New AIM admission: LungLife AI

Andrew Hore
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New AIM admission: LungLife AI

California-based LungLife AI is developing the LungLB lung cancer diagnostic test. The plan is to have a commercial test available in the US by 2023. The cost of a test could be less than one-tenth of the cost of a lung biopsy, which has an average cost of nearly $15,000.
The cash raised in the placing will fund the validation study and the utility study for the LungLB test. These studies will be used in the application to the FDA. There will also be a post-surgical validation study. Additional cash will finance further development.
The share price opened at 185p and closed at the high for the...

New AIM admission: CMO Group

Andrew Hore
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New AIM admission: CMO Group

CMO Group is the largest online retailer of building materials in a market where pure online businesses still have a relatively small share. CMO can grow on the back of the continued move to online. There are also plans to combine the company’s websites in one unified website.
Longer-term growth will come from adding more categories of product. Areas such as plumbing, bathrooms and electricals have been identified. There are also opportunities for acquisitions.
The shares commenced trading at 138.5p and ended the day at 154p. There were 328,760 shares traded.
In the first five months of 2020, ...

New Aquis admission: Helium Ventures

Andrew Hore
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New Aquis admission: Helium Ventures

Helium Ventures is a shell seeking to acquire a business in the upstream natural gas sector, with a focus on helium.
The share price jumped to 16p (14p/18p) on the first day of trading. That values the company at £2.69m. There were nearly 1.3 million shares traded. There were 17 trades at prices between 14p and 17p.
The underlying value of Helium Ventures cash is 4.9p a share, so this is a significant premium to cash/NAV. Helium One Global (LON: HE1) has done well since joining AIM last year, but it already has a helium asset and is making good progress with exploration.
The Helium Ventures sh...

Virtual AGMs are improving investor engagement according to research

Liam Roche
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Virtual AGMs are improving investor engagement according to research

The pandemic has been the ‘catalyst’ for widening AGM participation says Lumi CEO

Virtual AGMs are becoming more normal and the phenomenon is resulting in surging levels of shareholder engagement.

That is according to data released by Lumi, the regtech company.

Lumi’s research found that 90% of AGM’s conducted, or set to be conducted, in 2021, will be fully remote, while 9% will be carried out via some kind of hybrid approach.

The figures represent a dramatic shift as workplace culture has transformed throughout the pandemic.

Figures show that when comparing the first halves of 2020 and 2021, while the same number of people attended AGMs, the amount of messages being sent doubled during H1 2021.

Commenting on the findings, Richard Taylor, CEO of Lumi said: “The format of the AGM has remained relatively unchanged for decades, yet the technology has always been ahead of the curve – but like many of the ways we work, the pandemic has been the catalyst for the world’s largest companies to widen their AGM participation with virtual events. This is a watershed moment when companies are rethinking how all shareholders can be included in important decision making.”

The majority of shareholder meetings occurred between April and June in the UK and US, and as the pandemic impacted the world, they were forced to adapt in order to go ahead as planned.

Taylor added: “While many companies were able to hold virtual meetings in 2020, this did not always replicate the previous in-person experience. For example, some organisations were only able to share an audiocast that shareholders listened to live, some could only send a recording after the event and other meetings were held behind closed doors entirely.”

“With a year to plan ahead, we’re seeing companies running things very differently in 2021 by using technology to build shareholder interactivity as standard. This has allowed shareholders to be more actively involved in their AGMs, asking more questions than ever before.”

ECB adopts new ‘symmetric’ inflation target

Liam Roche
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ECB adopts new ‘symmetric’ inflation target

The ECB had previously chosen to keep inflation below, but close to 2%

The European Central Bank has revised its own inflation target to 2% and confirmed its willingness to let it surpass this level at times.

The announcement gives chiefs at the central bank the ability to keep interest rates down for a longer period of time.

The ECB had previously chosen to keep inflation below, but close to 2%, therefore this change allows it to put forward more robust stimulus measures if needed.

The revised target is defined as ‘symmetrical’. This means that going below 2% is equally as unfavourable as going above the level.

President of the ECB Christine Lagarde said: “The new strategy is a strong foundation that will guide us in the conduct of monetary policy in the years to come.”

“When the economy is operating close to the lower bound on nominal interest rates, it requires especially forceful or persistent monetary policy action to avoid negative deviations from the inflation target becoming entrenched,” the ECB said. “This may also imply a transitory period in which inflation is moderately above target.”

Commenting on the ECB Strategy Review, Jesús Cabra Guisasola, Associate at Validus Risk Management, said: “The ECB is trying to mirror the Fed’s monetary policy by letting the inflation target of 2% move above or below this level when needed.”

“Nevertheless, this announcement is softer than the Fed’s 2% average inflation target as the HICP inflation average in the euro-area has been well below this goal for the last decade.”

“Looking ahead, this decision will provide further support for the ECB to continue its ultra-dovish tone and supporting the eurozone with favourable financing conditions.”

“Mute reaction in the FX market after the announcement. However, the euro is now trying to recover some of its losses against the dollar after falling below the $1.18 support level yesterday.”

Eurozone inflation fell in June amid a fall in the price of oil, according to data published last month. Inflation across the EU was down by 0.1% from May to 1.9% in June.

Euro 2020 Finals: FTSE 100 vs FTSE MIB

Liam Roche
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Euro 2020 Finals: FTSE 100 vs FTSE MIB

England ended a 55-year wait to play in a major tournament final on Wednesday night, beating Denmark in extra-time at Wembley courtesy of a Harry Kane goal. The Three Lions will now face an Italy side that has also impressed throughout, getting past a resilient Spain team in its previous game en route to the final.

For both countries the coronavirus pandemic has been a trying time, causing the loss of life and economic despair. As both now appear to be on their respective roads to a recovery, this article will examine the performance of the stock markets and wider economic outlooks of the on-field rivals.

FTSE 100 vs FTSE MIB

FTSE 100 (red & green) and FTSE MIB (blue)

Despite the jubilant scenes in HA9 and across the country, the mood was not reflected by the FTSE 100 on Thursday. At the time of writing, the UK index is down by 2%. Similarly, in Italy, the euphoria has not rubbed off on its major index, the FTSE MIB, which is down by 3.02% over the past five days.

The FTSE MIB, tracked above by the blue line, is the benchmark stock index for the Borsa Italiana, the Italian national stock exchange. Following a dramatic crash, as with many indices across the world in February 2020, the FTSE MIB recovered to surpass pre-pandemic levels. However, following a recent retreat, it is sitting at 24,609 points, slightly below the level before the coronavirus took a grip of the world economy.

The FTSE 100, on the other hand, remains some way off its pre-pandemic high of over 7,400 points. This is despite a strong recovery which has seen the UK index trade above the 7,000 mark for over a month now.

UK

While the performance of the players has undoubtedly raised the mood of the country, can this translate into economic performance? Chancellor Rishi Sunak suggested that there could be an increase in consumer confidence on the back of the Euros, while business owners continue to draw attention to the constraining measures of the continued restrictions.

Simon French, chief economist at brokers Panmure Gordon, told the BBC that on-pitch success could translate to increased growth. However, it is dependent on other factors, he added.

“If a victory on one day coalesces with a broader feelgood factor, like we saw during during Euro 96 or the 2012 Olympics, it could boost consumer sentiment,” French told the BBC.

“The difference this time is that UK households have a lot of pent-up savings due to the pandemic – we estimate about £20bn – and the speed with which they are spent is closely linked to consumer sentiment. Winning the final, along with lots of other things, like reopening, the easing of restrictions, could help unlock many billions of pounds worth of additional spending. But it would only be a contributing factor.”

While the UK economy’s recovery, specifically the rapid vaccine roll-out, has been reported to be going well, there are some complications.

A recent rise of Covid-19 infections in the UK has caused a fall in the number of people visiting bars and restaurants in June. The prime minister confirmed his intention to go ahead with the removal of ongoing restriction on July 19. While it could merely represent a slight bump in the road, other complications remain, such as inflation and labour shortages.

Italy

The Bank of Italy believes the Italian economy will grow by 5% in 2021. It put its raised forecast down to circumstances around Covid-19 improving, and an increased revision in Q1 GDP data. The central bank also said growth in 2022 would come down to 4.5%.

These figures will come about as investments will rise significantly on greater certainty over the future, in addition to low interest rates and funding from the EU’s ‘Recovery Fund’. In 2020, the Italian economy contracted by 8.9%, its most damaging fall in output since the second world war.

However, Italy has exported many more goods since the pandemic as its businesses have adapted to digital technology. By April, the Financial Times reported that goods exports had increased by 6% compared to January 2020 levels. In addition, online retail sales increased by more than 50% in January 2020, far exceeding the 42% average in the eurozone.

Digitalisation and innovation are fundamental to Italy’s plans following the pandemic, in a country which has been previously held back by crippling bureaucracy.

On the economic front, there is much to be cheerful about for the UK and Italy. Yet, as for their respective football teams heading to Wembley on 11 July, there is still work to be done.

Dunedin Income Growth Investment Trust: positioned for a changing world

Aberdeen Investment Trusts
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Dunedin Income Growth Investment Trust: positioned for a changing world

By Ben Ritchie and Georgina Cooper, Investment Managers, Dunedin Income Growth Investment Trust PLC

  • There has been a decisive move among investors to incorporate environmental, social and governance (ESG) considerations into their analysis of companies.
  • Poor management of risks around carbon emissions, water or labour rights put businesses in peril.
  • For Dunedin Income Growth Investment Trust, we wanted to formalise our ESG process and make it clearer to our investors.

Even before the pandemic wrought profound and enduring changes on the world, ‘disruption’ had become commonplace. Industries as diverse as financial services, healthcare or car manufacturing have all seen technology force change in recent years. Post-pandemic, many of these structural shifts have accelerated and it has become even more important for investors to stay ahead. 

At Dunedin Income Growth Investment Trust, we have pivoted towards these trends over the past five years, bringing in higher growth companies on the right side of structural economic change. As we see it, these companies should be in a good position to grow their pay-outs to investors over time, but also deliver higher capital growth. 

This has seen the Trust take exposure to trends such as the digitalisation of industry, the growing wealth of emerging market consumers and rising healthcare spending. Today, we believe the Trust is positioned for economic recovery, without being vulnerable should it fade. Importantly, it is relevant for a changing world. 

However, there is one area where we wanted to be clearer about our decision-making. Over the past few years, there has been a decisive move among investors to incorporate environmental, social and governance considerations into their analysis of companies. It has become far more than simply a ‘nice to have’, but an integral part of risk and performance management.

Why? Governments across the world, from the US to China, have committed to low carbon targets. Companies that are on the wrong side of this movement have found their businesses under greater scrutiny, subject to fines and regulatory sanctions. Their cost of capital has increased as banks and other lenders have considered them at greater risk. In this way, poor management of risks around carbon emissions, water or labour rights puts businesses in peril. 

At the same time, there are a lot of exciting companies emerging that address these problems in sectors such as renewable energy, waste management or environment technologies. These companies are benefitting from an increasing wave of government and private sector capital. While this means that investors need to be wary on valuations, particularly among some of the companies involved in emerging technologies, there are a range of new opportunities.

Environmental considerations

We have lengthy experience of managing ESG risks at Dunedin Income Growth Investment Trust and across all Aberdeen Standard Investments portfolios: every business in our portfolios has been graded on ESG by our investment analysts. However, we recognise that some of the language in this area can be alienating and investors often don’t know what they’re getting. As such, we wanted to formalise our ESG process and make it clearer to our investors. This is why we asked shareholders to support more formal screening in the portfolio. It doesn’t change the investment philosophy or dividend policy. It simply formalises our existing research work. 

In building our plan for the Trust, we didn’t want to make too many value-based judgements. We recognise that investors’ ethical priorities can vary considerably. With this in mind, we focused largely on the environment, tobacco and weapons. This follows Aberdeen Standard Investments’ socially responsible investing (SRI) approach, which has been well-established and rigorously reviewed. We also see these as the areas of greatest regulatory pressure. Companies that don’t align themselves with those requirements are going to face a cost of capital and/or fines and sanctions. Today, we see that pressure building for oil, big tobacco and weapons companies. It could happen to other sectors and if so, we will be ready to adapt. 

In practice

We are automatically excluding those companies that make weapons and tobacco, plus those oil and gas companies that don’t have a meaningful weighting in renewables and natural gas. We are also excluding companies that get low scores based on our proprietary ESG quality ranking and the bottom 10% of the index ranked on our in-house scoring metrics.

This makes a small difference to our universe of stocks. Around 6% are excluded on the sector screen, another 13% on quality analysis and another 10% are excluded on the in-house score. On current analysis, 29% of the market is screened out, once some overlap is taken account of.

This change will have an impact on our income options in the portfolio. Areas such as tobacco are significant dividend payers, so their exclusion inevitably reduces choice. However, if anything, it pushes us to re-allocate into other, higher growth ideas. Having the flexibility to invest up to 20% overseas is helpful. In terms of sectors, we might see a bigger swing towards financials and away from commodities. We believe though that this impact is more manageable with the investment opportunities that we have available to us.

To our mind, the move to formally incorporate environment, social and governance considerations in investments analysis is a significant and long-term shift in the way financial markets operate. It cannot be ignored and will increasingly be reflected in the price of shares. We wanted to make it an explicit part of our Trust’s mandate for the future. 

Important Information

Risk factors you should consider prior to investing:

  • The value of investments and the income from them can fall and investors may get back less than the amount invested.
  • Past performance is not a guide to future results.
  • Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years.
  • The Company may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that any movement in the value of the company’s assets will result in a magnified movement in the NAV.
  • The Company may accumulate investment positions which represent more than normal trading volumes which may make it difficult to realise investments and may lead to volatility in the market price of the Company’s shares.
  • The Company may charge expenses to capital which may erode the capital value of the investment.
  • Derivatives may be used, subject to restrictions set out for the Company, in order to manage risk and generate income. The market in derivatives can be volatile and there is a higher than average risk of loss.
  • There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value.
  • As with all stock exchange investments the value of the Company’s shares purchased will immediately fall by the difference between the buying and selling prices, the bid-offer spread. If trading volumes fall, the bid-offer spread can widen.
  • Certain trusts may seek to invest in higher yielding securities such as bonds, which are subject to credit risk, market price risk and interest rate risk. Unlike income from a single bond, the level of income from an investment trust is not fixed and may fluctuate.
  • Yields are estimated figures and may fluctuate, there are no guarantees that future dividends will match or exceed historic dividends and certain investors may be subject to further tax on dividends.

Other important information:

Issued by Aberdeen Asset Managers Limited which is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Registered Office: 10 Queen’s Terrace, Aberdeen AB10 1XL. Registered in Scotland No. 108419. An investment trust should be considered only as part of a balanced portfolio. Under no circumstances should this information be considered as an offer or solicitation to deal in investments.

Find out more at www.dunedinincomegrowth.co.ukor by registering for updates. You can also follow us on Twitter and LinkedIn.

Persimmon sales surpass pre-pandemic levels amid housing boom

Liam Roche
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Persimmon sales surpass pre-pandemic levels amid housing boom

Persimmon full-year dividend payment to come in at 235p

During the first half of the year Persimmon’s (LON:PSN) sales went above levels seen before the pandemic as the company reaped the benefits from a booming housing market.

The FTSE 100 company confirmed that its revenues came to £1.84bn during H1 of 2021, above the figure of £1.75bn seen over the same period of time in 2019.

The UK house builder’s sales were as low as £1.2bn during the first half of 2020.

Persimmon also bought 10,000 new plots of land at 48 sites, it reported, along with a forward order book amounting to £1.82bn. The group also holds £1.3bn in cash on its balance sheet.

The group also confirmed it is bringing forward its planned dividend payment of 110p to 13 August, while over the course of the entire year shareholders will receive a 235p payout.

“Pre-Covid Persimmon had to adopt a ‘less is more policy’, a series of issues with build quality leading it to dial down temporarily on the number of homes built to ensure purchasers weren’t left unsatisfied,” says Russ Mould, investment director at AJ Bell.

“So, investors will be relieved the housebuilder has now been able to ramp up build volumes to pre-pandemic levels without apparently compromising on quality.”

“This follows up on the recent agreement with the competition authorities to support customers who have encountered issues with leasehold properties. After the scandals over wonky house builds and executive pay, Persimmon is making strides towards being a better corporate citizen.”

“It’s easy to be generous when your pockets are full so there should be little surprise that with more than £1 billion of cash Persimmon is accelerating capital returns to shareholders. However, Persimmon is also buying up land at attractive valuations, laying the foundations for future profitable growth.”

The Persimmon share price is down by 4.07% pre-lunchtime on Thursday to 2,945p.

WH Smith raises guidance and buys a number of Dixons stores

Liam Roche
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WH Smith raises guidance and buys a number of Dixons stores

WH Smith sales are recovering as Covid-19 restrictions ease

WH Smith (LON:SMWH) announced on Thursday that its sales are recovering as Covid-19 restrictions ease, causing the firm to raise its guidance for the full-year.

Another reasons for its improved outlook is its acquisition of of a number of former Dixons stores.

WH Smith bought 17 Dixons stores at sites, including major UK airports, which the company expects will deliver sales at around £60m per year.

The group’s total revenue came to 62% of 2019 levels in the 18 weeks to July 3.

“In Europe, where travel restrictions have been eased in recent weeks, we are seeing a gradual improvement as passenger numbers begin to recover,” the company said. “Outside of North America and Europe, our international business is seeing broadly similar trends to UK air, with passenger numbers significantly down versus 2019.”

“Dixons pulling out of the airport retail market has left WH Smith with an opportunity to increase its market share of selling overpriced adapters for foreign electrical sockets and headphones to replace the ones you left down the back of the sofa when packing to go on holiday,” said Russ Mould, investment director at AJ Bell.

“We all know these types of products can be bought cheaper online but there will always be a market for that last-minute purchase at the airport.”

“WH Smith’s contract win to open new stores in various UK airports is not only a chance to swoop in the gap left by Dixons’ departure but also a chance to roll out its InMotion brand which it acquired in 2018 when it bought North America’s largest airport-based electronics retailer.”

Domestic and business travel is picking up in the US, which might explain why WH Smith says it expects to raise its earnings expectations for the full year thanks to a stronger showing from its North American operations.

The WH Smith share price is down by 1.61% on Thursday to 1,623p.

Miners and banks weigh down the FTSE 100 on Thursday

Liam Roche
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Miners and banks weigh down the FTSE 100 on Thursday

The FTSE 100 fell by 1.36% on Thursday to 7,053 with miners and banks the principal sectors weighing on the index.

This suggests that investors have started to worry again about the strength of the economic recovery says Russ Mould, investment director at AJ Bell.

“You know it’s a bad day when only six stocks in the FTSE 100 are in positive territory. So much for the celebratory mood from last night’s England football win,” Mould said.

“Miners’ fortunes are heavily tied to commodity prices and the cost of metals and minerals is typically determined by supply and demand for industrial projects around the world.”

“Banks are also heavily influenced by economic activity. A strong period of growth means there could be greater opportunities to lend money to businesses and such a backdrop might also point to rising interest rates which increases the chance for the banking sector to make higher profit margins. If the economic outlook is not as strong, then investors start to go off banks for fear that it will be harder for them to push up earnings,” said Mould.

A pullback in the oil price is also bad for the FTSE 100 given how oil producers Royal Dutch Shell and BP are major constituents of the stock index and a decline in their share prices acts as a drag on the UK market.

In Asia, Hong Kong’s Hang Seng fell by just under 3% as Chinese tech stocks experienced a major sell-off amid fears of further regulatory interference.

“This year we’ve already had a big fine for Alibaba for violating anti-monopoly rules and more recently Chinese authorities told app stores to remove ride-hailing group Didi from their platforms, saying it illegally collected users’ personal data,” Mould said.

“China is clearly flexing its muscles and investors in this space should have already braced themselves for regulatory interference after the move on Alibaba.”

FTSE 100 Top Movers

Entain (1.85%), Just Eat (1.31%) and Ocado (0.22%) were the three companies leading the FTSE 100 on Thursday out of a handful in the green.

At the other end, Anglo American (-3.15%), Natwest (-2.98%) and Persimmon (-2.96%) made the biggest losses during the morning session on the FTSE 100.

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