London brokers feel some pain

Macro & Overnight

Oil prices sharply higher as OPEC+ reduces output. After spiking sharply, Brent crude settled at about 5% higher.

This move is a reminder that Saudi Arabia has switched sides and that Clancy Agreement that tied Saudi oil to the US $ is fading into history.

The West had become too relaxed about falling energy prices as the worst fears regarding energy supply failed to materialise last winter.

UK Company News

Ensilica mixed signal chip maker has secured a contract with an existing European-based customer for approximately $2.4m. This contract and others total $13.5m and underpin current market expectations. 

Burford, the litigation finance pioneer, has announced a major long-running case decision in litigation against the Argentinian government in the YPF-Petersen matter. While the scale of the award has not been quantified, estimates are in the mid-single $ billions. (Meet the CEO, ITCOM episode 7).   

Judges Scientific, the instrument manufacturer, has acquired Henniker Scientific specialising in deposition and plasma technology, for a total of £2.3m. 

Broker Numis announced its H1 revenue would be down c14%. It says that the outlook for M&A remains encouraging, with a scarcity of ECM transactions and lower equity revenues. It points out that its balance sheet remains strong.

Rival broker Peel Hunt reported its full-year revenue should align with market expectations, some 35% below last year. It points to its robust balance sheet and a gradual improvement in its deal pipeline. But it said that capital markets activity is at historic lows. Its equities revenue is down due to lower market volumes, while administrative expenses have increased.

Not surprisingly, institutional and corporate broking is in a slump. PH and Numis are tier 1 local London brokers and look after a sizeable portion of the UK’s listed smaller and midcap companies. Owning brokers or investment banks is similar to owning a football club, where the star players take the upside in the good times. However, these companies should be attractive recovery plays ahead of better times returning for UK capital markets (whenever that might be).     

Animal genetics company Genus has announced a new CEO.  

Saietta, the EV supplier, has received an order for 3,000 bespoke eDrive units from AYRO worth c £5m over the next two years. 

Spirent, the network testing supplier, has announced a £56m share buyback. 

Tracsis, the rail and transport data provider, announced H1 results. It has seen a positive start to Q3 with high activity levels across the Group. Expectations for the full year are unchanged. 

Troubled cloud data software supplier Wandisco has provided its first update since its share suspension. Experienced trouble-shooter Ken Lever has been appointed Executive Chairman and a new CFO. The financial reset is going to be very significant and painful to shareholders. However, the shares look like they can come out of suspension at some stage.    

Prognosticator