Pound enjoys strong resurgence against the dollar

Liam Roche
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Pound enjoys strong resurgence against the dollar

Just after lunchtime on Wednesday cable stands at $1.3869

The pound has sharply risen against the dollar over the past five days, with a big move coming yesterday afternoon.

Covid cases fell in the UK, allowing the pound to win back some gains, while orders for durable goods fell short of Wall Street’s expectations, giving the US economy a headache.

Positive economic data has been coming out of the UK, as well as the eurozone, which is giving investor’s a renewed appetite for risk.

Just after lunchtime in the UK on Wednesday cable stands at $1.3869,

In the UK, Covid cases are set to fall for the seventh day in a row, which is propping up the pound, although there are fears that cases could rise again in the near future.

The pound strengthening is a continuation of the trend that started in December when the UK and EU put pen to paper on a trade deal in the aftermath of Brexit.

Since the middle of March, the pound is up against the euro by 13.1%.

In terms of the dollar, the upcoming Fed meeting where the US central bank will discuss its monetary policy will influence sentiment around the greenback over the coming weeks.

Barclays, US Tech Stocks and Junior Miners with Alan Green

UK Investor Magazine
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Barclays, US Tech Stocks and Junior Miners with Alan Green

Alan Green joins the UK Investor Magazine Podcast for our latest instalment of UK equities and global markets. We discuss Barclays (LON:BARC), Power Metal Resources (LON:POW) and Tertiary Minerals (LON:TYM)

We start with looking at US Tech stocks in Apple and Alphabet and go through the numbers from their bumper quarterly updates. Both produced revenue figures that surpassed analyst estimates in a strong quarter for two of the world’s largest technology companies.

Given the strong results from Apple and Alphabet, we explore whether we may be reaching the top of the earnings cycle as we come out of the pandemic and if a period of weaker growth could cause waves in equities.

Barclays (LON:BARC) also reported a huge jump in profits as they released half year profits that rose to £5bn helped by the reversal of COVID provisions and strong investment banking activity. Barclays also increased their dividend and we look forward to what investors could expect from Barclays and other UK banks in terms of payouts in the future.

We also explore Power Metal Resources (LON:POW) and Tertiary Minerals (LON:TYM).

Oakley Capital Investments portfolio strength drives 11% NAV uplift

Liam Roche
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Oakley Capital Investments portfolio strength drives 11% NAV uplift

Oakley Capital Investments (LON:OCI) confirmed its portfolio strength drove an 11% NAV uplift as the investment company released a trading update for the six months ending in June 2021.

NAV Growth

Oakley Capital Investments’ (OCI) unaudited NAV at the end of June was £804m, amounting to a NAV per share of 445p. The total NAV per share return, including dividends, is 11% since December 2020 and 26% since June 2020.

Performance

Oakley Funds sustained its solid performance levels and EBITDA growth, while the impact of Covid-19 continues to take a toll on its operations. Of its current portfolio, 14 companies equalling 52% of NAV grew their revenues at or above exceptions during the six month period. Four companies accounting for 14% of NAV saw a modest impact on financial performance due to Covid, while three companies which make up 29% of NAV, continue to be significantly impacted, the company said.

Investments

Over the past six months, OCI made a total look-through investment of £95m which, aside from some minor follow-on investments, was attributable to the acquisition of four new platform investments: idealista (Fund IV), Dexters (Fund IV), ICP Education (Fund IV) and ECOMMERCE ONE (Origin Fund).

Cash and Cash Commitments

  • Balance sheet – OCI has no leverage and had cash on the balance sheet of £172 million at 30 June 2021, comprising 21% of NAV
  • Recent commitments – OCI’s total commitment to the Oakley Capital Origin Fund, which closed in January 2021, was €129 (£111) million
  • Total outstanding commitments – outstanding Oakley Fund commitments are £438 million

OCI is a Specialist Fund Segment traded investment vehicle that aims to provide shareholders with consistent long-term capital growth in excess of the FTSE All-Share Index by providing liquid access to private equity returns through investment in the Oakley Funds.

The Oakley Capital Investments Limted share price is up by 0.85% during the morning session on Wednesday.

ITV gets boost from Euros coverage and easing of lockdown restrictions

Liam Roche
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ITV gets boost from Euros coverage and easing of lockdown restrictions

Concern’s remain over ITV’s advertising revenue streams in the long-term

ITV (LON:ITV) confirmed it received its highest advertising revenues in its near 70-year history as the UK broadcaster emerged from the coronavirus pandemic.

The increase came about thanks to a combination of the Euro 2020 football championships, Love Island and the easing of lockdown restrictions.

ITV confirmed that its advertising revenue for June surged by 115% year-on-year, as its total revenue rose by 25% over the first six months of 2021 to £1.8bn.

Its broadcast revenues initially took a big hit when the pandemic happened as large companies were forced to reign in their levels of spending. There has been a reversal in this trend as the economy has opened back up as businesses are now competing for position.

“A bullish set of results from ITV shouldn’t come as a surprise. The reopening of the economy is a natural driver for companies to increase advertising and so ITV’s associated revenue has grown by a decent rate,” said Danni Hewson, financial analyst at AJ Bell.

The company’s blockbuster show Love Island is back on the nation’s screens, “which means another rush by advertisers to bag a slot in the commercial breaks,” said Danni Hewson, financial analyst at AJ Bell.

While there has been a shot-term spurt of growth, Hewson remains less convinced over the UK broadcaster’s outlook.

“This is fine now, but ITV’s position longer term remains uncertain. There is structural shift of advertising away from TV and towards online channels.”

“ITV may have done well in the past year thanks to people being at home during the pandemic and who, having exhausted everything on Netflix, found themselves watching traditional TV channels again.”

“However, there is a real risk that was a one-off event, and streaming programmes and films on-demand will rule once more. That places even more pressure on ITV to come up with must-watch shows. As such, it will have to plough significant amounts of money into the studios arm to enrichen its content,” said Hewson.

Just before 11am on Wednesday, the ITV share price is pretty much unchanged from yesterday’s close, sitting at 119.38p.

Shares are reluctant to jump despite strong quarterly results

Liam Roche
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Shares are reluctant to jump despite strong quarterly results

The FTSE 100 crept above 7,000 as UK markets opened on Wednesday, with strength among UK-facing banks offset by weakness in miners and pharma stocks.

“Barclays topped the FTSE risers after its quarterly numbers sounded the right notes with news on dividends, share buybacks and a greater than expected release of provisions set aside to cover any potential loan losses relating to Covid,” says Danni Hewson, financial analyst at AJ Bell.

“The second quarter earnings season is proving to be a mixed bag for markets, with investors looking past many impressive top line figures and digging deeper into the numbers to find anything they can to worry about.”

“It says a lot when a big-name stock like Apple doesn’t see a share price jump on better-than-expected quarterly earnings,” says Hewson said.

Microsoft also beat expectations, yet its shares barely moved in after-hours trading as good headline news on earnings was offset by concerns about a slowdown in the rate of growth for its Azure cloud computing operations.

All eyes will be on the US Federal Reserve which is in the middle of its two-day policy meeting.

“As always, investors will want to know the central bank’s latest view on the outlook for the US economy and whether it is time to tinker with policy support measures.”

The spread of the Delta virus variant in recent weeks and months could give the Fed reason to make no changes to its policy.

FTSE 100 Top Movers

St James’s Place (5.32%), Fresnillo (4.68%) and IAG (4.12%), each making strong gains, led the way on the FTSE 100 during the morning session on Wednesday.

HSBC (-1.79%), BHP (-1.58%) and Reckitt (-1.43%) are Wednesday’s three biggest losers heading into the second half of the week.

Santander boosted by strength of used car sales in US and UK housing market

Liam Roche
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Santander boosted by strength of used car sales in US and UK housing market

Santander’s revenue during Q2 rose by 6% to €11.3bn

Strong demand for used cars in the US and homes in the UK allowed the Spanish Banco Santander to secure a strong increase in its Q2 profits.

For the second quarter ending in June the banking giant reported a net profit of €2bn, compared to a loss of over €11bn year-on-year as it stomached write downs on the value of a number of its operations.

Santander’s revenue during Q2 rose by 6% to €11.3bn, while its expenses rose at a more gradual pace by 4%.

Out of all of Santander’s key markets, it generated the largest underlying profit from America during the first half of 2021, in addition to making a series of acquisitions in recent weeks. This comes as a surprise to many who expected Santander to gradually ease away from the US market as its competitors have done.

Santander’s car financing operation is one of the biggest in America, and soaring used car prices have pushed its profit levels in the region.

In addition to the US, Santander performed strongly in the UK, where it is one of the top mortgage providers. The bank benefited from Britain’s booming housing market, which performed above expectations during the pandemic on support from the UK government.

Nathan Bostock, chief executive officer, commented: “we have delivered another strong financial performance while continuing to support our customers, colleagues and communities through the challenges of the pandemic. The results are testament to the hard work of our teams and reflect the strategic decisions we have taken over recent years as well as the economic recovery.”

“We have delivered good growth in net interest income and strong mortgage lending. At the same time, we have continued to focus on enhancing our customer experience and improving efficiency,” Bostock added.

Music Magpie sees increase in profit and revenue in first set of results since IPO

Liam Roche
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Music Magpie sees increase in profit and revenue in first set of results since IPO

Music Magpie posted a pre-tax profit of £4m for the six months ending in May

Music Magpie (LON:MMAG), the technology reseller, confirmed on Wednesday that its revenue and profit rose in it’s first interim results since its IPO in April.

The retailer posted a profit before tax of £4m for the six months ending in May, an increase of £0.7m compared to the same period a year ago.

Revenue edged up from £71.1m to £72.8m over the same period of time.

As the cost of tech products rises, Music Magpie has carved out a niche in the market, while its awareness of environmental concerns has resonated with customers.

However, despite the positivity around its first set of results as a listed company, the Music Magpie share price is down by 1.89% during the morning session on the AIM market.

Russell Pointon, Director, Consumer, at Edison Group, commented on the results: “In its first set of interim results since listing in April, musicMagpie has reported revenue growth of 2.3% (constant currency 3.7%), adjusted EBITDA growth of 13.5% (constant currency 14.8%), and adjusted EPS growth of 15.2%.”

“For all three product categories, revenue grew in the period, and gross margins continued to improve with the ongoing focus on buy and sell prices. By geography, the UK produced the strongest growth with 6.6% growth, but the US was down 6.3% as its focus on profitable trading continues. With respect to new initiatives, there are encouraging early signs with rental subscriptions, which temporarily suppresses one-off revenue growth in return for recurring revenue and higher EBITDA. Also, the SMARTDrop Kiosk concept to recycle phones at Asda is to be further rolled out.”

Pointon added: “Current is stated to be in line with management’s expectations, with strong growth in rentals. Management expects sales in disc media and books to revert to normalised pre-pandemic levels but for margins to remain resilient. In aggregate they expect adjusted EBITDA will be in line with expectations.”

Google owner Alphabet sees advertising revenue soar during pandemic

Liam Roche
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Google owner Alphabet sees advertising revenue soar during pandemic

Alphabet’s operating profits more than tripled to $19.4bn

Google owner Alphabet (NASDAQ:GOOGL) announced record-breaking Q2 revenues on Tuesday evening as the firm continued to benefit from the pandemic.

Alphabet far exceeded its expectations, recording second quarter revenues of $61.9bn, up 62% compared to the same period a year ago.

The jump reflects a rise in online activity by consumers, in particular an 83.7% increase in ad revenue generated from YouTube.

Alphabet’s operating profits more than tripled to $19.4bn, as its operating costs rose 33.2%, while its headcount increased by 13%.

That was entirely driven by strong results in the core Google Services business, which includes; Android, Chrome, Maps, Play, Search and YouTube. Sales in that business rose 63.1% to $57.1bn, while operating profits rose 134.2% to $22.3bn. Traffic Acquisition Costs in the division rose 63.3% to $10.9bn.

Thomas Philippon, an economist and professor of finance at New York University, told The Guardian that people have been pushed to use the services of tech companies during the pandemic.

“They were already on the rise and had been for the best part of a decade, and the pandemic was unique,” Philippon said. “For them it was a perfect positive storm.”

The Alphabet share price rose by 3.2% in after-market trading.

Nicholas Hyett, Equity Analyst at Hargreaves Lansdown: 

“With confidence returning to economies inching out of lockdowns, marketing departments are loosening the purse strings. As the sales of goods and services move online, Google is gathering an ever-increasing share of global advertising spend. That means Google is enjoying a growing share of a pie that is itself expanding quickly. A rising tide lifts all boats, but Google is a veritable hovercraft compared to the familiar names of the ‘old media’.”

“As a software platform provider, Alphabet enjoys incredible operating leverage, which is to say its revenues feed through to profits at a pace other companies could only dream of. That’s true at the cash level too, and as a result the group’s maintained a net cash pile of well over $100bn despite buying back $24.2bn of shares in the quarter.”

“Spectacular growth, incredible cash generation and multiple category killing products all at a fairly reasonable 30 times future earnings. It’s difficult to find things not to like at Alphabet.”A

Apple outperforms market expectations yet fails to galvanise investors

Liam Roche
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Apple outperforms market expectations yet fails to galvanise investors

Apple’s operating profits increased by $11bn to $24.1bn

Apple (NASDAQ:AAPL) profits soared as the world economy comes away from the pandemic that served to benefit major technology companies last year.

Q3 net sales rose by 36% to $81.4bn compared to the year before, while each location reported record levels of revenue.

Apple outperformed market expectations with its results, as iPhone sales rose by 49.8% to $39.6bn, while Mac and iPad sales increased by 1.3% and 11.9% respectively to $8.2bn and $7.4bn.

The Americas remains Apple’s largest market, from where 44% of its sales were made at a value of $35.9bn.

Greater China saw the biggest increase in sales of $14.8bn, up 58%.

Earnings announced by Apple showed that demand for gadgets and other such products improved recently, suggesting that the American tech giant is reaping the benefits as the world recovers from the pandemic.

The higher sales also mean a 20.2% increase in Research and Development spending, while operating profits increased by $11bn to $24.1bn.

Apple announced a quarterly dividend of $0.22 per share.

Despite the impressive results, Apple shares remained flat in after-hours trading.

Sophie Lund-Yates, Senior Equity Analyst at Hargreaves Lansdown, said: 

“The problem with being the best is you risk becoming a victim of your own success. That’s what we’ve seen from the reaction to Apple’s results, where despite an exceptional performance, the market’s response has been somewhat muted.”

“The growth might be slower than last quarter, but you only have to look at the figures to appreciate Apple’s hardly in any trouble, quarterly revenues of over $81bn would put most businesses on the planet to shame. Almost any way you frame this picture, it looks good. That just goes to prove that heavy is the head that wears the crown,” said Lund-Yates.

New AIM admission: Northcoders set for training roll out

Andrew Hore
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New AIM admission: Northcoders set for training roll out

Northcoders Group offers software coding training and helps the students to gain employment. Demand for this training is enormous with the government estimating that 1.2 million technically skilled people will be needed by 2022. The knock-on effects of Covid-19 will only have accelerated this requirement.
This is a fragmented market and Northcoders can roll out its services in additional regions. This will be important for the growth of the company. There could also be acquisition opportunities.
Trading has improved this year and the Manchester and Leeds sites have reopened. Revenues to the en...

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