Speed of UK recovery surpasses expectations

Liam Roche
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Speed of UK recovery surpasses expectations

Bank of England cuts forecast for GDP on labour shortages

The UK economy recovered quicker than expected through April and June as Brits splashed the cash after they were released from lockdowns.

The Office for National Statistics said that GDP rose by 5.5% in Q2 after initial forecasts suggested it would come in at 4.8%.

The surge in GDP was supported by shops reopening with households spending playing a significant role in the 5.5% increase.

Jonathan Athow, deputy national statistician at the ONS, explained the new figures, saying: “The economy grew more in the second quarter than previously estimated, with the latest data showing health services and the arts performing better than initially thought.”

“The revised figures also show households have been saving less in recent years than previously thought.”

“Household saving fell particularly strongly in the latest quarter from the record highs seen during the pandemic, as many people were again able to spend on shopping, eating out and driving their cars.”

In Q2, household spending rose by 7.9%, as the savings ration dropped to 11.7% from 18.4% over the first three months of the year.

However, ongoing supply chain issues, including a shortage of HGV drivers, led to the Bank of England cutting its GDP forecast from 2.9% to 2.1%.

Fidelity International’s investment director, Maike Currie, said that “no-one really knows what is next”. He added: “I think what we can be certain of is that we’ll see under-employment, where employees return to work but possibly not on a full-time basis and that they might need to supplement their income.”

Boohoo sales soar as profits dip

Liam Roche
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Boohoo sales soar as profits dip

Boohoo share price dives in early morning trading

Boohoo, the online fashion retailer, confirmed that it has doubled its market share in the UK and US since the beginning of the pandemic, although its profits dived despite robust investment.

Sales jumped by 20% to £975.9m over six months up to the end of August year-on-year, while profits before tax plunged 64% to £24.6m.

One of the reasons costs were down was increased shipping costs, which exceeded levels seen before the pandemic by £26m.

At the time of writing, the Boohoo share price is down by over 8%.

Additional checks at the border following Brexit saw the company’s profit margins fall from 57.8% to 53.6%, Boohoo said.

“Given Boohoo’s successful customer acquisition over the last 18 months, its revenues look set to continue to grow in the short term, buoyed by these customers buying more expensive products,” Harry Barnick, Senior Analyst at Third Bridge.

“However, investors will be playing close attention to the sustainability of growth in the UK as Boohoo noted Q2 results were impacted by higher returns and the reopening of physical retail.”

“Although Boohoo’s market share has doubled over the last two years, as we head into the all-important Christmas season, the UK market is hotting up, with Chinese competitor, Shein, presenting a real threat to Boohoo’s market share given its price point and broad offer.”

New AIM admission: Peel Hunt floats after profit peaks

Andrew Hore
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New AIM admission: Peel Hunt floats after profit peaks

Broker Peel Hunt is coming back to AIM two decades after a brief spell on the junior market was ended via a takeover.
Peel Hunt originally joined AIM in February 2000, which was near to the top of the market, and then agreed to a bid at the end of the year. The management buy out of the broker happened in November 2010 when markets were recovering. This suggests that Peel Hunt and its managements have a history of knowing when to float and sell, then buy back at a lower price if the opportunity arises. Peel Hunt has timed both its flotations to coincide with strong stockmarket activity.
Existi...

LoopUp cash call at large discount

Andrew Hore
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LoopUp cash call at large discount

Cloud-based conferencing services provider LoopUp (LON: LOOP) is raising cash at a 32% discount to the mid-price of 37p. The offer price of 25p is also a 73.5% discount to the flotation price of 100p back in 2016.
A placing will raise £7m and a PrimaryBid offer will raise additional funds. The acquisition of SaaS-based hybrid training technology business SyncRTC Inc will not take much of the cash because the enterprise cost is £3.26m and £2m of that is in shares at around 37p each.
The rest of the cash will go towards investment in cloud telephony and the reduction of debt
LoopUp has had a rol...

Electric Vehicles and Green Energy Metals Miners with Alan Green

UK Investor Magazine
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Electric Vehicles and Green Energy Metals Miners with Alan Green

By 2040, mineral demand for Electric Vehicles is predicted to be 21.5mt, the largest of all clean energy technologies. Electricity networks are predicted to demand 13.9mt.

Norway has banned the sales of fossil fuel cars by 2025 but is set to meet that target a lot sooner. Other countries such as Italy still have plenty of space to improve as only 10% of cars sold are currently electric. The UK only recorded 8.4% of new registrations as EVs, according to AutoTrader.

Cobalt, lithium and Nickel are the main metals used in the production of EV batteries.

63kg of Graphite, 53kg of Copper and 39.9kg of Nickel is required in the manufacture of the average eclectic car.

Minerals used in EV, according to the International Energy Agency:

-Copper: 53.2kg

-Lithium: 8.9kg

-Nickel: 39.kg

-Manganese: 24.5kg

-Cobalt: 13.3kg

-Graphite: 66.3kg

Roskill Analysts predict Cobalt demand will rise to 270,000 tonnes per year by 2030, up from 141,000 in 2020.

One of the world’s largest mine is operated by Glencore in the Democratic Republic Congo producing 30,000 tonnes a year.

Nickel consumption totalled 2.5 million metric tonnes in 2020 and is predicted

109kg of Molybdenum is needed per MW of electricity production from Offshore wind.

Companies discussed:

Kavango Resources (LON:KAV) have a number of projects including the Kalahari Suture Zone which is targeting a Nickel-Copper-Platinum resources similar to that of Norilsk in Russia.

Blencowe Resources (LON:BRES) is developing the potentially low-cost Orom-Cross Graphite project in Uganda.

Glencore (LON:GLEN) is the world’s largest Cobalt miner.

Altona Rare Earth (LON:ANR) is explorer focused on Rare Earths that have applications in Clean Energy production.

Power Metal Resources (LON:POW) has a broad portfolio of metals including Lithium exploration in Quebec. The company is planning a number of IPOs for their assets.

Castillo Copper (LON:CCZ) is of course a copper explorer but has recently acquired Lithium assets.

Cadence Minerals (LON:KDNC) operates a range of Lithium projects including a stake in Europe Metal Holdings (LON:EMH)

Panther Metals (LON:PALM) is predominantly a gold play but is developing Coglia Nickel -Cobalt project.

Tertiary Minerals (LON:TYM) has two copper projects and a selection of silver projects.

Many Brits to be squeezed financially in October

Liam Roche
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Many Brits to be squeezed financially in October

Furlough scheme, VAT holiday Universal Credit uplift and stamp duty holiday all come to an end

October looks set to be a decisive month for the finances of Brits as household costs rise while the Government is set to cut its support for households.

The furlough scheme, the VAT holiday, the Universal Credit uplift and the stamp duty holiday all end on 30 September.

While an energy price cap comes in on 1 October, pushing costs up by £140.

Additionally, food costs are rising, with ongoing supply chain issues driving them higher.

The furlough scheme ending is expected to lead to a rise in people being made redundant.

“The latest figures show that 1.6m people are still in furlough and even the bosses at the Bank of England are expecting a spike in unemployment as the scheme is wrapped up,” says Laura Suter, head of personal finance at AJ Bell.

The energy price cap is going to increase bills for the average customer by £140 from 1 October, but many will see rises far higher than this.

“Usually you’d be far better off getting off your provider’s standard variable tariff and locking in a fixed-rate deal, but the energy market is so barmy at the moment that no one is offering a fixed deal for a cheaper price than the energy cap,” says Suter.

“This means everyone needs to face up to rising energy bills, just as we head into the colder months. If your deal has ended you need to weigh up whether you want to secure a fixed-rate deal now, at a higher cost than your current price, with the expectation that you’ll be protected from rising energy prices. Or you can stick with the energy price cap rate and gamble that recent gas price rises end soon.”

Anyone who has been to the supermarket recently may have noticed that their weekly bill has been rising.

“A combination of shipping issues, driver shortages, supply chain issues and a leap in demand have all lead to a spike in prices – in July we saw the largest monthly rise in food costs,” says Suter.

“While you can’t directly combat rising prices, you can reduce your food bill. There are lots of offers out there for using online grocery delivery services for the first time, which can get decent discounts on a shop. Or you can go back to the old-fashioned methods of sticking to your list, meal planning and budgeting.”

Housing market slows as savers keep stashing cash

Liam Roche
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Housing market slows as savers keep stashing cash

Analyst expects gradual rather than sharp slow down in housing market

Mortgage approvals in the UK slowed down for the third consecutive month in August as the market continues to cool on the back of a surge during the pandemic.

Mortgage providers approved 74,453 home loans, down from 75,100 in July.

The drop comes after the government’s stamp duty holiday was scaled back.

While August saw a small rebound in borrowing compared to July, the £5.3bn borrowed is 20% lower than the average for the past 12-months.

“Approvals for house purchases, which are the figures that give us an insight into what future months look like, show a slight reduction on the past year but are still above pre-pandemic levels,” says Laura Suter, head of personal finance at AJ Bell.

“Rather than seeing a total drop off a cliff, as many have feared, it’s likely that the housing market will just gradually slow down as the final end of the stamp duty holiday arrives and many of the people who wanted to move in the race for space will have done so.”

“The nation’s frugal lockdown saving ways have not been dented by being able to go out and spend more, with us all saving £9.1bn in August – almost double the usual savings amount we saw pre-pandemic. However, savers were rewarded with yet another drop in savings rates to yet another historic low.”

With no signs of the Bank of England raising rates and inflation being high, and poised to shift even higher in the coming months, diligent savers are being clobbered from both sides.

“A mini rates war in some corners of the savings market has improved the best buy rates, meaning there are some options out there for those willing to shop around. And anything is better than leaving it dwindling in your current account earning 0.01% interest – at that rate you’d need £100,000 in savings just to get £10 back each year in interest,” says Suter.

Borrowing on credit cards, personal loans and car finance rose slightly but is still about a third of what it was in pre-pandemic times.

Three key things investors look for before deploying capital

Liam Roche
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Three key things investors look for before deploying capital

With advancements in technology, investing is being democratised like never before. However, with more power comes more responsibility for founders and investors. Founders and investors are still humans who are susceptible to making costly mistakes.

“We see thousands of Enterprise Investment Scheme qualifying investment opportunities each year,” Andrew Aldridge, Partner at Deepbridge Capital. “We screen companies based on stringent criteria, including the protectability of the Company’s intellectual property, the global market they are targeting, their revenues to date, and much more. However, it is the people behind the product or service which are ultimately the reason behind why we invest and for this there is no one-size-fits-all.”

However, the key attributes that commonly set great entrepreneurs apart include resilience, drive, teamwork and an understanding of their own limitations.

Resilience

Those who have experience running their own business will know that things rarely go as planned, even if the owner has a perfect business plan. However, resilience can steer a business through tough times.

“It is also important that founders have the drive to grow a business and aim for an exit opportunity in line with investors’ goals. When raising venture capital, it is important the entrepreneurs realise that their goals need to be aligned and the business cannot drift,” says Aldridge.

Team

It may seem obvious but it is vital to hire the right people. A founder who shows the ability to work in and lead a team, is therefore critically important or you’ll find your capital being used up on hiring and firing and not progressing with long-term committed professionals.

Play to Your Strengths

The final key point is that founders need to have the humility and self-awareness to understand their own weaknesses and where help is required. “For example, academics may know the science and purpose of their life-changing discovery, but they may not have the commercial experience to build a business or the sales aptitude to take the product to market,” Aldridge says. Only by understanding their gaps can the founders then bring in the required team-members to expedite the growth of the Company. Understanding one’s own weaknesses is very much a strength.

FTSE shrugs off sell-off in US and Asia

Liam Roche
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FTSE shrugs off sell-off in US and Asia

The FTSE 100 was off to a solid start on Wednesday morning, up by 0.72% at the time of writing at 7,078.80.

“If investing is often about climbing a wall of worry, then market participants arguably face the equivalent of the Matterhorn right now but on Wednesday investors seemed to be undaunted,” says AJ Bell investment director.

This is despite a big sell-off in Asia and the US overnight, with tech stocks leading the way down.

“The global energy crisis is really just the latest manifestation of a wider shortage of stuff as demand has flooded back in the wake of the pandemic,” Mould adds.

Then you have specific pressure points like the crisis around Chinese property developer Evergrande and the latest in what feels like a series of periodic battles over the debt ceiling in the US.

“Against this uncertain backdrop central banks are having to weigh up inflation risks which, like chewing gum on the sole of a shoe, are proving stickier than they’d hoped.”

To counter the threat posed by rising prices they face the prospect of dialling down economic support at a time of mounting uncertainty over the recovery.

FTSE 100 Top Movers

Next (3.04%), Ferguson (2.42%) and Segro (2.4%) are leading the way on the FTSE 100 on Wednesday morning.

Royal Mail (-5.4%), Admiral and Smith (-2.04%) and Nephew (-1.5%), have not fared so well so far, as the trailing three companies on the UK index.

Next increases full-year outlook as profits surge to £347m

Liam Roche
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Next increases full-year outlook as profits surge to £347m

Next also warned against stock levels due to supply chain issues

Next has raised its forecast again, as the retail outlet thinks its fill-year profit could reach its highest point since 2016, having seen its trading levels “materially exceed expectations” during H1.

The clothes seller anticipates its profit before tax for 2021 will rise to £800m, the highest point in five years.

Since its shops re-opened in April, Next says its sales have surpassed expectations, while online deals have fallen back somewhat.

“The positive sales trend has continued through August into the second half, despite significant stock shortages caused by Covid-19 disruption to international supply chains,” Next said.

Although Next did warn that ongoing supply chain issues meant that its stock levels were not optimal, which means its sales are vulnerable.

Next chief executive Lord Wolfson said the retail bounce-back from the coronavirus pandemic was “far stronger than we anticipated”. 

“Sales in retail stores have done better than planned, while online sales have fallen back less than we expected. It appears that the wider economy has not suffered the long term damage many feared, for the moment at least. And, in particular, employment has held up well,” he added.

The Next share price is up by 2.75% during the morning session on Wednesday.

“Next is a best-in-class UK retailer so if even it is struggling to navigate staffing and supply chain issues then you know its peers will be really under the pump,” says Russ Mould, investment director at AJ Bell.

“The company is also very upfront with its guidance, so you know you are getting an unfiltered version of events.”

“Trading may have been better than expected in recent months, supporting an increase in full year guidance, but the company is clear on the risks it faces heading into the key Christmas trading period,” says Mould.

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