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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March 22, 2023

Haven’t they broken enough already?

Macro & Overnight

Higher-than-expected UK inflation, which increased last month to 10.4%, has put the cat among the rate-setting pigeons at the BoE for Thursday’s decision.

Later today, the Fed will announce its rate decision, having weighed up the price and financial stability dilemma. Whether they raise by 25bps or pause, they will get criticism. A tad more on the tightening dial to ensure the job is done correctly. But wait, haven’t they broken enough already?

 

UK Company News

Alpha Group, the corporate FX and alternative banking supplier, had FY results. Group revenue was up 27%, FX Risk Management revenue was up 22%, and Alternative Banking Solutions revenue was up 41%. Basic earnings per share, including interest income, was up 50% to 86.8p. The Group is cash generative and debt free with £144m net assets and £114m in cash. Employee headcount increased from 214 to 357. It also announced plans to list on the Main Market for 2024. Trading y/e has been positive and in line with Board expectations. It is confident in delivering revenue and profit growth while bringing forward investment and accelerating growth.

Alpha safeguards 100% of its clients’ cash in segregated safeguarding accounts with Tier 1 counterparties consisting of Barclays Bank, Citi Bank, Goldman Sachs and Lloyds Bank. Unlike a bank, Alpha does not use client cash to issue loans; therefore, 100% of client-held funds remain in cash at all times. Its blended average cash balance has been £1.6bn, and the blended average interest rate has been 2.8%, delivering over £40m of interest income to Alpha in 2022. 

Replicating much of what a bank can do for you without the risks inherent in being a bank is proving a powerful engine for growth. Click here to listen to CEO Morgan Tillbrook discuss Alpha and its strategy. 

Fevertree, the posh tonic producer, reported FY revenue growth of 11%. As highlighted in January, the business faces significant inflationary headwinds, most notably concerning glass bottle costs. Inflationary pressures impacted the Group’s gross margin, most notably in glass costs and trans-Atlantic freight costs. However, it is confident of delivering strong growth in the year ahead and repeats its revenue guidance range of £390m – £405m. This represents growth of 13%-18% year-on-year, with momentum continuing across its growing regions, especially the US, and a return to growth in its most established market in the UK. As a result, the Group expects to deliver EBITDA in line with previous guidance of between £36m – £42m.

Irish-based online travel agent targeting the youth travel segment Hostelworld reported FY revenue increase of 312%. Full-year net bookings totalled 4.8m, an increase of 228%, while Adjusted EBITDA profit of €1.3m compared to a loss of €17.3m. Its cash as of €19.0m is down from €25.3m last year. However, it serves a resilient and growing category with a loyal customer base with a strong desire to travel despite the uncertainties of the economic cycle. It is encouraged by the trends seen since the start of the year and believes the business is on track to deliver its targets for FY 2023.

Hostels are very different from the Youth Hostels of old. It is a dynamic and fragmented travel and leisure category to which Hostelworld provides a vital access point. 

XPS Pensions updated that it continues to perform strongly. The Board now expects FY revenues to be ahead of the current consensus and in the range of £163 million – £165 million, representing YoY growth of 17% – 19%. XPS has seen high levels of client activity, driven partly by continued regulatory changes and demand for advice in response to the increased volatility in financial markets following the “mini-budget” in September 2022. Additionally, it has seen significant growth in Risk Transfer services as funding positions have improved and clients have looked to de-risk.

Prognosticator 

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