Dilemma of spiking commodity prices

Macro & Overnight

Just as financial markets have been hanging out the bunting and celebrating the end of inflation, underlying commodity markets are starting to spike.

The dilemma remains, are we headed into a deflationary recession or a double dose of inflation?

Either way oil and commodity markets are rising strongly. Brent crude is up 15% over the last month, grain markets have spiked over recent days, with wheat up 16% this week.

UK Company News

Alpha Group updated that revenue increased by 20% to £55m, FX Risk Management revenue increased by circa 21% to £39m, and Alternative Banking revenue increased by 32%, including the income from interest on client balances of £33m in H1. The average Alternative Banking client balances in Q2 2023 of £1.9bn and blended average interest rates of 3.8% helped net cash increase 26% in six months to over £142m. June was a record month for the Group, and its pipeline of activity for H2 continues to grow. It is on track to deliver on 2023 expectations. (Listen here for more background). 

Altitude Group reported revenues increased by £6.9 million to £18.8 million, up 57.2%, operating profit growing by 83.4% to £2.0 million with cash increased by £0.3 million to £1.2 million despite cash outflow from investing activities of £1.1 million. The US delivered adjusted operating profit growth of 49%, reaching $4.1m. It is confident the Group will deliver substantial growth for FY24 and win further material contracts for future years.

Diaceutics updated 32% revenue growth in the first six months, reaffirming its full-year outlook. Its order book growth of 43% in H1 2023 provided good forward visibility DXRX platform. DXRX adoption by large pharma customers is driving momentum, with 21 of the top 30 global pharma companies now Diaceutics’ customers. Cash of £17.9m means it believes it is fully funded to execute significant growth plans. (Listen here for more background). 

Games Workshop reported its FY finished having delivered eight consecutive years of Group sales and profit growth. It reported the highest level of sales and the most profit generated since flotation 29 years ago. It will continue to focus on product quality – in June 2023, it launched the Warhammer 40,000 range of miniatures. It waits to see if its hobbyist customers like them as much as we do.

JTC updated that its growth accelerated from the 12% delivered at FY 2022 and is now significantly above the Company’s medium-term guidance range of 8% to 10%. With both Divisions performing well, it expects to deliver full-year 2023 results at least in line with market expectations.

Microlise reported solid trading during the first half of FY23, in line with management expectations. Increased demand from OEM customers, contributing to ARR growth of 11% and deliveries to direct customers resulting in an order backlog increase of 95%, which is expected to be delivered during H2 as new vehicle lead times continue to improve. Cash at 30 June 2023 was £14.1m (31 December 2022: £16.7m), after a spend of £2.86m on acquisitions. It expects supply chain and microchip shortages to ease during the period. As new vehicle lead times improve, the Company is confident of meeting market expectations for revenue, profit and cash. (Listen here for more background).  

WANDisco AIM suspension lifted post equity raise 

Wickes updated on an improved second quarter driving positive first-half LFL performance with full-year expectations maintained. Its revised capital allocation policy supports a maintained dividend and £25m share buyback programme comfortably with the market consensus for FY2023. 

Wickes was always a good business, but it’s spin-off from Travis Perkins was not ideally timed and came with a management team light in PLC experience. Today’s confirmation of continued solid performance combined with a £25m share buyback represents confirmation that its management has learned well about life as a listed company.

Prognosticator