Emmerson presents at the UK Investor Magazine Virtual Conference April

UK Investor Magazine
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Emmerson presents at the UK Investor Magazine Virtual Conference April

Graham Clarke, CEO of Emmerson PLC, joined the UK Investor Magazine Virtual Conference to discuss recent progress at the Potash mining company.

Emmerson is specialist Potash miner focussed on the development of the low cost, high margin, Khemisset Potash Project in Northern Morocco.

Clarke outlined the latest updates in the companies negotiations and answered questions around possibilities for off take agreements and the reasoning behind a move to the AIM.

You can download the presentation slides here.

UK inflation up to 0.7% in March

Liam Roche
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UK inflation up to 0.7% in March

Bank of England is estimating that inflation will reach 1.9% by the end of the year

The UK’s Consumer Price Index (CPI), a measure of inflation, increased by 0.7% during March, up from 0.4% the month before, according to ONS figures released on Wednesday.

CPI was raised by an increase in fuel costs and clothing even though the price of food went down.

The ONS also confirmed that the prices set by manufacturers jumped by 1.9% for the year up to March, the highest in just under two years.

The prices they paid for inputs rose sharply by 5.9%, the most since September 2018.

The Bank of England is estimating that inflation will reach 1.9% by the end of the year while experts are saying it could exceed that figure before then.

Yael Selfin, chief economist at KPMG, said: “The increase in Ofgem’s energy price cap in April, alongside rising oil prices and the reversal of the VAT rate for hospitality and tourism, will push inflation above the two per cent target later this year.”

While others have said the spike in inflation is nothing to worry about, including Laith Khalaf, financial analyst at AJ Bell:

“The spike in inflation is nothing to worry about – yet. We always knew inflation was going to rise once we started lapping the beginning of the pandemic, in particular the steep falls in energy prices witnessed in the spring of last year,” Khalaf said.

“Petrol prices were 4.3p higher in March than a year ago, when they stood at 119.4p. In May 2020, they dropped to 106.2p, so this upward pressure on inflation will continue to grow in the coming months, even if fuel prices are relatively stable now.”

Khalaf added that there are a number of factors to monitor that could influence spiralling inflation.

“The big question is whether the economic recovery, combined with fiscal and monetary stimulus, will start to foster a more sustained, inflationary trend that has the potential to get out of hand,” Khalaf said.

“This risk isn’t likely to come home to roost anytime soon, with unemployment expected to rise later this year, thereby acting as a drag on rising wages. But beyond that, the worry is that the powder keg of cheap money could ignite an inflationary spiral.”

UK set to go further on climate targets

Liam Roche
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UK set to go further on climate targets

UK government to make pledge to slash the its carbon emissions by 78% by 2035

The UK is set to commit to deeper cuts in its carbon emissions as it prepares to host the UN’s COP26 summit later in 2021, the Financial Times reported on Tuesday.

Over the next few days Boris Johnson will make a pledge to slash the UK’s carbon emissions by 78% by the year 2035, to a level last seen in 1990.

The new goal will be revealed ahead of a major US climate summit taking place on Thursday, where Joe Biden will put forward his own target for reducing America’s carbon emissions.

The UK’s latest target raises the bar from its previous goal of a 68% emissions reduction by 2030, already one of the most ambitious among the world’s major economies.

Achieving the ambitious target will come down to a number of factors. Firstly, the UK will need to implement an electricity system that operates without generating carbon emissions. Second, there will need to bee a reduction in meat and dairy consumption. Third, low-carbon heating systems will need to be introduced in homes, and finally, more woodland will need to be planted.

The Financial Times also reported that emissions from international aviation and shipping were likely to be featured in the targets.

The global movement received a boost when the US rejoined the Paris Climate accord in what John Kerry our last, “best hope” to get the world on track to limit global warming to 1.5C, as the Presidential Envoy for Climate underscored the security challenges posed by climate change.

The EU and China have pledged to reduce their emissions by 55% and 65% respectively by 2030, while India and Japan have announced goals of 33-35% and 26% by the same date.

The pandemic has so far been a barrier to efforts to organise a physical meeting of COP26, although organisers remain determined that it will go ahead.

“We are working very hard to ensure that we have an in-person physical COP, taking into account of course any Covid-related contingencies,” summit president Alok Sharma told parliament last week.

“I don’t sense any desire among parties for a further postponement,” he added.

French Connection earnings preview

Jon Levinson
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French Connection earnings preview

Results Preview 
Finals are due Next week…..FCUK
French Connection (LSE: FCCN)
19.5p (19-19.75p)Market Cap: £19m
Next Results Finals 28th April 
FCUK is known for its woman’s, men’s and kids' clothes but over recent years the brand has been stretched to cover home furnishings, from glass to furniture to rugs. The Finals to January 2021 will be  reported on Wednesday 28th April. At the Interims the chairman stated that, ‘this has undoubtedly been the most difficult trading period that the Group has ever faced’…..but then it got worse with the second ...

Bank of England launches task force on digital currency

Liam Roche
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Bank of England launches task force on digital currency

Rishi Sunak referred to the currency as ‘Britcoin’

UK households could be using digital pounds to pay for goods sooner rather than later as the Treasury and the Bank of England (BoE) revealed plans to set up a task force to look into the idea.

A central bank digital currency (CBDC), which would sit alongside cash and bank deposits, could offer an alternative method of receiving and making payments.

While CBDC could be underpinned by blockchain technology, according to The Times, it would also be pegged to the pound, and therefore much less volatile than cryptos such as bitcoin.

No decision has been made to introduce the currency, however, authorities have begun looking into the advantages.

Some of which included a more resilient payments system, faster payments and the provision of a government backed alternative to a future currency developed by the private sector.

The task force will be jointly chaired by Sir Jon Cunliffe, deputy governor at the BoE, and Katharine Braddick, the Treasury mandarin responsible for financial services, while the BoE will also establish a CBDC division.

The BoE confirmed that if a central bank digital currency were introduced, it would be denominated in pounds sterling, like banknotes, “so £10 of CBDC would always be worth the same as a £10 note . . . Any CBDC would be introduced alongside — rather than replacing — cash and bank deposits.”

In a report released last month, the BoE suggested that the new medium would provide stability as an alternative payment main plumbing for card payments was hit by an outage, The Times reported.

Jason Cozens, founder of Glint, which lets users make and receive electronic payments backed by physical gold, said: “This is the clearest indication yet that the Bank of England is looking to control or, better yet, crush the rise of alternative currencies.”

He warned that CBDCs were still tied to the performance of national currencies and “subject to the same external factors that erode our purchasing power and the value of our cash and savings”.


FTSE 100 surrenders 7,000 level after US tech sell-off

Liam Roche
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FTSE 100 surrenders 7,000 level after US tech sell-off

The FTSE 100 is down by over 1% at Tuesday lunchtime, falling well below 7,000 after mixed trading in Asia and a fall in the US as tech stocks slumped.

Russ Mould, investment director at AJ Bell, said the move spoke to uncertain sentiment around markets from investors.

“Investors seem to be struggling to make up their minds on where we are with the Covid-19 pandemic, unsurprisingly as this is a global picture with plenty of moving parts,” Mould said.

“The markets are bouncing from reopening optimism to concerns over mounting infections in parts of the world as the rollout of vaccines proves patchy.”

FTSE 100 Top Movers

Avast (4.25%), Weir Group (0.99%) and Fresnillo (1.03%) are the top movers on the FTSE 100 at midday.

At the bottom end, Imperial Brands (-7.05%), British American Tobacco (-6.89%) and IAG (-4.41%) are the top fallers on the UK index.

Primark

Primark confirmed on Tuesday that its operating profit fell by 90% to £43m in H2 as the budget fashion brand raised its estimate for the volume of sales that will be lost due to trading restrictions in the second half of the current year.

Associated British Foods (LON:ABF), Primark’s parent company, said in its trading statement that while many stores in the UK have set trading records since returning to business on April 12, trading across the continent has been mixed.

UK Unemployment

Britain’s unemployment rate dropped for the second consecutive month to 4.9% from December to February, a period in which most of the company remained locked down. This is according to figures revealed by the ONS on Tuesday. According to poll of economists by Reuters, the jobless rate was supposed to go up to 5.1% from 5% in the three months leading up to January.

“The drop in UK unemployment below 5% in the three months to February suggests the job retention scheme is doing its job, though beneath the surface more up to date indicators suggest a less happy picture with 56,000 fewer people on company payroll in March,” Mould said.

Improving performance and bumper dividends

Andrew Hore
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Improving performance and bumper dividends

Strong cash inflows have improved the cash position of this company and it has a portfolio of valuable land assets that should add to the value of the company over the medium-term. Profit forecasts have been significantly upgraded on the back of the latest trading statement.
Bumper dividends are promised as cash is repatriated from an overseas joint venture, where performance is better than expected. This is on top of a growing underlying dividend. The share price has risen on the back of the trading statement, but it is still at a discount to NAV.
Past problems have been sorted out or are on ...

UK unemployment falls below 5%

Liam Roche
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UK unemployment falls below 5%

813,000 jobs lost since the beginning of the pandemic

Britain’s unemployment rate dropped for the second consecutive month to 4.9% from December to February, a period in which most of the company remained locked down.

This is according to figures revealed by the ONS on Tuesday.

According to poll of economists by Reuters, the jobless rate was supposed to go up to 5.1% from 5% in the three months leading up to January.

The ONS linked the fall to a large volume of men leaving the jobs market altogether. The so-called inactivity rate rose by 0.2 percentage points in the three months to February, echoing a rise during the first lockdown of last year.

The number of employees on company payrolls dropped by 56,000 during the same period, the first decline in four months, a further reminder of the precarious state of the UK labour market.

The total number of jobs lost since the beginning of the pandemic now stands at 813,000, over half of which were held by people aged below 25. The London hospitality industry was the most severely hit according to thee ONS.

Danni Hewson, AJ Bell financial analyst, commented on employment figures from the ONS:

“It might seem odd to be looking back when so much of the focus over the past couple of weeks has been on the future but it is important to understand the scale of the economic jolt the country has had,” Hewson said.

“Most of the data published by the ONS today is unsurprising but it does reinforce the huge challenges ahead. Whilst the unemployment rate fell a sliver for the three months to the end of February, early indicators suggest there was a further decrease in the number of employees on the payroll in March, down 56,000 from the previous month.”

“Once again the data confirms that it’s the under 25s bearing the brunt of lockdown restrictions – just over half of those falling off payrolls in the past year have been in this age bracket. But the playing field is levelling off; vacancies in sectors like hospitality were up in March as businesses geared up for lockdown release.”

Primark owner AB Foods reinstates dividend

Liam Roche
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Primark owner AB Foods reinstates dividend

Primark to forgo £700m of sales in H2

Primark confirmed on Tuesday that its operating profit fell by 90% to £43m in H2 as the budget fashion brand raised its estimate for the volume of sales that will be lost due to trading restrictions in the second half of the current year.

Associated British Foods (LON:ABF), Primark’s parent company, said in its trading statement that while many stores in the UK have set trading records since returning to business on April 12, trading across the continent has been mixed.

While many stores have reopened with restricted trading in place, a number have seen delays. Subsequently, Primark is expecting to miss out on £700m in H2, up from an earlier estimate of £480m.

Primark said its US operations had made a profit and that the reopening phase in Europe would be particularly cash generative as already paid-for stock is sold on.

The retailer plans to repay £121m from the UK government’s furlough scheme, set up to protect workers during the coronavirus pandemic, ABF said on Tuesday, while confirming that it will pay an interim dividend of 6.2p a share in July.

The outlook for AB Foods’ sugar, grocery and ingredients businesses in the second half was also muted after an “exceptional” first six months.

Chris Beckett, head of equity research at Quilter Cheviot, commented on Primark’s bounce following the reopening of the UK:

“Primark was clearly going to be a big beneficiary from the economic re-opening after a £3bn hit to sales experienced during the pandemic. But while we saw pictures of queues outside many stores last week, it is pleasing to have confirmation that Primark stores generated record sales in England and Wales, some 40% of their total global selling space, in the first week after reopening, showing strong pent-up demand from consumers for value-for-money clothing,” Beckett said.

“Over half the stores in England and Wales broke their own sales records, showing the strength of demand from consumers to spend their cash. Unlike in previous re-openings, Primark has seen more demand for fashion ranges rather than more essential items like nightwear, and per-person spending has improved.”

Avast raises its guidance as firm maintains ‘positive momentum’

Liam Roche
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Avast raises its guidance as firm maintains ‘positive momentum’

Avast revenue up 10.5% during Q1

Avast (LON:AVST), the cybersecurity company, raised its guidance for the year after it posted an increase in its profits during Q1.

The company, which listed in London in 2018, confirmed revenue of $237m during Q1, a rise of 10.5% from the year before.

Avast‘s adjusted earnings before tax, interest, deprecation and amortisation also jumped by 10.3% to $134m.

The company said in its trading update released on Monday its small business unit had maintained “positive momentum”, while its consumer direct division had continued to deliver growth.

In March Avast renewed its contract to promote Google’s Chrome browser with the distribution of its antivirus products for the next year.

Avast also refinanced a $480m and €300m senior secured term loan, which it said would extend its loan maturity to March 2028 and reduce interest costs.

Having sold its Family Safety mobile business, Avast is now expecting to release its revenue growth for the year towards the end of its 6%-8% guidance.

During pandemic Avast benefited from raised demand for cybersecurity services, and has previously announced a dividend for 2020 of 11.2 US cents per share.

The firm will pay its shareholders in June and will publish its half-year results in August.

“Avast has made a good start to the year with continued demand for the company’s security, privacy and performance solutions,” said chief executive Ondrej Vlcek.

“The business is trading in line with expectations as we successfully execute on our stated goals to drive customer engagement and monetisation. We look forward to the remainder of the year with confidence.”

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