won via a tender early in the second half.

Two resolutions were defeated at the annual general meeting. These were the re-election of chairman Sir Peter Middleton to the board and the authority to purchase the company’s own shares. Richard Hickinbotham will become interim chairman

Christie Group to sell popular Trentham Estate on behalf of St. Modwen

Natasha Doris
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Christie Group to sell popular Trentham Estate on behalf of St. Modwen

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 firm are set to sell the Trentham Estate on behalf of property group St. Modwen, following a strategic review of St. Modwen’s core business.

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 revenues grow 195% to £32.7m in HY1 2022

Natasha Doris
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Access Intelligence revenues grow 195% to £32.7m in HY1 2022

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.”

Access Intelligence reported an annual recurring revenue (ARR) of £59.6 million, representing a growth of £700,000 in the HY1 period, with an adjusted EBITA anticipated to hit £200,000.

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 identifies conductive anomaly at Ragged Range project

Natasha Doris
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0
Thor Mining identifies conductive anomaly at Ragged Range project

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.

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 commences drilling at Red Settler project

Natasha Doris
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0
Wishbone Gold commences drilling at Red Settler project

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.

“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.

How far could the FTSE 100 fall?

UK Investor Magazine
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How far could the FTSE 100 fall?

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.

With such a strong weighting in highly valued technology shares, the S&P 500 is down 23% this year and the Tech-focused Nasdaq has shed 32%.

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.

Future shares fly on completed acquisition of Who What Wear, trading on track

Natasha Doris
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0
Future shares fly on completed acquisition of Who What Wear, trading on track

Future shares were up 6.5% to 1,653p in early afternoon trading on Friday following its completed acquisition of US women’s lifestyle publisher Who What Wear.

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.”

M&C Saatchi board withdraws bid recommendation

Andrew Hore
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M&C Saatchi board withdraws bid recommendation

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.

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