March 16, 2023

Banking woes move to Europe

Macro & Overnight

Banking woes head to Europe as Credit Suisse sends up a distress flare.

Oil prices head lower again.

ECB rate decision today.

UK budget attempts to forge a path between financial responsibility and economic growth. It gets a mixed reaction.

 

UK Company News

Litigation financier Burford Capital Meaningful upswing in portfolio activity as courts resume normal operations post-pandemic. More than 30 trials and final merits hearings are scheduled for 2023, and it already sees positive outcomes. Burford’s liquidity is benefiting from realisations, collections and external capital raising. Additionally and worryingly, Burford added, it has been engaged with the SEC regarding the fair value of legal finance assets, including the acceptability of its historical valuation methodology under US GAAP. As a result, there will be “modifications” to Burford’s fair value approach. Litigation assets are opaque and hard to value. Burford has struggled to shake off its reputation in financial reporting since a short seller attacked it in 2017. The move to an NYSE listing was part of a strategy to improve its reputation. Burford remains confident that the outcome of these discussions will benefit the Group and its investors. However, this is not a good look. Listen to Founder and CEO Chris Bogart talk about Burford in more detail. 

The mine drilling and mine services contractor Capital Ltd has reported revenue of $290.3 million, up 28.0% and a net profit of $42.5 million, up 16.2%. Fleet utilisation decreased to 73% in Q4 2022, compared to 79% in Q4 2021, due to repositioning the contract portfolio, reducing exposure to small-scale contracts, and focusing on large-scale mine sites and Tier-1 projects with more growth potential.   Group revenue guidance for 2023 is $320 to $340m (with MSLABS expected to nearly double revenue in 2023). 

Sofa retailer DFS said that H1 rev was down 2.2%, reflecting a weak market environment. Profitability has been hit hard, particularly in Q1. It reports that cost headwinds are abating, and profit margins should improve in H2. Its profit guidance is in the range of £30-£35m, in line with market consensus, but towards the lower end of our previous guidance.

Gym Group reported membership at 821,000, an increase of 14.3%. However, it has seen a bumpy start to 2023 vs its expectations and now anticipates revenue increases from yield improvements and new site openings to be offset by cost increases. It is taking a more measured approach to new site openings in 2023.

Restore hadFY results. The data storage and information management company saw net box growth of 1.6%. It started 2023 with good momentum following contract wins, cost reduction actions, and pricing changes. Its net box numbers will continue to grow within the guided range of 1% to 2% for FY23. It reports that trading since the start of the year has aligned with the Board’s expectations.

Prognosticator 

NB Prices are as at the previous day’s close.

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