Insolvency market growing

Macro & Overnight

The S&P closed down 2% last night. News Corp and Disney announced disappointing numbers, and cryptocurrencies fell further after Binance pulled their plans to acquire FTX.

The US mid-term elections seem to have thwarted the Trump Republican Party coronation for 2024 as Ron De Santis strengthened his position. It remains to be seen to what extent the results will impact Biden’s legislative ambitions.

Oil prices fell for the third consecutive day after US crude inventories increased and China struggled to contain new cases of Covid.

China reported that Covid cases continue to rise, hitting the highest levels in 5 months.

On his recent visit, Olaf Shcholtz reportedly proposed selling China the BioNTech vaccine. Maybe Xi will call him back.

Attention today turns to US inflation data with expectations of a slowdown in the inflation rate for both the monthly and yearly core numbers.

Pivot watchers will be looking for the Fed to use any positive news on inflation to reduce their planned interest rate increases which would be considered a positive for economic and oil demand growth.

UK Company News

Centrica issued an unexpected trading update that upgraded guidance to the top end of the range. Centrica’s wholesale activities drove this solid performance, offset by cost pressures in the retail division.

Astra Zeneca Q3 results raised earnings guidance.

Consumer staples spinout Haleon issued a Q3 upgrade to FY guidance despite adverse currency moves.

Auto Trader reported decent H1 results despite challenges. The company cited changing economic circumstances, resulting in a lower audience, continued low stock volumes and weak used car transactions. Management highlight the prospects for recovery in the used car market as new car registrations are now at their lowest level in 30 years.

Medical supplier Convatec expects cost inflation of 8-9% for the year but continues to expect to deliver an operating profit margin of at least 18%. There is a CMD to be held on 17 November 2022.

Dominos Pizza Q3 update said it continued with market share gains YTD and has had a solid start for Q4. It reported an initial incremental benefit of being on the Just Eat platform. DPG’s share of the UK takeaway market increased from 6.4% in Q3 21 to 7.2% in Q3 22. Their earnings guidance was unchanged.

Building materials supplier Grafton Group reported inline results but highlighted increased risks in 2023.

Defence services group QinetiQ H1 results reported that the threat environment is becoming increasingly complex, and Western forces must rethink their approach to defence and security. The company stressed the importance of information advantage, emerging technologies, cyber capabilities and autonomous platforms, which has significantly increased. Increasing revenue guidance, QQ said they are on track to deliver profit in line with expectations for FY23.

Manolete, the UK’s leading listed insolvency litigation financing company, reported that UK insolvencies had exceeded the pre-pandemic levels for several months. Case completions were 48% higher than the comparable period and aligned with the Board’s expectations. The company expects its market to grow over the coming months as the “economy realigns across many industry segments”. They say that many sectors will see more bankruptcies and corporate failures. However, the speed at which the company profited from this trend has failed to meet investor expectations.

Network testing vendor Spirent’s Q3 update reported a continued positive performance. It expects improvement to the sourcing environment next year but has already experienced a stabilisation of both lead times and cost increases. The company is confident in FY expectations for the full year.

Component supplier TT Electronics reported that its supply chain constraints persist alongside continued inflation pressure from wages, material costs and energy. It considers that inflation dynamics will mean some lag in recovery. Meanwhile, it sees improved cash generation and a year-end leverage position within its targeted 1-2x net debt to adjusted EBITDA range. The company expects to report profits in line.

Travel convenience retailer WH Smith FY reported decent results with multiple worldwide growth opportunities. It expects a year of significant growth.

Prognosticator