FTSE 100 down as oil prices drop below $110

Natasha Doris
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FTSE 100 down as oil prices drop below $110

The FTSE 100 was down 0.2% to 7,556 shortly after midday on Thursday after oil prices dropped below $110 per barrel.

The price of Brent Crude was down to $106 per barrel after the US announced a potential release of 180 million barrels of oil from its strategic reserve, in a bid to compensate for the loss of exports from Russia.

Yesterday, the FTSE 100 outperformed European indices helped by stronger commodities. However, the impact of stronger commodities diminished today and London’s leading index joined European shares that were broadly weaker.

“It has felt a bit like the FTSE 100 was singlehandedly being kept afloat by the big oil stocks, BP and Shell,” said AJ Bell investment director Russ Mould.

Shell shares were trading down by 1% to 20,897p and BP shares were down 2% to 374.9p following the developments.

China’s Covid-19 lockdown and Russia’s war in Ukraine are yet to upset the market in a major way, with analysts awaiting the results from crumbling peace talks between the embattled countries and the prospect of advanced lockdowns in China.

The OPEC meeting later today will also bring new developments for the oil market moving into the end of the week.

“Really this is tinkering at the margins. What might put more of a brake on prices is action by OPEC at its meeting later but the extent to which it could increase production, even if it wanted to, is open to question,” said Mould.

Intermediate Capital Group led the market risers with an increase of 2.9% to 18,232p after the company successfully raised €1.5 billion for its debt Infrastructure Fund, ICG Infrastructure Equity 1.

The group surpassed its initial €1 billion by €500 million as a result of “strong client demand.”

Pearson rose 2.3% to 756.8p as it recovered some ground following Apollo’s withdrawal of interest in the company after the educational services provider rejected its third and final takeover bid.

Halma PLC shares were up 1.8% to 25,340p.

Taylor Wimpey share were trending down 3.5% to 130.1p as Nationwide Building Society said house prices had skyrocketed at their fastest rate of growth in 17 years by £33,000.

Houses are projected to decrease in desirability as inflation spikes and rising energy costs eat into shrinking consumer wallets.

Next fell 3.1% to 60,790p in the retail sector’s decline in sales on the back of rising inflation and falling consumer spending in retail, reported at a 0.3% drop in February by the Office of National Statistics (ONS).

The Royal Mail Group dropped 3% to 335p as it continued its spiral downwards.

Oil falls on potential 180m barrel reserve release from US

Anshula Kumar
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0
Oil falls on potential 180m barrel reserve release from US

Oil prices fell 5% to $107 a barrel, finally dropping from the $110 mark after the Biden administration took steps to control fuel costs by considering a release of 180m barrels of oil from their Strategic Petroleum Reserve.

As part of its effort to decrease fuel prices, the Biden administration is reportedly considering a release of up to 180m barrels of oil from the Strategic Petroleum Reserve (SPR) over the next several months.

The Biden administration confirmed that this will be ‘largest-ever release’ since 1974, dating back to when the reserve was created.

For months, global energy supplies have been tightening as economies began to reopen and pandemic lockdown measures were loosened.

However, the global energy markets have been shaken with oil bans and sanctions imposed on Russia for invading Ukraine, as Russia is the second largest global oil exporter after Saudi Arabia.

Oil bans have led to rising fuel prices across the globe and have become a major political issue in the US as mid-term elections approach in November.

Biden discussed the potential to supply oil to the EU earlier this month, as EU leaders became wary of their economic progress due to high dependence on Russian oil.

The US is the largest oil producer in the world and currently produces 11.7m barrels per day, which is insufficient to meet global demand.

The possible oil release comes ahead of a meeting on Thursday between the Organization of Petroleum Exporting Countries and its allies, including Russia, known as OPEC+, an oil production group.

The US, the UK, and others have already pressed OPEC+ to increase its output, however OPEC+ currently appears unlikely to deviate from its strategy to steadily increase output. Most major energy-producing countries are either at capacity or unwilling to expand output.

Meanwhile, an emergency meeting of the International Energy Agency (IEA) has been scheduled for Friday.

It’s uncertain whether other IEA members, including the United Kingdom, France, Germany, and Japan, will follow the US in releasing oil reserves.

Russ Mould, Investment Director, AJ Bell commented, “You can understand why the US leader felt he had to do something, given the political heat he is getting for rising fuel prices, however a speculated release of one million barrels of oil per day over the coming months has to be seen in the context of total global output of around 100 million barrels per day.”

“Really this is tinkering at the margins. What might put more of a brake on prices is action by OPEC at its meeting later but the extent to which it could increase production, even if it wanted to, is open to question.”

HICL Infrastructure sell Queen Alexandra Hospital for £108m

Natasha Doris
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0
HICL Infrastructure sell Queen Alexandra Hospital for £108m

HICL Infrastructure announced the disposal of its 100% interest in the Queen Alexandra Hospital Project on Thursday.

The project will reportedly be transferred to InfraRed European Infrastructure Income Fund 4, which is set to pay £108 million to HICL following the transfer.

HICL announced that the £108 million proceeds will represent a 1.5p per share increase on NAV aligned with the company’s valuation on 30 September 2021.

The company invested in the Queen Alexandra Hospital in 2010, and highlighted InfraRed’s active asset management strategy in de-risking and stabilising the project since 2018 as a key factor in contribution to the rising NAV.

The agreement is subject to customary approvals and HICL shareholder approval, however if successful, the disposals are scheduled to be redeployed into the group’s advanced pipeline and to pay down its revolving credit facility.

“The disposal of HICL’s investment in Queen Alexandra Hospital is a tangible example of the Company’s business model in action,” said HICL Chairman Ian Russel.

“HICL, through its Investment Manager InfraRed, seeks to enhance shareholder value in the existing portfolio through active asset management to optimise portfolio performance and composition.”

“The proceeds provide an alternative source of funds to rotate into the Company’s advanced pipeline.”

“The Board unanimously recommends that Shareholders vote in favour of this transaction, as all the Directors intend to do in respect of their own beneficial holdings of Ordinary Shares.”

HICL Infrastructure shares rose 0.5% to 177.9p in late morning trading on Thursday after the announcement.

UK economy boosted by Covid-19

Anshula Kumar
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0
UK economy boosted by Covid-19

The UK economy grew faster than expected with GDP growth of 1.3% in the last quarter of 2021 compared to the third quarter, as the health sector saw a boom in business with the arrival of the Omicron variant.

The Office for National Statistics estimated the GDP growth for Q4 2021 to be approximately 1%.

The 1.3% rise in GDP was a step in the right direction for the economy against the 0.9% GDP Growth in Q3 of 2021.

However, compared to Q2 2021’s GDP growth of 5.6% on the back of the economy’s rebound from the pandemic and its restrictions, the Q4 GDP rise is still optimistic.

Increased trips to the clinic at the start of Q4, a significant rise in coronavirus testing and tracing and the continuation of the vaccination programme were the primary drivers of growth in the health and social work.

According to the ONS, the household saving ratio reduced to 6.8% in Q4 compared to 7.5% in Q3 2021. Rising customer expenditure in transport, net tourism, clothing and footwear led the increase in household spending as consumers dipped into lockdown savings.

In Q4, real household disposable income dropped by 0.1% whilst nominal households’ gross disposable income grew 1.3%, which was offset by quarterly household inflation of 1.4%.

In Q3, household disposable income adjusted for inflation declined by 0.2% compared to Q2 due to impacts from inflation on household budgets as well as a downward revision of pension contributions.

During the fourth quarter, real household disposable spending increased by 0.5%, underperforming from the initial expectations of 1.2% growth.

However, it was not all bad news, as the UK did manage to shrink its balance of payments to £7.3bn with the help of foreign investments, despite supply chain problems prevailing due to the pandemic.

Government officials monitoring the country’s fiscal condition predicted that with inflation reaching 9%, investors expect the recovery to slow down in 2022 since consumers face a decline in the standard of living.

Danni Hewson, Financial Analyst, AJ Bell said, “It might seem odd, but Omicron actually provided a substantial boost to UK economic growth in the last three months of 2021.”

“Growth was stronger than had been forecast and by the end of the year the UK economy was a hair’s breadth from where it had before the ravages of Covid.”

“But even in the dying days of 2021 inflation was already packing a punch. Household’s disposable income fell, people started to dip into savings as a way to offset those inflationary pressures, put simply people were having to pay more for what they wanted.”

“With the expectation that this year will deliver the biggest fall in living standards since the 1950’s alarm bells are clanging, and damage done to savings and pension contributions in the now will have consequences in years to come.”

“And the squeeze has only just begun, the pressures households were experiencing last year will be nothing compared to what is to come.” 

UK House prices rise £33k in 17 year record growth

Natasha Doris
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1
UK House prices rise £33k in 17 year record growth

UK house prices have spiked in their fastest rise in 17 years, with the average price per home increasing £33,000 over the last year.

The Nationwide Building Society confirmed that house prices cost £232,134 on average in March 2021 and grew 14% to £265,312 in the past 12 months.

Nationwide chief economist Robert Gardner added that the recent 1.1% month-on-month increase marked the eighth consecutive month of price growth in the housing market.

House prices have hit a 21% rise since the Covid-19 pandemic emerged in 2020, however the market has retained an unexpected level of momentum against the background of rising borrowing costs and shrinking household budgets.

“The number of mortgages approved for house purchase remained high in February at around 71,000, nearly 10 per cent above pre-pandemic levels,” said Gardner.

“A combination of robust demand and limited stock of homes on the market has kept upward pressure on prices.”

Gardner also said that the increased consumer savings over lockdown contributed to steady housing market demand.

“The significant savings accrued during lockdowns is also likely to have helped prospective homebuyers raise a deposit.”

“We estimate that households accrued an extra (around) £190 billion of deposits over and above the pre-pandemic trend since early 2020, due to the impact of Covid on spending patterns.” 

Gardner caveated his comment with the insight that older, wealthier households were maintaining the majority of the savings advantage.

However, the housing market is predicted to shrink in coming months as household budgets feel the pressure of climbing credit card debt and short-term borrowing surge on the back of rising inflation and spiking energy prices.

UK and US intelligence report Putin’s officials lied about Russian progress in Ukraine

Natasha Doris
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0
UK and US intelligence report Putin’s officials lied about Russian progress in Ukraine

GCHQ head Jeremy Flemming reported that Vladimir Putin’s officials have been lying to him about Russia’s progress in the war against Ukraine.

The spy agency head was visiting Canberra, Australia to make a speech at the National Security College on Thursday when he gave his perspective on the current situation in the Kremlin.

Flemming said in a speech on Thursday that Putin’s advisors are “afraid to tell him the truth” about the poorly calculated outcome of his decision to invade the neighbouring state.

The GCHQ head lamented the “barbarity” of Putin’s invasion and the Russian leader’s failure to follow through on his poorly-calculated war.

“Far too many Ukrainians and Russians have already lost their lives. And beyond this toll, many, many more have had their lives shattered.”

“The UN estimate that in just over a month, more than ten million people have already fled their homes. It’s a humanitarian crisis that need never have happened.”

Flemming stated that Putin had over-estimated his military capabilities and under-estimated the effects of sanctions on the Russian economy, alongside the reported refusal to carry out orders and outright incompetence by the Russian army.

“He over-estimated the abilities of his military to secure a rapid victory. We’ve seen Russian soldiers – short of weapons and morale – refusing to carry out orders, sabotaging their own equipment and even accidentally shooting down their own aircraft,” Flemming continued.

He blasted Putin’s poor planning and his inner circle’s overwhelming fear of telling him the reality of his invasion.

US intelligence have commented with similar insights, as officials across the board noted the rising tide of uncertainty within the Kremlin.

US director of White House communications Kate Bedingfield said: “We have information that Putin felt misled by the Russian military which has resulted in persistent tension between Putin and his military leadership.”

“We believe that Putin is being misinformed by his advisers about how badly the Russian military is performing and how the Russian economy is being crippled by sanctions because his senior advisers are too afraid to tell him the truth.”

The war in Ukraine continues to rage on over a month after Russian tanks rolled into the country, however it has become evident that Putin’s military victory is far further from his grasp than he initially predicted.

Polymetal shares: is 1,000p achievable?

Anshula Kumar
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0
Polymetal shares: is 1,000p achievable?

On Tuesday morning, the Anglo-Russian miner, Polymetal released a statement addressing possible restructures focused on improving shareholder sentiment as the company has faced serious consequences of the Russia-Ukraine war such as heavily imposed sanctions and being booted off the FTSE 100 last Monday.

Russian companies saw investors withdraw from their shares as the tensions grew between Russia and Ukraine and Polymetal was at one pint down over 90% YTD.

Polymetal shares faced serious scrutiny from investors as Russian sanctions were imposed by the West. However, shares have since rebounded and investors will be asking; ‘can Polymetal shares return to 1,000p’?

A Polymetal share price of 1,000p will by no means represent a complete reversal, but it is a significant psychological level for investors.

When the markets started dropping Polymetal shares with the g invasion of Ukraine, the company released a press statement addressing the sanctions and how Polymetal was shielded from the impact.

The company informed investors that Russian sanctions will not disrupt Polymetal’s operations in Russia and Kazakhstan. Apart from the sale of gold bullions being hurt by Russian sanctions, the company’s production guidance is unhindered.

Polymetal assured the markets that they are equipped to handle all liquidity issues that may arise and have stockpiled resources to ensure no disruption is caused to operational activities, at least for the next three months.

The Russian miner’s shares have nosedived 70% to 375p YTD despite their attempts to reassure investors at every stage of the war. Polymetal shares had peaked at 1,729p early June 2021.

Currently, the company has a market cap of £1.1bn with a forward P/E ratio of 1.5, the lowest amongst all LSE listed peers. This alone suggests an inherent value to the shares, despite a heavy discount attributed to Polymetal by the market.

However, Polymetal does have a dividend cover of 30x and a ROCE of 28x, representing the company’s capabilities are in place to handle returns to investors despite times of uncertainty.

On March 2 2022, the miner did announce a proposed final dividend payment of $0.52 will be paid to shareholders in May 2022. The final dividend reduced from $0.89 in 2020 as geopolitical tensions beat up Polymetal’s fiscal position.

Not too long ago, six directors, including chair Ian Cockerill, resigned from the board in an attempt to abandon a potentially sinking ship.

Polymetal have since hired Riccardo Orcel as an independent non-executive chair and installed some stability to the company after a turbulent month. The board now consists of 8 members as Polymetal replace 4 non-executive directors.

Kazakhstan

Polymetal has been analysing the possible divestment of its operations in Kazakhstan as per the request of a group of investors on Monday.

Polymetal produced 1.7 million troy ounces of gold equivalent in 2021, of which 558,000 ounces were produced by its two mines in Kazakhstan.

On Tuesday, the mining group addressed ongoing media speculation regarding a possible change in the company’s corporate structure. The group said they are “evaluating various options that could maximise shareholder value.” The statement was meant to relieve investors of their worry and ask them to hang tight while Polymetal figures it out.

Polymetal shares on Wednesday gained 10% as the company presented a fresh outlook for the rest of 2022, before falling back to finish negative.

On Wednesday, Polymetal reported an increase in net debt from $1.6bn to $1.8bn which it will use towards its seasonal working capital and resource procurement.

Currently the miners have short-term capital financing from Russian banks and is waiting for additional liquidity in Q2 2022. 

The company has $0.4bn cash held by institutions which are not subject to Russian sanctions along with a $0.5bn undrawn line of credit.

The company reinterated in the statement that Russian and Kazakhstanian operations are unhindered, and projects in the advance stages of development are back on schedule.

Logistical challeneges having impacted Polymetal’s POX-2 project causing a 3-6 month slippage and early stage projects are delayed by a year.

Pacific POX project is suspended indefinitely while the company look for re-site alternatives for the venture in Kazakhstan.

Junior JVs of the company will suffer due to 50% cuts in the budget of Greenfield exploration.

Polymetal said that its Brownfield explorations schedule and volumes will remain unaffected.

Riccardo Orcel said, “It is my opinion that investors, private and institutional, that collectively control over 75% of this company deserve a Board that will lead the company through this turbulent time, preserving and hopefully rebuilding the value of their investment as well as protecting the livelihood of thousands of employees, contractors, suppliers and other stakeholders.”

The Polymetal share price was up 11% at the time of writing on Thursday.

Sovereign Metals presents low-carbon Kasiya graphite at UK Houses of Parliament

Natasha Doris
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0
Sovereign Metals presents low-carbon Kasiya graphite at UK Houses of Parliament

Sovereign Metals presented its low carbon footprint Kasiya graphite at the UK House of Parliament Roundtable on behalf of the Critical Minerals Parliamentary Group, with the Critical Minerals Association.

The mining group predominantly highlighted the Kasiya graphite’s potential for applications in lithium-ion batteries, which is currently the main market for coarse flake graphite, and traditional industrial applications.

The company noted that the product from its Kasiya mine in Malawi was a quality resource as a result of its high purity and high crystallinity, which is crucial for the material to be upgraded to the minimum 99.95% TGC for lithium-ion battery anodes.

Sovereign Metals estimated that the battery sector is set to be the greatest driver for graphite demand by 2028, with the commodity making up as much as 50% of the average lithium-ion battery composition.

The mining firm said it was capable of producing high-quality coarse flake graphite with a substantially lower carbon footprint than China, where over 75% of the global supply for natural graphite is currently sourced.

The company noted that the graphite from its Kasiya project held an 80% lower greenhouse gas emissions trail than graphite produced in the Heilongjiang Province in China, adding that each tonne of product would produce only approximately 0.2 tonnes of carbon emissions.

“The importance of sustainable supply chains for clean-tech solutions such as lithium-ion battery powered electric vehicles cannot be underestimated,” said Sovereign Metals Chairman Ben Stoikovich.

“As such, Kasiya could become globally strategically important as it has the potential to supply not one, but two, critical raw materials to world economies looking at building a sustainable future and tackling climate change.”

Sovereign Metals shares rose 5.4% to 33.7p in early morning trading on Thursday following the announcement.

Tate & Lyle acquires Quantum Hi-Tech Biological for $237m

Anshula Kumar
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0
Tate & Lyle acquires Quantum Hi-Tech Biological for $237m

Global provider of food and beverage ingredients, Tate & Lyle, has agreed to purchase ChemPartner Pharmatech’s leading prebiotic dietary fibre business, Quantum Hi-Tech Biological (Quantum) in China, for $237m.

Tate & Lyle’s position as a major player in dietary fibres has been greatly strengthened by the takeover of Quantum, which brings a high-quality portfolio of specialty fibres, strong R&D capabilities, and proprietary manufacturing processes and technologies.

Tate & Lyle’s ability to supply added-fibre solutions for its clients across a range of sectors, including dairy, beverages, bakery, and nutrition has improved as a result of the acquisition.

The acquistion of Quantum also strengthens Tate & Lyle’s footprint in China and Asia is strengthened, as well as its ability to develop food and beverage solutions using its leading speciality ingredient portfolio.

Quantum’s fructo-oligosaccharides (FOS) and galacto-oligosaccharides (GOS) fibres are manufactured in the Guangdong Province of Souuthern China. When the acquisition is completed, Quantum’s management team will join Tate & Lyle.

The deal is expected to close in the Q2 2022, however is subject to the approval of the shareholders of ChemPartner.

At the end of the transaction, consideration of £237m will be paid in cash for all of Quantum’s equity shares.

Quantum had sales of $46m and EBITDA of $14m in the 11 months ended November 30, 2021. Tate & Lyle forecasts the acquisition to boost sales growth and EBITDA margin in the first year under its operation.

Mr. Zeng Xianwei, Chairman, ChemPartner, said, “Tate & Lyle, with its global customer reach, strong focus on R&D, and strong fibre portfolio, is the ideal company to take Quantum on the next stage of its development.”  

QUANTUM

Quantum specialises in FOS and GOS research, development, production, and sale.

FOS from sucrose and GOS from milk sugar or lactose, together account for around 25% of the total dietary fibres market, which is expected to rise at a rate of 6% per year.

The FOS and GOS market in China, which accounts for the majority of Quantum’s revenues, is expected to increase at a rate of roughly 10% per year.

Tate & Lyle shares rose 3.6% to 745p after the company announced its takeover of Quantum.

“We are delighted to announce the agreement to acquire Quantum, a leader in prebiotic dietary fibres and a business recognised for its high-quality ingredients and solutions,” stated Nick Hampton, Chief Executive Officer, Tate & Lyle.

“FOS and GOS are highly complementary to our existing fibre portfolio and will enable us to offer a broader range of solutions to our customers.”  

“This acquisition significantly strengthens our fortification capabilities and expands our customer offering in key food and drink categories.”

BBGI reports 9.4% Investment Basis NAV growth and projected dividend rise in 2022

Natasha Doris
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0
BBGI reports 9.4% Investment Basis NAV growth and projected dividend rise in 2022

BBGI shares remained flat at 175.1p in early morning trading on Thursday following a moderate 9.4% Investment Basis NAV growth to £1 billion against £916 million in 2020.

BBGI reported a NAV per share increase of 2.1% to 140.7pps compared to 137.8pps in 2020, alongside a 171% total shareholder return since its Initial Public Offering (IPO).

The infrastructure investments company announced a 7.3p dividend per share and added that it was aiming for a 7.4p dividend in 2022.

BBGI attributed its NAV increase to its active management activities, and highlighted its £79.2 million of accretive cash investments in 2021.

The investment group further noted its £51 million acquisition agreement for an interest in a Canadian healthcare asset in 2021 and its £24 million investment in a Canadian green energy investment in February 2022.

BBGI currently holds no assets in Russia or Ukraine, with its portfolio split in 36% Canadian holdings, 33% in the UK, 11% in Australia, 11% in the US and 9% in Continental European investments.

The firm said that its global infrastructure investment remains strong going forward in 2022, and has projected strong potential for expanding its portfolio as a result of growing urbanisation, flexible working models and the desire to reduce emissions.

“The Management Board continues to use its industry relationships to source attractive investment opportunities for the Company’s pipeline, and our internal management structure creates the proper incentives for the Management Board to focus on preserving the value of the Company’s portfolio and growing the Company in a thoughtful and disciplined manner, and not be an asset gatherer focused solely on assets under management,” said BBGI Chair Sarah Whitney.

“This structure has supported much of the Company’s successes in the past ten years, and as a result I have full confidence in our continued ability to create attractive and sustainable long-term value and benefits for all our stakeholders.”

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