Barclays to acquire Kensington Mortgage Company for £2.3bn

Natasha Doris
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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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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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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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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.”

FTSE 100 bounces after brutal equities sell-off

Natasha Doris
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FTSE 100 bounces after brutal equities sell-off

The FTSE 100 was up 0.2% to 7,103.6 in early afternoon trading on Thursday as the market recovered slightly from the barrage of selling in earlier trading.

“Red was the dominant colour on the markets across Asia and Europe, following a similar showing on Wall Street last night. Investors just cannot find a good enough reason to shift their bad mood and so the selling continues,” said AJ Bell investment director Russ Mould.

Overnight, the NASDAQ closed was down 0.1% to 11,053, the Dow Jones slid 0.4% to 14,352.7 and the S&P 500 dipped 0.1% to 3,759.8.

Going into the US open, S&P 500 futures were pointing to the index opening 20 points higher.

Commodities declined on recession fears, as investors kept a wary eye on the gloomy macroeconomic prospects. In addition, the price of copper dropped to a three-month low as China maintained a strict zero-Covid policy, threatening global production if major economic hubs re-enter lockdown.

“Investor sentiment towards commodity producers is heavily influenced by the global economic outlook which is not great at present,” said Mould.

“The market is worried that central bankers will make a policy mistake in their fight against inflation by pushing up interest rates too fast and causing a recession. The perfect scenario is a soft landing, but that is hard to achieve.”

“The price of copper for delivery in three months’ time sunk to a 16-month low amid worries about the economic outlook and fears about Covid cases in China, a country known for its ravenous commodities demand.”

Anglo American fell 0.6% to 3,185.2p, Antofagasta dipped 1.6% to 1,223.2p, Croda slid 0.8% to 5,991p, Endeavor dropped 2.5% to 1,7565p and Fresnillo lost 3.4% to 785p.

Housebuilders

The housebuilders continued to feel pressure from rising 9.1% inflation and 1.25% interest rates, as the cost of living finally threw a splash of cold water on the red-hot demand.

Barratt Developments dipped 1.3% to 453.7p, Persimmon fell 0.8% to 1,793.2p and Taylor Wimpey slid 0.6% to 155.7p.

Polymetal

Meanwhile, Polymetal landed back on the radar with its recent business update, confirming it still had the capability to sell gold from its Russian and Kazakhstan operations, with production picking up after Covid put a dampener on its projects for a couple of months.

The mining group warned investors that dividend payouts would be curtailed by liquidity and operational challenges, reflecting the rough time the company has endured since anti-Russian sanctions sent their stock price tumbling off a cliff.

“Russia-focused silver and gold miner Polymetal reassured the market that it was still able to sell gold from its operations in Kazakhstan, and that Russian operations were picking up after Covid-related slowdown in April and May,” said Mould.

“Polymetal said it would decide in September whether to pay dividends. Given rising net debt and short-term liquidity challenges, it seems highly unlikely that shareholders will get a cash payout in the near-term.”

Oil Rises Above $110

However, oil rebounded above the $110 mark, with benchmark Brent Crude trading at $111 per barrel. Shell and BP shares rose 1.4% to 2,105.5p and 1.9% to 390.5p on the higher prices, respectively.

Naked Wine slumps on disappointing figures

Andrew Hore
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Naked Wine slumps on disappointing figures

Online wine retailer Naked Wine (LON: WINE) had a good Covid lockdown but it is finding it difficult in more normal times. Although a £3m pre-tax profit was reported for the year to March 2022, Naked Wine is set to fall back into loss this year.

Subscriptions boomed when people had to stay at home and could not go out to buy wine or drink in pubs and restaurants. Once signed up the new Angels (subscribers) were expected to continue to be subscriber members.

However, economic uncertainty and inflation mean that ending a Naked Wine subscription could become a way of saving money that is required to cover higher energy and food prices. Last year, repeat customer sales retention fell from 88% to 80% and it is lower than the year before the pandemic. There was a 9% increase in active Angels to 964,000, though.

The five-year forecast payback of the investment in acquiring new customers has declined from 2.6 times to 1.5 times. The year one payback has declined from 82% to 68%.  

In 2021-22, US sales fell but were slightly higher in constant currency terms, while UK sales were 10% ahead. The US improved its profit contribution, but only because less was spent on acquiring new customers.

Even last year, people were taking up the introductory offer and then cancelling memberships and there is a new customer recruitment strategy in the UK. The plan is to attract fewer new Angels but improve the quality of customer added. More is being spent on brand marketing and that may help.

Forecast

Peel Hunt has downgraded its 2022-23 expectations from a £1.3m pre-tax profit to a £6.9m loss, even though revenues are forecast to improve from £350.3m to £375.2m, which is at the higher end of the guidance range.

The balance sheet is strong with £39.8m in the bank even though inventories were increased from £76m to £142m. There is a new $60m credit facility.

The share price has fallen by 36.7% to 182p on the back of the 2021-22 results. This shows how unforgiving the market is to even small disappointments.

AIM movers: Tandem, Engage XR, iEnergizer, Bango, Phoenix Global Resources, ex-dividends

Andrew Hore
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AIM movers: Tandem, Engage XR, iEnergizer, Bango, Phoenix Global Resources, ex-dividends

In the 24 weeks to 17 June 2022, the revenues of leisure products and toys distributor Tandem Group (LON: TND) have fallen by nearly one-third and Cenkos has downgraded its 2022 forecast revenues by £8m to £30m. the share price fell by one-fifth to 240p. Bicycle and home and garden product sales have more than halved so far this year. Pre-tax profit expectations have been slashed from £3.6m to £1.4m and this means that Tandem is likely to go from a net cash position to net debt of £2.6m. There has been an improvement in trading in recent weeks, but the outlook remains uncertain. Construction of the new Birmingham warehouse is on track.

Virtual reality software developer Engage XR (LON: EXR) has announced two partners for its enterprise focused Metaverse, ENGAGE Link. They are HITC, which will be in the enterprise plaza, and The Vitual Human Interaction Lab at Stanford University, which is in the education plaza. ENGAGE Link should launch in the fourth quarter of 2022. The core ENGAGE platform is generating increasing revenues and D’Carrick Co has renewed for three years at a total value of €300,000, an increase from €70,000 a year. The Engage XR share price has been rising for a week and today it added 14% to 14.25p.

Contact centres operator iEnergizer (LON: IBPO) released results for the year to March 2022 and proposed a final dividend of 13.8p a share. That takes the total for the year to 21.92p a share, an increase of 55%. The share price rose 9% to 490.5p. Total revenues were nearly one-third higher at $265.2m and pre-tax profit was 55% ahead at $83.2m. Net debt fell from $115.9m to $100m. Growth should continue with new customers and contract extensions. There was no more news about the strategic review or talks with Mumbai-based BPEA Advisors Private Ltd concerning a potential bid. Canaccord Genuity has been appointed joint broker.

Bango (LON: BGO) has signed an agreement with an unnamed multinational technology company, which will use the Bango platform for carrier billing and bundling services for app store payments and subscription services. This will not have an impact on the current financial year. Bango shares rose 11.5% to 141p.

Argentina-focused oil and gas company Phoenix Global Resources (LON: PGR) has risen a further 0.55p to 6.55p following news earlier in the week concerning discussions with 84% shareholder Mercuria Energy Group about a cancellation of its AIM quotation and a cash offer to purchase shares from independent shareholders at 7.5p each.

Ex-dividends

Support services provider Tribal Group (LON: TRB) is paying a 1.3p a share final dividend and the share price fell 2p to 86p.

Identification services provider GB Group (GBG) is paying a 3.81p a share final dividend and the share price declined 7.5p to 435.7p.

Patent translation services and software company RWS (LON: RWS) is paying a 2.25p a share interim dividend and the share price slipped 4.5p to 349.9p.

Lloyd’s insurance underwriting services provider Helios Underwriting (LON: HUW) is paying a 3p a share final dividend and the share price is unchanged at 162.5p.

Photonics company Gooch & Housego (LON: GHH) is paying a 4.7p a share interim dividend and the shares have risen 15p to 901p.

Record inflation drives UK borrowing to £14bn in May

Natasha Doris
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Record inflation drives UK borrowing to £14bn in May

Government borrowing hit £14 billion in May 2022, representing a £4 billion decrease against 2021 levels, however the borrowing rate was £8.5 billion higher than pre-pandemic levels in May 2019.

The Office of National Statistics (ONS) reported £66.6 billion in central government receipts, representing a year-on-year rise of £3.4 billion, including £48.3 billion in tax receipts.

The report confirmed a central government current expenditure fall of £2.2 billion to £74 billion against May 2021, with the additional £3.1 billion of cost debt interest repayments made in the year-to-date offset by a reduction of £4.9 billion in paid subsidies.

Central government debt hit £7.6 billion, with the RPI on index-linked gilts contributing £5 billion over and above the accrued coupon payments and other components of debt interest.

According to the ONS, May saw the third-highest debt interest payment made by central government in any single month and the highest payment made in any May on record.

“There is nowhere inflation is not making its presence felt and the hike in interest payments on the government’s debt mountain is a prime example – a hike of 70% compared to the same period last year, a record for the month thanks to all those index-linked gilts,” said AJ Bell financial analyst Laura Suter.

“With inflation already at a 40-year high and the expectation that the peak is still to come, the OBR is forecasting that the cost of servicing the debt will hit £87bn this financial year, a cautionary note that is undoubtedly stuck to every whiteboard in the Treasury.”

Public sector net borrowing excluding public sector banks (PSNB ex) dropped £6.4 billion to £35.9 billion year-on-year, however the level was £19.8 billion higher than May 2019.

The ONS announced a central government net cash requirement drop of £12.3 billion to £11.5 billion in May, bringing the total for the financial year to May 2022 to £13.9 billion.

The report added that PSND ex was £2,363.2 billion at the end of May, with an increase of £170.1 billion. The total represented approximately 95.8% of GDP with an increase of 0.5% compared to May 2021.

The ONS also noted PSND ex excluding the Bank of England (PSND ex BoE) rose by £88 billion to £2,041.8 billion, representing around 82.8% of GDP and a reduction of 2.1% GDP year-on-year.

“People are feeling the pinch, the Government has already stepped in with billions of pounds worth of support but there are plenty of voices warning that the help might not be enough to get households through what could be a long, cold winter,” said Suter.

“Pay is the topic du jour and one that’s not going to go away. Employers are in a sticky situation, if they don’t offer their workforce an increase that covers the worst of the inflation uplift they risk good people jumping ship or becoming embroiled in drawn out disputes that spill over into strike action.”

“What is responsible – helping people now or helping the people in the future? The past couple of years have been trying and expensive but the next months are shaping up to be more uncomfortable than anything Covid threw at us.”

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