Market Prognosis

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

November 9, 2022

Good news, death gets cheaper

Macro & Overnight

Global equity indices progressed further as the US mid-term election results rolled in. The final picture may be unclear for several days. The prospect of ‘gridlock’ with split control of the two houses appears to have risen over the past 24 hours.

The primary winner overnight is Republican Florida Governor De Santis making a Trump party coronation less likely.

US Treasuries rallied, with yields reversing yesterday’s move higher, and the US dollar extended its recent decline, with DXY now below 110.

Crypto concerns trimmed equity gains as the two largest crypto exchanges collided.

While still unclear, it would appear that rival Binance will acquire the FTX platform for an undisclosed (presumably distressed) sum.

In what looks like crypto’s Lehman moment, this disappearance of an exchange recently valued at $32bn, with a blue chip shareholder base and a champion of industry regulation, is significant.

There have been damaging direct losses, there are likely to be stranded customer assets, and there is a risk of contagion into other alternative finance sectors and more traditional financial markets. FTX is bigger than recent casualties, such as Celcius and Terra/Luna.

All crypto asset prices are lower over the last 24 hours. Some marginal tokens will not survive this event. Schumpeter’s creative destruction in action.

 

UK Company News

ITV told investors that it is mindful of the macroeconomic and geopolitical uncertainty, but there is strong operational momentum across its Studios and Media & Entertainment divisions. Financial and operating performance for the nine months to 30 September is as expected.

M&S had solid results and is guiding in line for the FY. There haven’t been many times in the last decade that this has been the case.

Wetherspoons Like-for-like sales in the first 14 weeks of the financial year were 9.6% higher than last year. Costs, especially concerning labour, food and repairs, were substantially higher. The company anticipates a positive cash flow in the current year. However, Exec Chairman Tim Martin remains cautiously optimistic about prospects and unusually quiet on broader national issues that tend to feature in such announcements.

Luxury timepiece vendor Watches of Switzerland upgraded guidance to reflect movements in foreign exchange. However, on a constant currency basis, revenue and adjusted EBIT guidance are unchanged.

Undertaker Dignity said they saw early promising signs of increases in market share growth. Still, profit continued to be impacted by a combination of factors, including fluctuations in the death rate, changes in pricing strategy and the introduction of their direct cremation service. Deaths for the year are three per cent below the prior period, and average revenue for funerals has decreased from GBP2,505 (Q3 2021) to GBP2,095 (Q3 2022). Dignity will continue to refrain from giving guidance. At least death is cheaper year on year.

Low-cost fitness chain Gym Group reported membership has increased, reaching 838,000 on 31 October 2022, an increase of 16.7% from the end of last year. It is on track to achieve its target of 28 new openings in 2022 and 25-30 new openings in 2023. They maintained tight cost control for the current year but see energy costs rising in the future.

Accesso, the technology solutions provider for attractions and venues, announced a five-year extension to its partnership with Cedar Fair Entertainment Company. Cedar operates 18 parks and entertainment venues and welcomes an average of 28 million guests annually, delivering over $1.5bn in average annual revenue. The accesso Passport ticketing solution enables Cedar Fair to “deliver a mobile-centric shopping experience for these guests, available on any device, with significant up-sell and cross-sell opportunities embedded across the purchasing journey”. Accesso is developing as a critical post-COVID opening-up beneficiary in the technology sector.

Tracsis, the public transport IT vendor, reported that Q1 trading has been in line with the Board’s expectations. The Group remains well-positioned to deliver further growth in the coming financial year and beyond.
Ashtead Tech, the offshore equipment rental business, saw a successful placing of VC shares into institutional hands.

Sofa supplier DFS has a new CFO.

Cables supplier Volex reported revenue and profits up and an inline outlook.

Purplebricks announced that it had received a shareholder requisition to remove Paul Pindar from the Board. Trouble at the disruptive estate agent continues.

Prognosticator

 

 

 

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