Value of Crown Estate supported by offshore wind farms

Liam Roche
-
0
Value of Crown Estate supported by offshore wind farms

Crown Estate’s marine portfolio rises to £4.1bn

The Crown Estate, the Queen’s property company, has seen its value jump by 7.5% to £14.4bn on the construction of offshore wind farms.

This happened despite revenues from high street properties falling as the pandemic took its toll.

Some of the world’s major energy companies made huge bids to lease seabeds in February, causing the value of the Crown Estate’s marine portfolio to rise to £4.1bn, The Times Reported.

On the other hand, the Crown Estate saw its on land property portfolio fall by £1.1bn, as the occupiers of its commercial property units found themselves unable to pay rent as a result of the pandemic.

The profits of the company which operates on behalf of the Queen fell by 22% during the 2020/21 financial year to £269.3m for this reason.

The Crown Estate gives its profits to the Treasury. The Treasury then gives a portion of this amount to the Royal Family in what is referred to as a “sovereign grant”.

The Crown Estate is anticipating a substantial increase in its income over the coming years as energy companies will begin paying in the region of £879 million a year to build wind farms.

Dan Labbad, chief executive of The Crown Estate, told The Times: “All things being equal we will see healthy income coming out of offshore wind in the upcoming years.”

“We’re not out of the woods yet. We’re still operating under lockdown, we don’t know how footfall will recover,” he said. “What the pandemic has thrown into sharp relief is that challenge and uncertainty are the new normal and there is no doubt we will face another difficult year ahead, but with the progress of the vaccination programme and our collective resilience as a society, there is reason to be cautiously optimistic,” he added.

New strategy outlined for Dignity

Andrew Hore
-
0
New strategy outlined for Dignity

The new management team has outlined its strategy for Dignity (LON: DTY) at the funerals and crematoria operator’s AGM. Selling a stake in the crematoria business is mentioned, but it is not the focus of the new strategy. Management says that Dignity needs to remain vertically integrated.
The argument is that the previous management policy of increasing prices led to a decline in market share and there were problems with telephone sales of prepaid funerals, where there were high levels of cancellations.
The telephony sales contracts have been cancelled and Dignity will no longer sell 10 year p...

Specialist Fund Segment admission: Literacy Capital

Andrew Hore
-
0
Specialist Fund Segment admission: Literacy Capital

Literacy Capital is joining the Specialist Fund Segment of the Main Market on 25 June, but no new money is being raised. The company is chaired by Capita founder Paul Pindar.
The focus is long-term capital growth through investment in unquoted investments and the provision of donations to charities. Literacy Capital makes an annual charitable donation of 0.9% of its NAV.
The company was formed in September 2017 and the investment manager is Literacy Capital Management LLP. Paul Pindar and his son Richard run the investment manager. The management fee is one-quarter of 0.9% of NAV. The director...

Victoria acquisition adds online expertise

Andrew Hore
-
0
Victoria acquisition adds online expertise

Acquiring hard flooring distributor Cali Bamboo Holdings Inc not only provides a North American base for floorcoverings and tiles manufacturer Victoria (LON: VCP) it also provides other opportunities.
Victoria is paying $76.1m (£55.1m) for Cali and repaying $27.8m (£20.1m) of debt. In the year to April 2021, revenues were $171.6m (£124.3m) and EBITDA of $13.8m (£10m). Revenues have been growing at 17% a year over the past five years. Margins are lower than for the group because Cali is not a manufacturer.
This is the latest in a raft of acquisitions in recent months. Victoria has spent more th...

Supply issues and staff shortages set the tone ahead of tomorrow’s Bank of England meeting

Liam Roche
-
0
Supply issues and staff shortages set the tone ahead of tomorrow’s Bank of England meeting

The IHS Markit flash UK composite output index came in at 71.7

Inflationary pressure on UK businesses hit record highs this month, while growth narrowed a bit from May’s all-time high, as Covid restrictions were eased.

This is according to the IHS Markit/CIPS UK Composite Purchasing Managers’ Index (PMI), which showed one of the most robust month-on-month increases in business activity in over 20 years.

The IHS Markit flash UK composite output index came in at 71.7, 1.2 shy of a record May.

IHS Markit said businesses have hired staff at “an unprecedent rate” in response to rapidly increasing workloads.

The survey also drew attention to the fact that input and output costs have reached new highs on supply-chain disruptions.

Chris Williamson, chief business economist at IHS Markit, said: “Businesses are reporting an ongoing surge in demand in June as the economy reopens, led by the hospitality sector, meaning the second quarter looks to have seen economic growth rebound sharply from the first quarter’s decline.”

“There are some signs that the rate of expansion appears to have peaked, as both output and new order growth cooled slightly from May’s record performance, but full order books and a further loosening of virus-fighting restrictions should nevertheless help ensure growth remains strong as we head through the summer.”

Danni Hewson, AJ Bell financial analyst comments on today’s Flash PMI figures, added:

“The latest flash PMI figures set the tone ahead of tomorrow’s interest rate decision by the Bank of England. Supply chains are still fraught, some materials are still hard to come by and delays are pushing some companies to try and buy ahead, at a premium. All those cost pressures will work their way through and signal an uncomfortably bumpy period where inflation will continue on its upward trajectory.”

“Add in staffing shortages being felt by industries like hospitality and you have a recipe which will require businesses to weigh up whether it’s better to slim down provision or scale up wages. Of course, the end of the furlough scheme could solve that issue. No one really knows how many of those still being cushioned will return to their substantive posts or be looking for new ones.”

GSK share price rises as chief executive sets out vision for the future

Liam Roche
-
0
GSK share price rises as chief executive sets out vision for the future

GSK Share Price

The GSK share price (LON:GSK) climbed by 2.68% on Wednesday as the company’s chief executive set out plans to secure its future on pressure from activist investors. The meeting follows a challenging past 12 months for the GSK share price, as the pharmaceuticals company has significantly underperformed the FTSE 100. However, despite being down by 14.46% over the past 12 months, the GSK share price has regained some momentum. Having added over 4% since the beginning of the year, it now stands at $1,432.20.

GSK trailed its major rivals, each bringing their variations of the coronavirus vaccine to the market, and its revenues fell, causing investors to turn away from the company. However, on the back of a meeting between Emma Walmsley and investors, many will be hoping the chief executive can bring about a positive outlook.

GSK Announcement

GSK gave an update to investors on Wednesday as the pharma company’s chief executive set out a plan to ensure long-term growth for shareholders.

The Financial Times reported that GSK will keep a stake in its ‘spun-off’ health division, which it could sell in the future to gather funds to invest in its drugs pipeline.

GSK will also break up its 68% stake in its consumer health joint venture in 2022, while it plans to retain 20%, from which it will be able to generate revenue from in time.

Walmsley has felt the pressure from investors who want to see what is in store for GSK in the future following the spin-off of the consumer division. This is particularly true of Elliot Management, the activist hedge fund, which took a multibillion-pound stake in the company this year.

Additionally, Walmsley’s ambition is to reach £33bn in sales by 2031. While over the next five years, the drugs company anticipates yearly sales growth of over 5%, and adjusted operating profit growth of more than 10%.

Finally, GSK confirmed that it will reduce its dividend after the spin-off in order to secure funds to re-invest into the company in the future. An aggregate dividend will be paid by GSK and consumer healthcare, anticipated to be in the region of 55p in 2022. While the new drugmaker will pay a dividend of 45p in 2023, the Financial Times reported.

Chris Beckett, head of equity research at Quilter Cheviot, commented further on GSK’s market announcement today.

“GSK’s announcement contained a whole host of market friendly targets, including a welcome target for double digital profit growth over the next five years that will need to be underpinned by a belief in the products in development and the segments the company will be focusing on,” Beckett said.

“The dividend reset, which works out at a 31% cut, is hardly good news, but it is not unexpected considering long-term concerns around true free cash flow cover. At 55p, the aggregate dividend across the two new companies works out to be a yield of 3.9% for FY22 versus the 6% yield for FY21.”

However, Beckett does not suspect there will be a completely clean break from the new consumer business. “The rationale for an ongoing investment in the consumer business will need to be explained by the executives. Investors won’t appreciate the overhang,” he said.

While the announcement appears to have gained some favour on the markets, much remains to be seen before the fate of the GSK share price is clear.

Liontrust ESG trust set for launch next week

Liam Roche
-
0
Liontrust ESG trust set for launch next week

10% of the management fees will go towards increasing ESG investment opportunities

Liontrust, the fund manager, is set to launch its investment trust next week, targeted at companies in the area of ESG (Environmental, Social, and Governance).

The “Liontrust ESG Trust” will have a portfolio of around 25-30 companies from all over the world.

The ESG investment trust is a more high octane version of Liontrust’s existing global fund, and will invest in ways which make it riskier, but with the potential for greater returns in the long-run, the company said.

The portfolio will be managed by Simon Clements, Chris Foster and Peter Michaels, who are all members of Liontrust’s sustainable investment team.

“The trust will make use of gearing straight from the off, and borrowing is expected to be around 10%, which should help to turbo charge long term returns in a rising market, but also accentuate drawdowns along the way. The investment trust will also invest in some smaller companies opportunities the fund can’t access, which again opens the door for a performance kicker, but at the cost of added risk,” Liontrust said in a statement.

The trust is also donating 10% of the investment management fee to projects that explore the potential for investment instruments relating to four Sustainable Development Goals that are “hard to invest in”.

Laith Khalaf, financial analyst at AJ Bell, commented on the timing of the launch, as well as some other advantages:

“A couple of high profile investment trust launches failed to get off the ground last year, but Liontrust has a few aces up its sleeve. The vaccine roll-out has delivered a significant boost to investor confidence, and Liontrust is launching this trust in the ESG space, where we know there is a lot of demand right now. Liontrust already has a well-established ESG range and the new investment trust will be run by the same team who manage the longstanding Sustainable Futures franchise, along similar lines to their existing Global Growth fund,” Khalaf said.

“The Liontrust sustainable investment team is one of the oldest in the business, having started life in 2001 at Aviva. Experience counts for nothing if it doesn’t deliver performance though, and the Sustainable Future Global Growth fund has shot the lights out on that front, ranking 15th out of 194 funds in the Global sector over ten years, with a total return of 310%, compared to 224% from the MSCI World Index*.”

Aegon closes property funds on liquidity issues

Liam Roche
-
0
Aegon closes property funds on liquidity issues

The Aegon Property Income Fund will close will close permanently as the asset management company has not been able to raise sufficient liquidity to meet redemption requests.

The £381m fund was suspended in March, along with other major UK property funds, as the pandemic brought about issues in ascertaining the value of underlying holdings.

Aegon said that it is closing its property investment funds to “ensure all investors are treated fairly”.

Initially, the asset manager was hopeful of reopening in Q2 of 2021, however liquidity issues and other factors meant that this didn’t happen.

“Accordingly, in order to ensure all investors are treated fairly, Aegon AM has decided to take steps to close the funds and return the proceeds to investors as quickly as possible, in a fair and orderly manner,” the company said in a statement.

The Aegon Property Income fund had amassed a cash level of 31.6% earlier in June.

Oli Creasey, property research analyst at Quilter Cheviot said the decision by Aegon to close its property fund did not come as a surprise.

“The fund was considered to be at risk earlier this year, a view that hardened following the news in May that a similar fund at Aviva was taking this same course of action,” said Creasey.

“The fund has been struggling for some time with one year returns particularly disappointing, especially when considering that a considerable percentage of assets were held as cash throughout this period. The broader UK property market returned c.6% over the same period, while the average property fund returned -1.6%, so significant underperformance will also have contributed to this decision.”

“The fund is not overly exposed to retail or leisure – arguably the biggest problem sectors in UK property at present – however, it is heavily underweight the high-flying industrial sector, and has significant exposure to regional (ex. London) office property, which has also struggled during the pandemic. With a high vacancy rate, the fund has clearly felt the full effects of the pandemic and have struggled to turn this around. Its vacancy rate has rocketed to 23% despite being at just 1.2% two years ago.”

Berkeley Group, Bitcoin and Rare Earths with Alan Green

UK Investor Magazine
-
2
Berkeley Group, Bitcoin and Rare Earths with Alan Green

Alan Green joins the Podcast for our weekly instalment of markets and UK equities.

This Podcast starts by looking at Bitcoin and the factors driving the recent selloff. China has implemented restriction on Bitcoin that sent the price spiralling and we look at both sides of the argument around whether now is a time to buy.

We explore Berkeley Group Holdings (LON:BKG) after the company updates the market on a bumper 2020 where the South East focused house builder managed to grow their top line despite the pandemic.

However, shares in the London-listed company fell in the immediate aftermath and we question whether investors were simply expecting too much from the company, or were nerves around a slowdown in the wider housing market driving sentiment.

Rightmove said they saw house prices rise 0.8% in June, down from 1.8% in May.

We also discuss Mosman Oil & Gas (LON:MSMN) and Altona Energy (LON:ANR).

FTSE 100 in consolidation mode on Wednesday

Liam Roche
-
0
FTSE 100 in consolidation mode on Wednesday

The FTSE 100 gained 8.84 points during the morning session today, or 0.12%. “The markets seem to be in consolidation mode on Wednesday after their see-saw start to the week,” says AJ Bell investment director Russ Mould.

US and Asian stocks built on their previous day’s gains overnight and the FTSE 100 was broadly unchanged at the bell this morning.

“While recent market sentiment has been dictated by the US Federal Reserve, their counterparts in the Bank of England will take centre stage later today when they deliver their monthly address,” Mould said.

The UK central bank is facing pressure to show it can keep inflation under control after it failed to accurately forecast inflation levels this year.

“Investors might expect some guidance on the future trajectory of UK interest rates although consumer prices are merely bubbling on this side of the Atlantic when compared with the boiling point they have already reached in the US.”

A lot will come down to how transitory the current elevated levels of inflation prove to be.

FTSE 100 Top Movers

Shell (2.21%), Anglo American (1.71%) and BP (1.7%) are heading up the FTSE 100 a couple of hours into the morning session on Wednesday.

At the other end, Fresnillo (-2.09%), Phoenix Group Holdings (-1.95%) and GlaxoSmithKline (-1.41%), are trailing the pack.

1...952953954...1,824Page 953 of 1,824