Market Prognosis

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

December 6, 2022

Marston cheers on England

Macro & Overnight

US stocks fell after data showed the US services sector was still growing, despite the Federal Reserve’s best efforts. Sometimes good economic news is bad news for stocks.

The DXY and US bond yields rose from recent lows, threatening a retightening of conditions. A soft landing under challenging conditions involves reactive moves on the controls. The US still has more scope to negotiate a soft landing than Europe.

Asian stocks initially rose with growing evidence that China is starting to open up. However, momentum faded with the growing fears of rising US rates.

Energy markets were volatile but mainly lower. A lot is going on in energy markets.

US natural gas prices tumbled more than 10 per cent as warm weather and delayed the restart of the Freeport LNG terminal in Texas denied access to the lucrative European market. The latest decline leaves Henry Hub, the US marker, down almost 40 per cent from the high near $10 this year during exceptional European demand.

The crude oil market has a lot of contradictory data to absorb. The EU and wider G7 attempt to prohibit flows of Russian oil above $60, and the insurance ban appear to have caused tanker build-ups in the Turkish Bosphorous. But traders remain sceptical of these policies’ effectiveness, pointing out that Russia already has a large fleet of dark tankers shipping oil below the price cap.

In the UK, we have headlines today of plummeting London office values.

UK Company News

Ashtead Technology, the international subsea equipment rental and solutions specialist, announced the acquisition of Hiretech Limited for £20m. Hiretech is a management-owned, Aberdeenshire-based equipment rental, service and maintenance company serving the international offshore renewables, decommissioning, and conventional energy markets. It had revenues of £6.5m, EBITDA of £4.1m and EBITA of £3.4m for the year to October 2022. Ashtead expects the transaction to result in double-digit earnings accretion in FY2023 and generate returns significantly above the Group’s cost of capital in the first full year of ownership. This deal is the seventh acquisition in the last five years, and a continuation of the growth strategy set out during Ashtead’ss IPO in November 2021.

Come on, England! Marston’s, operator of 1,468 pubs, reported sales in line with 2019 and improved operating cash flow, helping to reduce debt by £16 million to a still hefty £1.2bn. With a reiteration of the “Back to a Billion” sales and net debt targets by 2026, the England World Cup games (so far) saw like-for-like drink sales by +50% vs last year in Marston’s mainly suburban venues. 

Oxford Metrics, the smart sensing software company, reported on strategic progress with the disposal of Yotta for £52.0m during the year. Its M&A pipeline remains focused on acquisitions in known entertainment, Life Sciences, engineering and sports markets and on companies that possess hard-to-replicate, deep Intellectual Property in integrated Smart Sensing and attractive financial metrics. Progressive note here. 

Saietta, which designs, engineers and manufactures complete e-drive systems for electric vehicles, reported on H1 results. This developmental company has a lot on its plate and has some significant strategic opportunities but, so far, very little revenue. Milestone agreements with key partners and a strengthened balance sheet remain key. Work with ConMet is progressing at speed, on plan and budget, with complete concept designs. However, the accounting treatment of ConMet receipts, from revenue to assets under a joint arrangement, will represent a reclassification from the income statement to the balance sheet of approximately £3m for the year.

Gooch & Housego, the photonic components and systems supplier, says it targets revenue and adjusted PBT growth at a lower level than previously assumed. The new CEO has begun a review of the Group’s strategy. Outcomes are due with the half-year results.

Travel location caterer SSP has seen continued trading improvement driven by a passenger revenue recovery. Post-period end, sales have averaged 104% of 2019 levels in the first eight weeks. North America division is performing particularly strongly. Guidance for revenue for FY23 and FY24 is in line with current market expectations.

 

Prognosticator

 

 

 

On this day ...

… in 1877, Thomas Edison recorded himself reciting “Mary had a little lamb” on his new invention, the phonograph. The results were barely audible. But it was a start. Sadly though, Edison, as is often the case with mercurial geniuses, swiftly moved on to other things, including the incandescent light bulb. (Remind you of anyone today)? The idea of recording music was not high on Edison’s list of priorities; indeed, he appears to have been tone-deaf, if not hard of hearing. He saw his invention mainly as a telephone repeater.

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