M&S swings back to profit, warns inflation to impact revenues in FY 2023

Natasha Doris
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M&S swings back to profit, warns inflation to impact revenues in FY 2023

Marks and Spencer’s shares were up 1.7% in early morning trading on Wednesday, after the company announced a revenue growth to £10.8 billion in its FY 2022 results against £9.1 billion in FY 2021.

The retailer reported a rise in operating profit before adjusting items to £709 million compared to £222.2 million year-on-year, alongside a pre-tax swing back to profit of £391.7 million from a £209.4 million loss the last year.

Marks and Spencer’s confirmed a post-tax profit of £309 million compared to a loss of £201.2 million in 2021, marking an overall return to profit for the group as business recovered on the back of lifted Covid-19 restrictions.

The company noted a free cash flow of £699.2 million from £296.4 million in 2021, with a net debt decline to £2.7 billion compared to £3.2 billion the previous year and a £400,000 net debt excluding lease liabilities from £1.1 billion, which the firm attributed to its recovery of profit, combined with a focus on working capital and tightly controlled capital expenditure.

“For me, what is important about these results is not just the restoration of profit and strong cash flow; it is that they demonstrate that M&S has fundamentally changed,” said Marks and Spencer’s CEO Steve Rowe.

“While there is much more to do, the business has moved beyond proving its relevance and has the opportunity for substantial future growth.”

“It has been my privilege to be the steward and shopkeeper of this fantastic business and extraordinary brand at such an important stage in its history.” 

Online Sales Growth

The firm commented that its international online retail sales grew to £250 million compared to £100 million in the 2019 to 2020 term, as a result of expansion in markets with a store presence and global platforms.

Marks and Spencer’s highlighted a 3.8% uptick in online clothing and home sales, and a 55.6% climb in overall online sales year-on-year. However, the group confirmed an 11.2% slide in store sales on lower performance from legacy high street and city centre stores.

Meanwhile, food sales saw a 10.1% increase due to robust value and quality perception. The firm said growth in its Costa Coffee and Ocado channels reinforced its belief in the long-term potential to expand its food sectors.

Inflation Approaches

However, Marks and Spencer’s commented that significant inflation its supply chain as a result of labour shortages, global supply issues and international borders and customs expenses, which it reportedly expects to increase going into FY 2023.

The company is subsequently planning for an adverse impact on volumes due to price inflation, which is set to squeeze consumer spending and profit growth.

Despite the warning, certain analysts expect that the firm is better positioned than its bargain competitors to weather the inflationary storm ahead, which they credited to its ‘secret weapon’ in its food business.

“M&S produced a tasty set of results. M&S’s food offering continues to deliver for the Group and our experts say it could be their secret weapon against the inflationary pressure set to rattle other supermarkets,” said Third Bridge analyst Ross Hindle.

“M&S’s premium brand positioning means they are less vulnerable to the pressure from discounters and many of the shoppers they do lose will be replaced by new customers trading down from eating out.” 

“Also, the old habits of splitting grocery shopping between multiple supermarkets are back, now the need to do one big weekly shop and return home has dissipated with Covid.”

Russia

The company pulled out of Russia after 17 years on 3 March 2022, in response to the country’s invasion of Ukraine. The exit cost the group a reported £31 million in business disruption and exit costs.

Marks and Spencer’s added that its Ukrainian business had been partially impacted in the war, however it commented that it was currently working with its partner in the state to reopen its outlets at the earliest possible convenience.

Dividend Remains Cut

Marks and Spencer’s mentioned an adjusted earnings per share of 15.7p compared to a loss per share of 10.1p, however the company decided against resuming its dividend payouts in lieu of restoring sustainable profitability and strengthening its balance sheet metrics in line with investment grade.

New AIM admission: EnSilica’s semiconductor designs

Andrew Hore
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New AIM admission: EnSilica’s semiconductor designs

EnSilica designs semiconductors for specific purposes, and it has been trading for two decades. EnSilica has successfully managed the current shortage in semiconductors because it has managed to pass on price rises. It is also currently more involved in the design stage, although that will change over the longer-term.
New semiconductor capacity being installed around the world will potentially spark more design work because it is based on newer 12 inch wafer technology.  EnSilica also believes that electronics companies may move towards a vertically integrated model, so they are less expo...

IXICO retains long-term promise

Andrew Hore
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IXICO retains long-term promise

Cenkos upgraded its forecast for medical imaging technology provider IXICO (LON: IXI) following the interim figures, yet the share price fell by nearly 10%. That is because of caution about the next financial year when there is likely to be a return to loss.
IXICO continues to win additional contracts, although they will have more impact in the future.  
Interim revenues fell from £4.9m to £3.9m. That was not a surprise because it was flagged that there would be a decline this year, which was exacerbated by the early closing of a study. Pre-tax profit fell from £635,000 to £201,000.
There...

Ways to Reduce Inheritance Tax in the UK

UK Investor Magazine
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Ways to Reduce Inheritance Tax in the UK

Many people in the UK seek ways to reduce inheritance tax. There are a few perfectly legal routes you can take to boost the portion of your inheritance that you get to keep. Tax reduction avenues often go unused because people aren’t aware of how they work, so let’s shed some light on some of the ways you can reduce your inheritance tax. 

What is inheritance tax?

When someone dies, the government levies a tax on their property, possessions, and money at set thresholds of value if any of it is to be inherited. For the most part, if everything is left to a spouse or civil partner, or a charity or community the amount of inheritance tax paid can be reduced.

Inheritance tax has two thresholds for liability. Inheritance tax only applies over a certain threshold. If the valuation of an estate (the sum of their money, property, and possessions) comes to below £325,000, the heir won’t be liable to inheritance tax, as long as the value of the estate is reported. This is known as the nil rate band. For giving away a property to step, foster, adopted, or direct children, the threshold can be bumped up to £500,000.

Whenever an estate exceeds these thresholds, a 40 percent taxation comes into play. This is on the value that exceeds the threshold. For example, a £400,000 estate due to be inherited by someone’s children would see £75,000 of that subject to 40 percent tax (i.e., £30,000).

Ways to reduce inheritance tax

Source: Unsplash

Many estates aren’t simply passed over to one person. People often leave a divide of their assets in their will to give away.In this case, one way to reduce liability to inheritance taxon particularly valuable assets, such as shares, is to transfer shares as a gift to your spouse or civil partner. The government won’t apply Capital Gains Tax on shares if they’re gifted(only later when they are sold), so you could invest in shares, gift them, and reduce some liability to inheritance tax by way of doing so. 

You may also want to consider making the most of the reduced inheritance tax rate that comes with giving a certain percentage of the estate to charity. If you leave 10 percent of the net estate to charity, the 40 percent tax rate an estate is liable to is reduced to 36 percent. In addition, the amount of tax owed is calculated based on what is left of the estate after some of it has been donated to charity.

Another great way to reduce inheritance tax liability is through a “whole-of-life” insurance policy. This type of policy enables someone to plan in advance to cover an inheritance tax bill so that heirs to their estate don’t need to foot the bill themselves. It’s a proactive way to make inheritance tax easier on heirs. 

There are always ways to reduce the amount of inheritance tax you owe, as long as estate holders are smart and plan in advance, and heirs are informed about the methods they can use. The key is to remain educated on the topic.           

Calnex revenue rises 23% to £22m on successful product launches

Natasha Doris
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0
Calnex revenue rises 23% to £22m on successful product launches

Calnex shares were down 3.2% to 161.6p in late afternoon trading on Tuesday, after the company announced a 23% rise in revenue to £22 million in FY 2022 compared to £17.9 million the last year.

The telecommunications solutions group reported a 16% EBITDA rise to £6.3 million against £5.4 million, alongside an adjusted pre-tax pre-tax profit jump of 18% to £5.9 million compared to £5 million.

Calnex attributed its profits growth to strong demand for test instrumentation, with a series of well-received product launches driving customer interest.

The company also mentioned its completed acquisition of iTrinegy Limited in April 2022, marking the group’s move into the Software Defined Networks technology for software application and digital transformation testing market.

“The transition to 5G and growth in cloud computing continues to drive demand for test instrumentation and Calnex is in a strong position to continue benefitting from these market trends,” said Calnex CEO Tommy Cook.

“We have made good progress in executing on our strategy, paving the way for accelerated future growth. The recent acquisition of iTrinegy represents a move into a new adjacent market and we anticipate accelerated sales in the long-term.”

“Furthermore, we have invested in our team and resources, the continued positive response to the new product launches provides optimism with regards to the long-term demand for our offering.”

So far, the company has reportedly navigated semi-conductor shortages across the international supply chain with success, and the group said it remained optimistic for its 2023 business prospects.

The software manufacturer commented that its business continued to benefit from evolutionary trends in the telecoms sector, especially cloud computing and 5G, driving the firm into 2023 with a record order book as a result of strong demand for test equipment.

“Whilst looking to the future with a degree of caution given the continuing component shortage situation, we can take confidence from the ability with which we have managed the situation to date, successfully shipping scheduled orders as planned,” said Cook.

“We move into FY23 with a record order book and look to the future with a strong sense of optimism.”

Calnex confirmed an adjusted EPS drop of 11% to 5.1p against 5.8p and a proposed final dividend of 0.5p per share, bringing the total payout to 0.8p per share over FY 2022.

FTSE 100 falls as windfall tax hit SSE

Natasha Doris
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0
FTSE 100 falls as windfall tax hit SSE

The FTSE 100 was down 0.3% to 7,489.7 in midday trading on Tuesday, as reports, initially by the FT, rolled in that the UK government looked set to impose a windfall tax on £10 billion of excess profits from electricity generators.

The spiking cost of living has spurred calls for the government to intervene and lift some of the pressure from struggling households on the back of rising energy bills, after the energy price cap rose 54% in April and inflation hit a 40-year high of 9%.

However, calls for a windfall tax have been met with comments that the measures might serve to undercut green energy investment in the sector.

“The Government wants to raise money to help households hit by a sharp rise in energy bills,” said AJ Bell investment director Russ Mould.

“While it is right that some support should be given to those most in need during these difficult times, the way in which new funds are raised means the Government runs the risk that energy companies slow down investment in new green projects which could make it harder for the country to hit its net zero emissions targets.”

SSE shares tumbled 8.6% to 1,750p and Harbour Energy fell 3.7% as a investors scrambled from the stock on the back of windfall tax fears.

BP and Shell also suffered a hit from the speculation, as their shares fell 1.5% to 422.1p and 1.1% to 2,359p, respectively.

Meanwhile, an exodus of advertisers from US tech companies saw app developer Snapchat tumble 31% in after-hours trading after its CEO warned of a lowered revenue and profit outlook for June, with Meta dropping 7%, Pintrest sliding 12% and Alphabet dipping 4% across the Atlantic.

Marketing-reliant groups in the UK followed the trend, with ITV shares falling 3.7% to 71.5p and WPP falling 3.6% to 930p.

Barclays shares gained 3.1% to 162.4p as a result of the banking giant’s highly-anticipated £1 billion share buyback scheme, which is set to launch today.

The programme had been delayed due to an over-issuance of US securities earlier this year, which pushed the buyback date from its scheduled launch in March.

The buyback will reportedly cover ordinary shares only, with no American depository receipts, and will be cancelled in a move to lower share capital.

UK energy price cap to shatter records at £2,800

Natasha Doris
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UK energy price cap to shatter records at £2,800

The UK energy price cap is set to increase in October to a record-shattering £2,800, with the average UK household anticipated to pay an additional £800 per year in energy bills.

The entire country is on track to pay an extra £18.3 billion in energy costs from October 2022, just as the cold weather starts to settle into houses and family requirements for heating surge.

The move follows April’s price cap rise of 54%, which sent consumer bills through the roof with an estimated £700 per year in extra energy expenses.

Meanwhile, the CPI hit a 40-year high of 9% in April, as the cost of living crisis began to eat into consumer pandemic savings and into credit allowances, and borrowing started to climb on the backs of desperate families struggling to catch up with spiking costs.

“The hike is even more stark when we consider that in September last year the average bill was £1,138 – an amount that seemed a lot at the time but has been eclipsed now,” said AJ Bell head of personal finance Laura Suter.

“It means the average household will have to find an extra £1,662 just to pay for the same energy to heat their homes or cook their food over the past year.”

An estimated 22 million people are currently on the price cap tariff, double the number the same time last year.

“What’s tough for most households is that there is no other option – all the fixed rate deals out there are far higher than October’s price cap rate,” said Suter.

“What’s more, Ofgem’s planned changes to the price cap mean that people need to brace for another potential increase just three months after this one.”

Consumers are set to struggle at the worst time for financial relief, as the war in Ukraine continues to send the price of foodstuffs including wheat surging, and supply chain impacts cripple companies until they can’t afford to absorb the expenses any further, sending prices spiking across the board.

The price cap rise will impact the most vulnerable in the UK, and without urgent government intervention, the rising tide of energy costs will continue to swallow consumer wallets whole.

“At £2,800 the average energy bill will now represent 30% of the annual state pension payment for a single person and 70% of the amount a single person gets each year from Universal Credit,” said Suter.

“It now feels almost impossible that the Government can ignore the pressure these rising bills are putting on the lowest income households.”

The pressure is now on Rishi Sunak to deliver tangible change in his Summer Statement in response to struggling household calls for support with bills.

“The Government isn’t short of ideas that have been suggested, from turning the £200 energy loan scheme into a grant, or increasing the Warm Home Discount, to bringing forward benefit increases or handing out another council tax rebate,” said Suter.

“But waiting until October to announce any handouts feels both unlikely and cruel to those families struggling now.”

Bytes Technology Group revenues grow 13.8% to £447.9m

Natasha Doris
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0
Bytes Technology Group revenues grow 13.8% to £447.9m

Bytes Technology Group shares increased 0.1% to 440p in early afternoon trading on Tuesday, following a revenue growth of 13.8% to £447.9 million in its FY 2022 results against £393.6 million in FY 2021.

The software company announced a gross profit uptick of 19.9% to £107.4 million compared to £89.6 million the last year, with an operating profit rise of 57% to £42.2 million from £26.8 million.

Bytes Technology further noted a gross invoiced income growth of 26.1% to £1.2 billion against £958.1 million over its financial year, as a result of strong growth across all businesses and continued expansion on the back of public sector customers.

“This is another record set of results for BTG, with positive contributions from all parts of the business,” said Bytes Technology Group CEO Neil Murphy.

“During the year we continued to strengthen our market position, by deepening our relationships with key software vendors and expanding our expertise in areas such as cloud, security and annuity software and services.”

“These steps enabled us to make meaningful progress against our strategy and ensure our customers continue to receive the highest quality of service.”

The company highlighted estimated disruption as a result of macro-economic pressures going into FY 2023, however, it assured investors that the group was confident of a strong outlook for the remainder of its financial year.

Bytes Technology mentioned an EPS of 13.7p against 8.5p year-on-year, with an adjusted EPS growth of 18.3% to 15.4p compared to 13p.

The firm also reintroduced its dividend with a final payout of 4.2p and a special dividend of 6.2p per share.

“I would like to thank all my colleagues who have done an outstanding job supporting our clients through the past year,” said Murphy.

“The progress we have made is a direct result of their efforts and would not have been possible without them.”

“With our growing customer base, strong reputation with key vendors and focus on sustainable growth, our business remains well placed to deliver against our strategy and capitalise on the exciting market opportunities ahead.”

Technology Minerals wins EA permit for Wolverhampton plant

Natasha Doris
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0
Technology Minerals wins EA permit for Wolverhampton plant

Technology Minerals shares gained 4.7% to 3.3p in early afternoon trading on Tuesday, after the battery metals group won an environmental permit from the Environmental Agency (EA) for its 49% owned Recyclus battery recycling firm.

The company commented that the permit would provide the key legal foundation for Recyclus to receive the variation of licence needed to kick off full-scale of operations at its Wolverhampton site.

The permit represents the second licence Recyclus has received over the past two weeks, including its previous permit for its Tipton recycling facility earlier in May.

Technology Minerals confirmed that the licence was required due to the unusual undertaking of recycling lithium-ion batteries within the UK.

The EA also reportedly reportedly prioritised the determination of the group’s application to transfer its permits across its Wolverhampton plant and its lead-acid Tipton plant, as a result of its contribution to protecting the environment.

The circular-economy firm added that its Wolverhampton plant would be the first in the UK capable of recycling lithium-ion batteries, once it was fully-operational, and would be the lynchpin of the company’s aim to increase its lithium-ion battery recycling capacity from 8,300 tonnes in its initial year of operations to 41,500 tonnes by 2027.

Technology Minerals further said it aimed to ramp up operations at its Tipton plant from 16,000 tonnes in the first year of full production to 80,000 in the next five years.

“Receiving the EA permit for our Wolverhampton plant is a critical step for the recycling facility to become fully operational which, for the first time, will bring industrial scale recycling capability for lithium-ion batteries in the UK,” said Technology Minerals chairman Robin Brundle.

“To be awarded priority status and be categorised as an organisation critical for environmental protection is fantastic. This high-level of recognition from the EA is reflective of the importance of Recyclus’ ambition to recycle batteries and establish a circular economy for battery metals in the UK.”

“With the increasing demand for critical battery metals, we are pleased to be seen as integral to ensuring a domestic supply through recycling.” 

Titanium Rutile, Graphite and EVs with Sovereign Metals

UK Investor Magazine
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Titanium Rutile, Graphite and EVs with Sovereign Metals

We were thrilled to welcome Sapan Ghai, Chief Commercial Officer of Sovereign Metals, to the Podcast. Sapan joined us earlier in the year to introduce Sovereign Metals, since then the company has released a raft of significant news that has been transformational for the company.

We start by discussing Sovereign’s key developments including the recent mineral resource estimate that confirmed Sovereign’s Kasiya resource in Malawi is the largest Titanium Rutile deposit in the world with some 1.8 billion tonnes.

Sovereign Metal’s graphite resource shouldn’t be under estimated and we talk about applications for graphite flake and the importance of in the electric vehicle revolution.

We finish with looking forward to what the rest of 2022, and beyond, holds for Sovereign Metals.

For more information on Sovereign Metals, please watch their presentation at the UK Investor Magazine Metals & Mining Conference earlier this year.

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