A new Xi in 23

Macro & Overnight

UK CPI inflation fell to 10.5% in December of 2022 from 10.7% in November, matching market forecasts.

It is the second consecutive month of slowing inflation.

Core inflation measures remain firm, indicating that retail inflation is unlikely to plummet.

In Davos, China plays well in the tent and promotes the new Xi for 2023 mantra that markets are embracing.

Also, from Davos, Intel CEO is reported saying the chip shortage isn’t over.

Oil prices rose on continued hopes of Chinese recovery.

Global fund managers are less bearish, as surveyed by Bank of America. Results indicate that fears of recession have fallen to a six-month low.

Japan has held the line on low rates via its yield curve control policy after a BoJ meeting that kept the policy rate at 0.5%.

And finally, from Davos, a flight tracker of the 100s of private jets flying into the resort reported on many that had flown very short distances. One had only flown 21km. Skiing could have been quicker.

Company Highlight - Alpha Group

Alpha Group, the corporate FX and alternative banking provider, said that profit before tax would be ahead of current-year expectations. The increased interest rate environment has allowed the group to benefit from additional interest income predominantly generated from its client balances. It expects this to contribute circa £9m of interest income in the last four months and for this benefit to continue into 2023. These results have been achieved after increased investment in people, infrastructure, and technology, particularly within the Alternative Banking Solutions division, where client demand continues to exceed expectations. The FXRM division has produced strong results, with revenues increasing to approximately £69m (2021: £57m) with client numbers increasing to 1,050. The Alternative Banking Solutions division continues to grow from strength to strength, with live accounts invoiced increasing to 4,200 and revenues increasing to approximately £29m (2021: £20m). 

The decision to disclose interest income separately but not in the ongoing revenue is sensible. However, it transforms the cash-generating ability of this high-growth company if interest rates remain at these higher levels over coming periods.

Alpha is growing internationally and by product line and is investing ahead of growth.

Founder and CEO Morgan Tillbrook was featured on the In the Company of Mavericks podcast last year.

UK Company News

Currys, the electrical goods retailer, updated on UK performance that continues to strengthen, compensating for weak International (Nordic). Overall its current year guidance is unchanged.

Specialist distributor Diploma expects an outcome for its FY in line with expectations. Diploma continues to enjoy strong operating margins, and although it remains mindful of the uncertain economic outlook, it is confident that its business model is resilient.

The retail industry is becoming increasingly aware that data-driven, personalised promotions as an effective way to drive increased trade and retain customer loyalty. Eagle Eye, the SaaS technology company offering retail chains personalised, real-time marketing solutions, has continued its strong trading momentum. EE has a healthy new business pipeline and will report growing margins. It is confident in delivering another year of profitable growth aligned with its expectations.

Following on from Remsdens yesterday, H&T UK’s largest pawnbroker and a leading pre-owned jewellery and watch retailer reported strong demand for pawnbroking loans in Q4 of 2022. Its full-year results should be in line with current market forecasts.

Brick and block manufacturer Ibstock updated on lower Q4 sales volumes across new build, repair, and maintenance segments. However, cash generation is ahead of previous expectations. The company expect conditions in 2023 to be more challenging than in 2022 but sees opportunities ahead. 

Kistos, an independent gas producer pursuing a strategy to acquire assets with a role in energy transition, also updated. Following a restructuring, it looks to utilise this structure for more flexible financing and distributions. It went on to say that the scale and the manner of the tax changes in the Netherlands and the UK have made investment decisions more challenging for the Board. It is actively evaluating opportunities outside of the UK and Dutch jurisdictions. With gas prices set to increase over the coming months as Europe races to refill storage and LNG is displaced from Europe to Asia as China recovers, the outlook for Kistos looks promising. 

QinetiQ, the defence technology and services supplier, expects to report good third-quarter performance and is on track to deliver FY expectations. 

S4 Capital saw Q4 trading in line with expectations. Mr Sorrell will be in Davos this week, no doubt.

Accesso, the technology solutions provider for attractions and venues worldwide, has signed strategic agreements with 18 new partners within the theme parks & attractions, ski, hospitality, cultural and zoo markets across the US and the UK. No numbers were given, but expect an update later this month. 

WH Smith, the travel retailer, posted positive like-for-like sales and a formula that is winning share in international airports. The UK high street remained resilient. 

Prognosticator