Oil falls back while investors look ahead to Iran nuclear talks this week

Liam Roche
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Oil falls back while investors look ahead to Iran nuclear talks this week

Brent crude oil reached highest level since May 2019

Oil retreated having touched multi-year highs on Monday, as the eyes of investors turn to talks this week between Iran and other nations over a nuclear deal that could push supplies of crude oil.

Brent crude oil was down by 0.9% to just over $71.20 a barrel early this morning, having reached $72.27 hours before, its highest level since May 2019.

West Texas Intermediate crude for July reached $70 for the first time since October 2018, but turned around, and came back down to $69.10 a barrel, a fall of 0.8%.

It is possible that some investors sold their contracts to cash in on profits when WTI reached $70, Avtar Sandu, a senior commodities manager at Phillips Futures in Singapore, told Reuters.

“The primary concern is about Iranian barrels coming back into the market but I don’t think there will be a deal before the Iranian presidential election,” Sandu said.

Figures showing that China’s crude oil imports fell in May by 14.6% compared to the year before could also have impacted prices.

Prior to today’s moves, both Brent and WTI rose over the past two weeks as fuel demand picks up in America and Europe as coronavirus restrictions are being eased in time for the summer.

Analysts have said that demand for oil across the world is expected to surpass supply in H2 of 2021 as OPEC+ implements an easing of supply cuts.

Support for the price of oil also came as talks between Iran and other nations over a nuclear deal stalled.

A fifth round of talks is expected to commence on June 10, while it has been reported that the US could lift economic sanctions on oil exports from Iran.

In America there has been a slowdown in the rate of growth of oil and natural gas rigs for the first time in six weeks, while the growth of drilling has also slowed.

CMC Markets analyst Kelvin Wong suggested that “U.S. oil drillers are less enthusiastic in adding more U.S. oil production and hence reduces the risk of a supply glut in the global oil market in H2 2021.”

Reckitt Benckiser records £2.5bn loss following sale of baby formula business

Liam Roche
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Reckitt Benckiser records £2.5bn loss following sale of baby formula business

Reckitt Benckiser will retain an 8% stake in the business

Reckitt Benckiser (LON:RKT) will make a £2.5bn loss by selling its underperforming baby formula business in China to a private equity company called Primavera Capital Group.

The FTSE 100 consumer goods company took over the business four years ago as part of its acquisition of Mead Johnson. The deal for the baby milk group came to $16.6bn.

Reckitt will now sell the majority of the Chinese division to Primavera for $2.2bn. The deal will amount to $1.3bn once costs are taken into account.

Once all costs are factored in, including goodwill, Reckitt will lose £2.5bn with the sale. It will also retain an 8% stake in the business.

“Reckitt’s deal to sell its China baby formula business helps to draw a line under one of the biggest strategic mistakes in its history,” said AJ Bell investment director Russ Mould.

“Questions were asked right from the start as to why Reckitt spent so much money buying Mead Johnson, a baby milk group which generated approximately half of its sales in Asia at the time of the acquisition in 2017.”

“Competition has been tough in the China baby formula market and the acquisition turned out to be a major disappointment. Three years after the deal, Reckitt took a £5 billion goodwill charge linked to the purchase of Mead Johnson, effectively putting its hands up and saying it got it wrong.”

The Reckett board put some of the business’ struggles down to closures of the Hong Kong border during the pandemic.

The consumer goods company wrote down the value of the baby milk business by £5bn, a fall in its book value of nearly 33%, as executives conceded that future profit margins would not meet their hopes.

Reckitt Benckiser chief executive Laxman Narasimhan said: “Today’s announcement marks another step in our strategy to rejuvenate growth and create long term value. As part of this journey, we are actively, and decisively, managing our portfolio.” 

The FTSE 100 firm, based in Slough, employees 40,000 across the world in over 60 nations. During the pandemic, as demand soared, Reckitt saw its sales jump by 12% to £14bn.

Oakley Capital announces investment in Afterbuy and DreamRobot

Liam Roche
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Oakley Capital announces investment in Afterbuy and DreamRobot

The move solidifies Oakley Capital’s position as the market-leader provider in the DACH region

Oakley Capital Investments (OCI) announced on Monday that Oakley Capital Origin Fund acquired controlling stakes in Afterbuy and DreamRobot, two of the leading providers of e-commerce software.

OCI will make an indirect contribution via Origin Fund of £6m.

Afterbuy and DreamRobot provide a comprehensive suite of Software as a Service (Saas) solutions for online sellers distributing products via online market places, including Amazon and eBay.

Across both businesses, more than €50m of gross merchandise has been processed to date.

The two investments mark the beginning of a strategy aimed at solidifying Oakley Capital’s position as the market-leading provider for small and medium-sized online merchants in the DACH (Australia, Germany Switzerland) region.

Oakley will support the growth of the businesses through its operational experience and software buy-and-build expertise, drawing on its track-record of successful investments in WebPros and Ekon, it said in a statement today.

Peter Dubens, Managing Partner of Oakley Capital, commented: “This is another example of Oakley’s repeated partnering with talented and trusted business founders, helping us to uncover attractive opportunities that others may not be able to access. As merchants continue to increase their online presence across multiple channels, we see a significant opportunity to build the go-to platform in e-commerce software alongside a talented management team.”

Daliah Salzmann, CEO of Afterbuy, added: “In partnering with Oakley, we look forward to building Germany’s leading e-commerce software provider. A combination of this initial platform investment, a fragmented marketplace and Oakley’s expertise will result in ECOMMERCE ONE being the principal supplier of software solutions to small and medium sized online retailers.”

Just last week Oakley Capital announced that the Oakley Capital IV has agreed to invest in ICP Education Holding, a leading independent group of UK nurseries.

TIP: The AIM share preventing hospital infections

Andrew Hore
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TIP: The AIM share preventing hospital infections

Small pharma companies tend to have one product or technology that could make them a highly successful investment. In some cases, there is a well advanced second treatment using different life sciences technology.
This pharma company has a treatment to prevent serious infections that has already had highly positive phase 2b clinical study results. The next step will be the design of a phase 3 clinical study.
There is also a second, acquired technology that could move to a phase 3 clinical study next year. This is another antimicrobial drug to prevent serious infections.
The share price did ris...

New AIM admission: Artisanal Spirits

Andrew Hore
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New AIM admission: Artisanal Spirits

The Artisanal Spirits Company owns the Scotch Malt Whisky Society (SWMS), which has 28,300 members around the world. The placing price was at the bottom of the 112p a share to 121p a share price range.
Online sales continue to grow, offsetting the understandably weak performance from venues. International sales grew despite disruption from the UK leaving the EU. The second quarter should benefit from the removal of US tariffs – the additional cost was absorbed by the company.
Management believes that the company has the ability to more than double revenues to up to £40m in 2026. The craft spir...

Director dealings: Emmerson

Andrew Hore
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0
Director dealings: Emmerson

Potash mine developer Emmerson (LON: EML) non-executive director Edward McDermott has bought 775,000 shares at 5.12p each. That £39,680 investment takes his stake to 1.25 million shares.
Since February, when £5.5m was raised at 5.75p a share and the subsequent announcement of a move from the standard list to AIM the share price has declined. Management believes that AIM offers more flexibility when it comes to funding and other transactions.
The share purchase appears to be taking advantage of that share price decline and it appears to have helped the share price recover from 5.15p to 5.7p in ...

New Aquis admission: TECC Capital

Andrew Hore
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0
New Aquis admission: TECC Capital

TECC Capital is a new shell that is seeking to buy technology or cannabis businesses. There is a wide list of potential sub-sectors that will be considered. It is broadly a list of the current fashionable sub-sectors.
Management is not seeking a business that is losing significant amounts of money, they want it to be near to cash generation at least. One of the areas that is highlighted is e-commerce.
The directors have been involved in the AIM reversals of Bidstack and BrandShield Systems. One of the residual investments held by BrandShield is a 10.7% stake in WeShop, which has developed an e...

IAG share price: Gallego would ‘participate in’ future consolidation

Liam Roche
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IAG share price: Gallego would ‘participate in’ future consolidation

IAG Share Price

The IAG share price (LON:IAG) held pretty steady over the past three months, amid uncertainty over the UK’s travel restrictions. However, in the last two days it dropped by nearly 13p a share to 196.52p. The move came as news emerged that Portugal, one of Europe’s major holiday destinations, was being removed from the green list. Since the beginning of the year the IAG share price is up by 23.2%. While many were expecting more countries to turn green than to go the other way, now is an ideal time to reassess the IAG share price to see what the future may hold.

Consolidation

The British Airway owner revealed in May that its passenger capacity during the first quarter was at around 20% of the level in 2019, before the pandemic. This does not bode well for the company which already made a loss before tax of £1.6bn this year. IAG may need to seek alternate strategies to combat rising costs.

The IAG chief executive Luis Gallego believes the company should look to merge assets. According to Gallego, there may be only two or three airlines per continent in the coming years. Additionally, while passenger numbers are expected to eventually return to normal, business travel is unlikely to fully recover. A significant portion of IAG’s revenue comes from this sector.

In Gallego’s view this could lead to further consolidation, which the IAG would “participate in”. Gallego’s willingness to act in this way could serve to secure the IAG share price in the future.

Portugal off Green List

Shares in major travel companies plummeted yesterday as the UK government removed Portugal from its green list of safe destinations. The government’s decision to change Portugal’s status to amber means those traveling will have to do a ten-day home quarantine on their return.

The news caused shares in the entire airline industry to plummet, and created uncertainty over the future.

Chief executive of the Business Travel Association, Clive Wratten, told The Times that the government’s ruling effectively meant the UK had essentially closed its border. “It is a devastating day for the travel industry as a whole. Removing Portugal from the green list will destroy any confidence in international travel, whether for work or leisure.”

The possibility of travelling to Portugal throughout the summer gave hope to the IAG share price and travellers alike in an otherwise dreary summer season. The traffic light system was first put into place on May 17 when international leisure travel resumed. Now that Portugal is being removed from the green list, only 11 countries will remain. There is no clarity over when major holiday destinations will be added to the green list.

Give big data another chance

Jon Levinson
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Give big data another chance

Rosslyn Data Technologies, (LON: RDT) has reported a trading update for the year-ending April 2021. It shows despite Covid handicaps a  4% increase in revenue to £7.4m, although an  EBITDA loss  of £250k, compared to a small profit (£36k)  as spending on sales and marketing is increased. This cloud-based big-data analytics platform is still looking for the most profitable users and usages.  It provides analytical services by combining four key technologies: bulk data extraction; cleansing; enrichment; and visualisation, all through a single cloud platform enabling...

US nonfarm payroll below expectations despite adding 559,000 jobs in May

Liam Roche
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0
US nonfarm payroll below expectations despite adding 559,000 jobs in May

America labour market strengthens amid shortage of workers

Nonfarm payrolls in America jumped by 559,000 in May, the US Bureau of Labor Statistics revealed on Friday.

The reading fell short of the market’s expectation of 650,000.

The figures are well up from the 278,000 recorded in April, which was revised from 266,000.

The rate of unemployment in America fell from 6.1% to 5.8% over the same time period.

The figures suggest the labor market has strengthened despite fears that a shortage of workers were keeping the economy held back.

US nonfarm payrolls were announced as the US economy appears to be rebounding strongly as restrictions are eased. Additionally, concerns remain over the possibility of inflation.

Robert Alster, CIO at investment management firm Close Brothers Asset Management comments: “The Fed and market alike have been waiting for this nonfarm print with bated breath. April’s figures were a shock, coming in at a quarter of the expected increase despite stellar economic growth and otherwise-positive employment data. Now we are seemingly back on track, and signals are pointing towards a bright future for the US.”

“But there are still some key questions to be answered. There are vacancies in the US job market, and as people return to the workforce it’s unclear why those vacancies are not being filled. At best, it’s simply a matter of time. At worst, there’s a mismatch between the labour needed and the labour available.”

“As firms like McDonalds and Walmart increase wages to tempt workers back faster, it adds fuel to the US’ inflationary fire. While a rise in disposable income and consumer spending would be positive, if wage growth prompts a persistent increase in inflation then the Fed may be forced to step in with a monetary fire extinguisher, risking dampening the recovery before it’s really begun.”

Many businesses have been struggling to find employees as demand picks up with many offering higher wages in an effort to lure workers in.

Jobs figures in March came in below expectations, leading to concerns over labour shortages and the subsequent impact on the US economy’s recovery.

The May report from US Bureau of Labor Statistics comes as the Fed will again put its spotlight on its monetary policy, where it may consider easing some of stimulus measures since the beginning of the pandemic.

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