Market Prognosis

A concise summary of the major macro events of the past 24 hours, and selected UK company-specific news.

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June 12, 2023

Forced Departures

Macro & Overnight

Who said, I know beyond doubt that I am, in fact, innocent of any wrongdoing. Was it: (a) Donald Trump, (b) Boris Johnson or (c) Nicola Sturgeon? 

It was (c), but it could have been any of them. However, it is worthy of note that of the three, only Donald Trump can fight his next election from prison.  

It could also have been (d) Crispin Odey, of course. Crispin has departed his eponymous investment fund after last week’s allegations of impropriety. The question for stock markets is, will investors follow him to the exit, and will the funds become forced sellers of some of their prized illiquid positions? 

UK Company News

Alfa Financial Software revealed on Friday that it had received several bid approaches, with EQT, Dechra’s recent suitor, being the named party. 

The PE bid support for the UK stock market has recently faded, with approaches to THG and Wood Group not materialising. However, after EQT agreed to a lower price for Dechra, it has revealed a keen interest in owning Alfa Financial Software. With interest rate uncertainty and reports of tighter credit availability for leveraged deals, it is an encouraging sign for the UK small-cap market to see some continuing PE interest.  

Frasers has taken a strategic stake and formed a partnership with AO World. 

Capital Limited, the mining services and drilling contractor announced the award of a new mining services contract and an extension of its revolving credit facility. It is in Gabon for earthmoving and crushing services for an iron ore project worth $30m pa over five years. Its capital expenditure guidance for FY23 is now in the range of $65 – 75m (up from $50 – 60 million). It has increased its revolving credit facility from $25m to $50m to help finance this significant project. 

Concurrent Technologies has announced a £1.25m systems win for a custom set of embedded computers for a large UK national defence installation. 

This contract represents a watershed for Concurrent as it positions itself from being a component supplier to a systems supplier—a strategy articulated by CEO Miles Adcock in ITCOM episode 13

Learning Technologies’ AGM statement discussed a challenging macro environment where they continue to see moderate business momentum supported by a healthy sales pipeline.  Our strong balance sheet will enable the Group to make select accretive acquisitions in due course that fit our long-term strategy

Cola producer Thungela said that coal prices have receded from record highs in 2022 and have fallen sharply since the start of the year. Following a milder winter in Europe and softer gas prices, European coal and gas stocks continued to be elevated, resulting in the redirection of coal volumes to Asia. This added significant supply to Asian markets, showing weaker demand, especially from China. Russian coal also continued to flow into the region at discounts. However, LNG prices are now starting to find support, which could make coal more competitive as a fuel source towards the end of the year as the European winter approaches. Other short-term price support factors include the impact of coal supply cuts, including lower volumes of low-grade South African export coal and reduced export volumes from western Russia.

Prognosticator 

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