Ireland increases corporation tax to 15%

Safiya Bashir
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Ireland increases corporation tax to 15%

Ireland will be increasing corporation tax from 12.5% to 15%.

The country will be signing up to a global tax reform for minimum rate internationals. Small and medium enterprises won’t be affected by the new rates.

Its previously low tax rates led to both Facebook and Apple basing their headquarters in Ireland.

Irish finance minister Paschal Donohoe said: “The government has now approved my recommendation that Ireland joins the international consensus. This is the right decision, it is a sensible and pragmatic decision.”

“We will remain an attractive location and ‘best in class’ when multi-nationals look to investment locations,” he said.

“These multinational enterprises support our economy with high-value jobs and at the same time, Ireland provides a stable platform and a long proven track record of success for MNEs choosing to invest here,” he added.

The new rate will affect companies that have an annual turnover of over €750m (£636m).

Chinese services sector grows in September

UK Investor Magazine
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Chinese services sector grows in September

The Caixin China General Services PMI rose to 53.4 in September signalling an expansion in the Chinese services sector.

September’s expansion came after a contraction in August with a reading of 46.7.

A PMI reading above 50 signals expansion and a reading below 50 means the sector is contracting.

A fall in COVID cases in China was attributed to helping optimism and growth in the services sector as the outlook improved.

However, the Chinese services sector was not immune to the threat of rising prices seen across the globe and both input and output prices rose from August.

Commenting on the China General Composite PMI TM data, Dr. Wang Zhe, Senior Economist at Caixin Insight Group said:

“The Caixin China General Composite PMI rose to 51.4 in September from 47.2 the previous month. Both market supply and demand recovered, and improvement in the services sector was stronger than in the manufacturing sector. Impacted by the pandemic, overseas demand was weak. Employment was stable overall. Prices gauges remained high, indicating strong inflationary pressure.

“Overall, because the impact of the pandemic was less severe in September than the previous month, services quickly rebounded. In contrast, the recovery in the manufacturing sector was limited, showing the economy still faced downward pressure.

“On the one hand, the epidemic continued to impact demand, supply, and circulation in the manufacturing sector. The state of the epidemic overseas and the shortage of shipping capacity also dragged down total demand. Epidemic control measures have clearly impacted the logistics industry. Domestic demand varied based on different types of goods. The demand for intermediate goods and investment goods was relatively high, while the demand for consumer goods was weak, reflecting consumers’ lack of purchasing power.”

Interims set an acquisition theme for Digitalbox

Jon Levinson
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Interims set an acquisition theme for Digitalbox

Digitalbox’s (LSE:DBOX) recently reported interims to June and the shares rallied as investors digested a general positive set of results. Its business focus is on mobile and online digital media and the shares have under-performed since reversing into a shell in a £10m deal with shares valued at 13.75p.
It owned Entertainment Daily which attracts woman 25-40 years old and since the listing has acquired the Daily Mash and The Tab, which was acquired in October 20 after raising £1.2m at 4.9p from a single strategic micro fund investor. This student publication was brought for cash as loss-m...

EIS: ‘no-greater Government giveaway to investors’

UK Investor Magazine
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EIS: ‘no-greater Government giveaway to investors’

The Enterprise Investment Scheme (EIS) provides investors in eligible early stage UK companies with generous tax-benefit benefits such ass 30% Income Tax Relief, Capital Gains Tax exemption and Inheritance Tax exemption.

Indeed, a Partner at Deepbridge Capital said there is ‘really is no-greater Government giveaway to investors’.

Deepbridge Capital manages £200m across their EIS Funds.

Investor Misconceptions

Andrew Aldridge, Partner at Deepbridge Capital, has highlighted investor misconceptions of the Enterprise Investment Scheme and why sophisticated and high net worth investors should consider the investments through the scheme for their portfolio.

“One of the potential misnomers is that EIS, and other tax efficient investments such as VCTs and Business Relief propositions, are only for the mega wealthy,” Aldridge said.

“With most EIS funds accepting investments as little as ten thousand pounds, there are opportunities for advisers to provide investors with tax-free growth away from pensions without having to commit unwieldy amounts – of course there are a myriad of other tax reliefs with EIS qualifying investments as well, not least 30% income tax relief, CGT deferral, inheritance tax exemption after just two years and loss relief in case everything does go wrong.” 

Diversified Portfolio

Andrew Aldridge outlined a potential scenario for investors who choose to invest in a diversified portfolio of EIS companies over a five year period:

“Let’s take a client who invests £12,000 each year into EIS propositions for five years. If that provides them with diversification across approximately three companies each year, then after five years they will have amassed a private equity portfolio of fifteen growth-focused companies.” 

“Such a portfolio would be minimally correlated to main market fluctuations and could also form part of wider inheritance tax planning.  In fact, to be profitable this portfolio could require as few as four of the companies achieving reasonable growth.  Any other successes in the portfolio are all profit and, importantly, tax-free growth (subject to EIS rules, such as assets being held for a minimum of three years).”

Mondi EBITDA jumps as input prices rise

UK Investor Magazine
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Mondi EBITDA jumps as input prices rise

Mondi (LON:MNDI) shares rose on Thursday after the paper and packaging group said Underlying EBITDA rose 27% in the third quarter.

However, the group pointed to higher input prices impacting Q4 leading to price inflation.

Mondi said it ‘remains well-placed to deliver sustainably into the future’ and shares rose 1.9% in early trade on Thursday.

“Major challenge of the quarter has been passing on input costs mainly energy, resins, transport and chemical costs. 3Q21 EBITDA was up 27% compared to 3Q20, only 1% above 3Q19. The group expects to be impacted in Q4 by elevated input cost and planned maintenance and project related shutdowns,” said Ben Nutall, Senior Analyst at Third Bridge.

Ben Nutall also highlighted the ESG factors at play with Mondi given their focus industrial supply chains.

“Mondi primarily operates in secondary packaging markets across commercial and industrial supply chains, rather than in direct to customer packaging. Unfortunately industrial supply chain customers are less environmentally conscious than retail customers. Mondi is now seeing some rapid e-commerce growth as we use more cardboard packaging, but it’s from a smaller base.

“Mondi had the best paper assets in the industry which has led them to follow a long paper strategy, meaning they sell more paper than they use to make boxes. Mondi is significantly exposed to any volatility in the paper market. Mondi’s main competitors, DS Smith and Smurfit Kappa are short and balanced on paper.

“Our experts expect to see defensive consolidation in the European packaging market over the next few years as key players prepare for a potential transatlantic merger further down the line,” Nuttal said.

Andrew King, Mondi Chief Executive Officer, said:

“Mondi delivered a strong performance in the third quarter withhigher average prices across the business and strong volume growth year-on-year, against a backdrop of sharply higher input costs. Throughout this period of high demand, we remained focused on ensuring security of supply and high-quality service for our customers. Our growth is underpinned by our leading packaging portfolio and we continue to develop innovative and sustainable packaging solutions to help our customers achieve their environmental goals.”

Nestle is “working hard” to avoid supply chain disruption

Safiya Bashir
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0
Nestle is “working hard” to avoid supply chain disruption

Nestle has said that it is experiencing supply chain disruption ahead of the Christmas period.

Global bottlenecks and a shortage of HGV drivers have affected business, which will make it more difficult this year to make sure products are on shelves.

Chief executive of Nestle, Mark Schneider, said: “Like other businesses, we are seeing some labour shortages and some transportation issues but it’s our UK team’s top priority to work constructively with retailers to supply them. We are working hard.”

Ahead of the next month’s Cop26 conference, Nestle also said that it would be moving away from dairy products.

“We think less meat and dairy is good for the planet, but it’s also good for diet and health, and it is also a big commercial opportunity,” said Schneider.

“The first unit is always going to be a little more expensive, this is a hump you have to get over, and then at some point economies of scale kick in making them more affordable as we have seen in electric cars.

“Some consumers are willing to pay a premium now for products that pave the way for that,” he added.

UK house prices surge at fastest rate since 2007

Safiya Bashir
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UK house prices surge at fastest rate since 2007

According to new figures from Halifax have showed that house prices have soared at the fastest rate in 15 years.

House prices increased by 1.7% in September. The average house price in the UK is now £267,587.

House prices in Scotland and Wales are growing faster than they are in England. House prices in Wales and Scotland increased in September by 11.5% and 8.3% respectively.

Halifax’s managing director, Russell Galley, said: “While the end of the stamp duty holiday in England – and a desire amongst homebuyers to close deals at speed – may have played some part in these figures, it’s important to remember that most mortgages agreed in September would not have completed before the tax break expired.”

“This shows that multiple factors have played a significant role in house price developments during the pandemic.”

“The ‘race-for-space’ as people changed their preferences and lifestyle choices undoubtedly had a major impact. Looking at price changes over the past year, prices for flats are up just 6.1%, compared to 8.9% for semi-detached properties and 8.8% for detached. This translates into cash increases for detached properties of nearly £41,000 compared to just £6,640 for flats.

UK gas prices hit record highs

Safiya Bashir
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0
UK gas prices hit record highs

UK gas prices soared on Wednesday, hitting record highs.

As a result, factories could be forced to close whilst households are likely to face higher bills.

Vladimir Putin has said that Russia, the largest supplier to Europe of gas, will ease the crisis faced. This caused prices to fall from highs 350p per therm.

Danni Hewson, AJ Bell financial analyst, commented on the rise in gas prices: “News that Russia will boost gas supplies has steadied market nerves a little this afternoon and helped temper those record price hikes but businesses are worried, and investors are too.

“Even at current prices some energy intense sectors will struggle to operate as normal over the winter months and those that can keep operating as normal will have to find a way to push costs through the system.”

“Ultimately it will be the consumer that will have to pay and for some consumers today was as unwelcome as an egg sandwich on a crowded train.”

Tesco, Oil and Stagflation with Alan Green

UK Investor Magazine
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2
Tesco, Oil and Stagflation with Alan Green

Alan Green joins the Podcast to discuss the tumbling equity market and a selection of shares for consideration.

We start with the volatility in equity markets caused by rising oil prices, that only 24 hours ago were helping lift the FTSE 100 through BP and Shell.

Fears are increasing rising energy prices could force central banks to tighten conditions just as the economy starts to falter.

Tesco released a solid set of results alongside the announcement of a share buyback which helped lift shares 4%.

We also discuss On The Beach and British Honey Company.

Tui to raise €1.1bn following surge in late summer bookings

Safiya Bashir
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0
Tui to raise €1.1bn following surge in late summer bookings

Tui has reported a surge in late summer holiday bookings.

After a quieter summer due to travel restrictions, the group announced plans to raise 1.1 billion euros to reduce its debt.

TUI’s chief executive, Fritz Joussen, said: “The capital increase will enable us to take a significant step closer to our goal of rapidly repaying the government loans.”

Tui has been bailed out several times by the German government since the start of the pandemic.

Whilst summer holiday bookings are normally around nine million, this year bookings hit around five million. This was driven by late summer holiday bookings primarily by German and Dutch customers.

AJ Bell investment director, Russ Mould, commented: “Travel operator TUI is back to the market with its begging bowl out again. Not for the first time in this crisis the slow return to normality for tourism is causing problems, putting more strain on its balance sheet than an elephant on a tricycle.

“The assumption through the pandemic has been that TUI would never go to the wall, despite a very messy balance sheet, because the German authorities would always step in to bail it out.”

“However, the state-backed loans it received weren’t handouts, they do need to be paid back hence the need to go out and raise more funds through a rights issue.”

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