Advertising exodus leads to plummeting US tech stocks

Natasha Doris
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Advertising exodus leads to plummeting US tech stocks

An exodus of advertising revenue from popular online companies has led to tech stocks plummeting today, as experts warn that advertisers are rolling back marketing due to less customer demand, as the cost of living continues to eat into consumer wallets.

Tech giant Alphabet reported falling advertising revenue in April, with Snapchat’s CEO issuing warnings of similar trends across its platform.

US markets took a brutal beating, as Snapchat shares tumbled 31% in after-hours trading, Meta Platforms dropped 7%, Pintrest shares fell 12% and Alphabet dipped 4%.

“Advertising spend typically tracks economic activity. When times are good, companies are confident to spend heavily to promote their products and services,” said AJ Bell investment director Russ Mould.

“When the outlook is gloomier, advertising spend is pared back. After all, why splash the cash on promotions if fewer people are going to open their wallets?”

Snapchat Spirals

Snapchat reported a lowered revenue and profits outlook for June, pinning the blame squarely on the spiralling macroeconomic environment as analysts proposed that advertising revenue had hit its peak for the current time.

The tech company currently trades below its $17 flotation price, and has plummeted 80% from its peak at September 2021, as a result of its second profit warning after Q2, which signals a bleak economic outlook for the firm.

Snapchat has also faced problems in its advertising rollout linked to Apple’s recent privacy and data protection guidelines, which stipulate that app developers must gain permission from a device operator to access their unique tracking number.

If the user denies access, it subsequently stymies Snapchat’s tailored advertising, which strikes a significant blow to the company’s already struggling advertising revenue.

“Whether Snap’s problems lie with the economy weighing on customers’ willingness to advertise, and or their growing concerns as to whether they will get an adequate return on that spending, remains to be seen,” said Mould.

“But what is clear is that Snap is not having much joy in turning new users into more profits.”

Fed next step

The US market is set to pivot its focus towards the Federal Reserve, as investors await an update concerning how Fed chair Jerome Powell intends to handle a rise in interest rates and how it will manage its bond holdings.

“With the era of cheap money hurtling to an end the focus will be on a speech from Jerome Powell, the chair of the Federal Reserve later, with investors keen to glean any new titbit of information about just how far and fast the US central bank will go in raising rates and offloading its mass bond holdings,” said Hargreaves Lansdown senior investment and markets analyst Susannah Streeter.

Tortilla Mexican Grill – latest purchase shows a leap forward

Mark Watson-Mitchell
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Tortilla Mexican Grill – latest purchase shows a leap forward

The latest deal by Tortilla Mexican Grill (MEX.L) this fast-expanding burrito and tacos food restaurant group looks to be a cracker.

When it came to the market in October last year it declared its aim to open 45 new sites over the next five years to add to its existing chain the UK and in the UAE.

This week it made a very quick leap toward its target.

Paying just £2.75m to an investment firm, it has added another eight sites in what, to me, looks like a cracking deal.

Buying a competitor

It has acquired the competing Mexican food Chilango chain, in what seems to be a deal that will really boost Tortilla’s coverage of premium sites, with six in London, one in Croydon and another in Manchester.

Chilango’s London sites are in Soho, London Bridge, Chancery Lane, Brushfield, London Wall and another in Islington, from where Tortilla built up its own operations.

Excellent synergy

The synergy of the acquisition is almost ‘textbook’ – it adds already operating sites, it creates another springboard from which the group can expand, while adding to its attractions to property owners with vacant sites anywhere around the country.

Plus, it also operates on a takeaway and delivery basis, making the operating of delivery kitchens and the group’s central production unit in Tottenham Hale even more economic. 

It significantly increases the group’s buying power.

Expansion continues

At the end of March, the group had 68 sites worldwide, some 52 sites in the UK operated by the group, three sites franchised to the SSP Group in the UK, four sites franchised to Compass Group UK & Ireland and nine franchised sites in the Middle East.

Richard Morris, CEO of Tortilla, stated that: 

“Chilango is a highly complementary brand that, similarly to Tortilla, provides a fantastic value-for-money proposition and embraces popular and growing sector trends for healthy, customisable food from an estate of restaurants situated in premium locations in London and Manchester.

This acquisition accelerates our ambitious plans to further expand the Tortilla brand and these sites are in addition to our initial target of opening 45 UK restaurants over the next five years, helping us to surpass this target. It also adds another brand to the Tortilla Group, enabling us to further strengthen our leading position in the UK’s fast-casual dining market.

We’re very excited about this acquisition and look forward to leveraging our combined knowledge and expertise within the Mexican fast casual dining sector.”

£1m extra for just £2.75m

The latest deal may not add massively in the current year’s figures for the group, but next year it provides an additional £1m a year to its EBITDA – all that for just £2.75m.

The group’s broker Liberum Capital is very bullish about the group and its prospects.

The sales for the current year to end December are estimated to rise from £48.1m in 2021 to £62.0m, while £74.5m is expected for 2023 and then £85.4m in 2024.

The broker is looking for £3.9m pre-tax profits this year, then £4.3m next year and £5.7m in 2024. 

That should take earnings up to 9.8p a share within the next two years or so, while at the same time building up its cash coffers from an estimated £1.4m by this year-end to £5.5m by end 2024.

That is even more impressive for a group that is looking to expand towards its target.

So, what about the group’s current share price?

The group came to the market last year at 181p a share, they hit 200p but have since then just drifted off with the market facing various Covid and Ukraine ups and downs.

Now at only 137.5p they look extremely attractive for investors taking the opportunity to jump aboard the shares of a rapidly growing group – from its float it could well have doubled in size inside two years.

The Liberum Capital analyst Anna Barnfather rates the shares as a Buy and has increased her target price to 235p.

SSP Group revenue grows 212.9% as travel demand picks up

Natasha Doris
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SSP Group revenue grows 212.9% as travel demand picks up

SSP Group shares gained 10.3% in early morning trading on Tuesday following a 212.9% revenue growth to £803.2 million in HY1 2022 compared to £256.7 million the previous year.

The company credited the lifting of Covid-19 restrictions to the resurgence in travel, leading to an uptick in consumer demand at its units across UK bases.

Demand reportedly returned to 64% of 2019 levels in HY1 2022, which was boosted in the first six weeks of the second half to 83% of pre-pandemic rates.

SSP Group said approximately 80% of its estate was currently open, representing 2,200 operating units across the UK and Republic of Ireland.

“The business is recovering well from a hugely challenging period. We have seen a significant rebound in trade since the impact of Omicron, with revenues currently running at over 80% of pre Covid-19 levels and with a similar proportion of our sites now open,” said SSP Group CEO Patrick Coveney.

The airport caterer announced a £14.7 million EBITDA against an underlying EBITDA loss of £110.3 million year-on-year, alongside an operating profit of £26 million from a loss of £219.9 million.

SSP reported a pre-tax loss under IFRS 16 of £2.3 million compared to a loss of £299.7 million the previous year, with a £55.3 million loss on a pre-IFRS 16 basis against a £182 million loss in HY1 2021.

The company mentioned a basic loss per share of 4.1p under IFRS 16 from a 42.3p loss per share.

SSP Group highlighted a free cash outflow of £30.9 million against £140.9 million year-on-year, following a £41.9 million capital investment to support the mobilisation of its new unit pipeline which has seen 50 new units opened over the period.

The travel food company also noted a net debt of £1,154.6 million, including lease liabilities of £814.8 million.

The group confirmed a strong liquidity position with cash and undrawn committed facilities of £606.9 million at the close of March 2022, after the repayment of £300 million borrowed under the Covid Corporate Financing Facility.

The company also noted a pipeline of 230 secured new units, which it expects to open over the coming two years, adding a projected £300 million of annualised sales.

It further expects cumulative net gains secured from the end of FY 2019 to add £500 million to annualised revenue by 2025.

SSP Group commented that its outlook estimated HY2 2022 sales at 80-85% of pre-Covid-19 levels and for FY 2022 sales of approximately £2-2.1 billion, along with a FY EBITDA margin between 5% and 6%.

The food and beverages company warned that it anticipated short-term supply chain challenges across the next few months, and the sharper sting of inflation pressure to impact profit levels.

The firm predicted a strong summer with medium-term expectations to return to broadly pre-coronavirus rates of revenue and EBITDA margins on a pre-IFRS basis.

“SSP has a number of fundamental strengths, including very strong local business platforms around the world, industry-leading operational execution, as well as outstanding financial discipline,” said Coveney.

“We anticipate a full recovery in leisure travel, which drives the majority of our business, and are confident that we are well positioned for the months and years ahead.”    

Assura enjoys 12.9% net rental income rise in banner year of growth

Natasha Doris
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Assura enjoys 12.9% net rental income rise in banner year of growth

Assura shares were up 0.6% to 68.8p in early morning trading on Tuesday after the company reported a 12.9% net rental income rise to £126.5 million compared to £112 million in its 2022 results.

The NHS-focused property trust announced a pre-tax profit growth of 43.9% to £155.8 million against £108.3 million year-on-year.

Assura added 47 properties to its portfolio for a consideration of £271 million, bringing its total number of properties to 645, with a development pipeline of £522 million.

“Assura has delivered another year of significant progress, maintaining its strong financial performance and making a positive contribution to the local communities in which it operates,” said Assura CEO Jonathan Murphy.

“With the UK’s healthcare estate lacking the critical buildings and facilities to tackle the growing backlog of treatments following the pandemic, we know the development of modern, integrated, and high-quality primary care space is a key enabler in reducing this pressure.”

“This area benefits from cross-party political support and Assura is committed to making a significant contribution – all the while accommodating for key emerging trends, including hybrid GP appointments, the requirement for mental health support, and digitalisation.”

Assura mentioned an IFRS EPS uptick of 36.6% to 5.6p compared to 4.1p, alongside a dividend per share increase of 3.9% to 2.9p from 2.8p.

The trust enjoyed growth across the board, with investment property rising 12.2% to £2.7 million against £2.4 million, diluted EPRA NTA per share increasing 6.1% to 60.7p against 57.2p and rent roll growing 11.5% to £135.7 million compared to £121.7 million.

The firm’s financial position included a loan-to-value rate of 36%, with net debt of £1 billion on a fully unsecured basis, alongside cash and undrawn facilities of £369 million.

Assura noted that all drawn debt was on a fixed rate basis, with a weighted average interest rate reduced to 2.3% against 2.4% in 2021, and a weighted average debt maturity unaltered at eight years.

The company also issued a 12-year £300 million Sustainability Bond with coupon of 1.6%.

The REIT commented that its business model, strong balance sheet and market position placed it in good stead to deliver shareholder value despite the volatile macroeconomic environment going into the coming year.

“Against an uncertain economic backdrop, Assura’s steady and reliable business model, strong balance sheet and differentiated market position means it is extremely well positioned to continue growing and delivering shareholder value,” said Murphy.

“We remain confident in Assura’s outlook for the coming year and beyond”.

Bargain deal for Judges Scientific

Andrew Hore
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Bargain deal for Judges Scientific

Scientifics instruments manufacturer Judges Scientific (LON: JDG) is making its largest ever acquisition and it is expected to be sharply earnings enhancing. That is why the share price jumped by 1040p to 7900p.
Geotek is a developer and manufacturer of instruments used to measure and log characteristics of geological cores and related services. There is a UK instrument business, a core logging service and a US-based gas hydrate business.
AIM-quoted Judges Scientific is paying an initial £45m in cash for Geotek. There could be further payments of up to £35m (50% cash and 50% shares). A minimum...

Tortilla Mexican Grill buys rival Chilango

Andrew Hore
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Tortilla Mexican Grill buys rival Chilango

Tortilla Mexican Grill (LON: MEX) is acquiring rival fast-casual Mexican restaurants operator Chilango. In the medium-term this could be a highly earnings enhancing deal.
Investment firm RDCP currently owns Chilango. Tortilla Mexican Grill will pay up to £2.75m for the restaurant chain. In 2021, Chilango generated revenues of £7.3m and made a small loss.
Chilango has eight sites in the London and Manchester. Just like Tortilla Mexican Grill they offer eat-in, takeaway and delivery. The two chains have similar product offerings and the Chilango brand will be retained.
There could be a small pro...

Condor Gold strikes gold at La India open pit project

Natasha Doris
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Condor Gold strikes gold at La India open pit project

Condor Gold shares gained 5% to 33.1p in late afternoon trading on Monday, after the mining firm reported a slate of positive assay results from the sampling of geotechnical drill holes on its La India open pit project.

Condor Gold confirmed promising discoveries in its planned Northern Starter pit, with 34.1 metres true width at 2.5 grams per tonne of gold amalgamated from 2.8 metres drill depth, including six metres at 4.3 grams per tonne of gold, two metres at 5.3 gram per tonne of gold and 3.6 metres at 8.7 grams per tonnes of gold at drill hole LIGT536.

The group also reported 28.7 metres true width at 2.6 grams per tonne of gold in the hanging-wall of historic mine workings at drill hole LIGT528, and 5.3 metres true width at 3.1 grams per tonnes of gold from 36 metres drill depth, along with a 5.1 metre true width at 2.7 grams per tonnes of gold from 51.4 metres drill depth at drill hole LIGT531, located in a zone which had been previously identified as low-grade between two high-grade shoots that host the planned starter pits.

“A wide zone of 34.1 metres true width of good open pit grade gold mineralisation of 2.56 g/t gold from only 2.80 metres drill depth is ideal material as initial mill feed for the permitted processing plant and supports the attractive project economics and 12 month pay back detailed in the PEA technical report filed in October 2021,” said Condor Gold CEO Mark Child. 

“This was a geotechnical drill hole within La India open pit that was initially surveyed and analysed for structures and rock strength, which once completed, was assayed for gold and silver.”

“It adds confidence to the geological model for the forthcoming Feasibility Study and serves as a timely reminder of the wide zones of material with good open pit gold grade available near surface within the fully permitted La India Project.”

Pelatro shares rise on $7.3m revenue FY 2021

Natasha Doris
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0
Pelatro shares rise on $7.3m revenue FY 2021

Pelatro shares spiked 22.6% to 23p in late afternoon trading on Monday, after the software group reported a revenue surge to $7.3 million compared to $4 million in its FY 2021.

The firm stated a recurring revenue of $4.8 million against $2.9 million year-on-year, along with an adjusted EBITDA of $2.8 million from $400,000 the previous year.

Pelatro announced an adjusted loss per share of 0.4c against 5.5c in 2020, representing a significant recovery for the marketing company on the back of three new customers, bringing its complete number of customers to 23.

The company also credited its recovery to a selection of recent contracts based in Asia and Africa in 2021.

The group added that it was currently processing the data of over one billion subscribers every day.

The firm reported an equity placing to raise $4.3 million to invest in its business and repay debt, with a current gross cash level of $3.3 million compared to $1.8 million the year before, and trade receivables of $5 million against $3.5 million in 2020.

Pelatro confirmed an ARR at 80% of its expected FY 2022 revenue, with a substantial order book and decent visibility over revenues for the upcoming months.

The software company further identified a new business pipeline of $17 million, alongside further drive into a fast-growing mobile advertising space.

“We are delighted to be able to show in these results figures which are in line with expectations; with solid growth in the revenue line of over 80% to $7.3m from $4.0m the previous year, with the majority being of a recurring revenue nature,” said Pelatro CEO Richard Day.

“The Group continues to trade in-line with expectations and our recurring revenue base gives us good visibility over the coming year and, together with our new business pipeline, gives us every confidence for the rest of 2022 and beyond”

Great Southern Copper to conduct follow-up exploration at San Lorenzo project

Natasha Doris
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0
Great Southern Copper to conduct follow-up exploration at San Lorenzo project

Great Southern Copper shares were up 3.7% to 4.2p in early afternoon trading on Monday, after the company announced the identification of several shallow and buried targets for follow-up exploration at its San Lorenzo copper-gold project in Chile.

The mining firm issued its report following the processing and interpretation of its ground magnetic data for its coastal cordillera-based project, on the back of a completed 63.6 km ground magnetics survey, which was designed to enhance Great Southern Copper’s geological understanding of the operation.

The processing and interpretation of the data was carried out by Perth-based Australian company ExploreGeo.

Great Southern Copper confirmed that the data revealed additional structural detail and areas of magnetite-destructive alteration, along with highlighted areas indicating the presence of buried intrusives.

The feedback reportedly identified seven new areas of interest in the magnetic interpretation, which have been ranked for follow-up exploration work, alongside 13 near-surface anomalies, interpreted as possibly either zones of higher vein density or small intrusions.

The company further discovered potential zones of late magnetite destructive alteration throughout areas of lower magnetic response enveloping the inner calc-potassic alteration.

Great Southern Copper also highlighted a possible buried monzonitic intrusive that could represent the parent pluton to the series of mineralised monzonitic dykes and plugs mapped at the surface, with follow-up exploration in the area listed as a high priority due to the relation between the monzonite intrusions and mineralisation noted in other sections of the project.

“The results from the recent ground magnetic survey identified multiple new targets worthy of further exploration and enhances our geological understanding of the San Lorenzo project,” said Great Southern Copper CEO Sam Garrett.

“With ground-truthing of the anomalies and interpretation underway by our team on site, plans are progressing well for the company’s first reconnaissance exploration drilling programme at San Lorenzo.”

“Negotiations with drilling contractors are underway to secure rig availability and we hope to be mobilising a rig to site before the end of June 2022.”

FTSE 100 pulled up by stronger commodity prices

Natasha Doris
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0
FTSE 100 pulled up by stronger commodity prices

The FTSE 100 was up 1% to 7,466.3 in midday trading on Monday, as investors moved into commodities stocks to shore up against rising inflation and recent inflation tech-heavy US market.

Optimism in Europe spilled over into US futures on Monday as indices bounced back from another week of losses last week.

“US indices clocked up their seventh week of losses in a row on Friday and the jitters around tech companies continued on Chinese markets with the Hang Seng sliding,” said Hargreaves Lansdown senior investment and markets analyst Susannah Streeter.

The cutting of a key interest rates by the People’s Bank of China failed to assuage concerns, as the initial relief last week diminished.

However, the slight easing of Shanghai restrictions gave way to some optimism, as the price of Brent Crude rose to $114 per barrel and families across the Atlantic geared up for summer holiday season.

“The benchmark Brent Crude rose 1% as supply concerns resurface particularly given the US traditional ‘driving season’ approaches, when families in thirsty pick-ups and saloons get onto the roads for holidays,” said Streeter.

Indeed, Shell and BP saw their shares gain on the market with a 1.8% uptick to 2,380p and a 2.4% rise to 427.2p, respectively.

Kingfisher rose 2.7% to 253.6p following its reported 16.2% increase in like-for-like sales compared to pre-Covid rates, alongside the launch of a £300 million share buyback programme scheduled to launch soon.

“Sales are proving more resilient than some might have feared. This suggests there is still some pent-up demand for home improvement despite the pressures on household budgets,” said AJ Bell investment director Russ Mould.

“Kingfisher has also benefited from market share gains as weaker rivals have faltered and its scale and financial strength should stand it in good stead for what promises to be a tricky consumer backdrop.”

“[The] decision to spend another £300 million buying back shares demonstrates a measure of confidence in the future.”

High commodity prices pulled mining companies up the FTSE 100, with Anglo American rising 3.8% to 3,659p, Antofagasta gaining 1.1% to 1,438p, Croda growing 2.6% to 6,908p, Endeavor shares up 2.6% to 1,893p, Fresnillo increasing 1.2% to 794p and Glencore enjoying a 3% increase to 512.3p.

Meanwhile, consumer goods felt the high cost of living continue to bite chunks out of its market share, with Sainsbury’s, B&M and Tesco falling 1.1% to 230.1p, 0.9% to 418.6p and 0.7% to 258.4p, respectively, as food inflation set into consumer budgets.

“The consumer spending shock is still unfolding, and we could see more pain for corporates and individuals in the coming months,” said Mould.

“Markets always price in what they think could happen, but it feels like there could be more gloom ahead.”

“Corporate profit margins are being squeezed and that could lead to reduced business investment which in turn could hurt the economy.”

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