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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November 22, 2022

Oil market volatility

Macro & Overnight

Yesterday’s prognosis that things were much quieter on the macro front proved slightly premature as all oil prices suffered a volatile day.

Crude prices ended the day broadly unchanged after reports in early trading that OPEC+ was considering production increases at the next meeting in early December. Benchmark prices fell by over $5, recovering after Saudi Arabian denial.

The volatility did not spread to other energy markets. European gas prices firmed as temperatures fell. Storage tanks are well stocked, but demand is now rising rapidly.

Staying with energy, the fallout from the UK Autumn Statement continued yesterday. Shell stated that it would re-evaluate its long-term North Sea CAPEX plans following the hike in energy taxation last week. Any decision to reverse its $25bn spend on the UKCS over the next decade puts UK’s future energy security in doubt.

UK Company News

Next-day fridge delivery specialist AO World reported maintaining its wafer-thin margins, but H1 losses widened. AO continues to be impacted by the cost of living crisis and supply chain issues. However, having closed loss-making operations, the remaining UK business is now cash generative. The company expects to report FY profits at the top end of the forecast range. 

Defence contractor Babcock showed enhanced H1 operational efficiency, cash flow performance and financial resilience in a volatile macroeconomic and geopolitical environment. Over 90% of FY23 revenue was under contract as of 30 September. Net debt to EBITDA is within the target range of 1.0x to 2.0x. Management continues to expect to offset inflationary pressure through operating efficiencies.

Network testing provider Calnex Solutions reported confidence that the Group’s performance for FY23 will be in line with market expectations. The Group is growing customer relationships with hyper-scale network operators such as BT, China Mobile, NTT, Ericsson, Nokia, Intel, Qualcomm, IBM and Meta. 

Forterra trading update and new CEO. Progressive note here.  

Restore, a leading provider of digital and information management and secure lifecycle services (mainly stores boxes for large companies), warned over rising interest costs and a slower market for IT services businesses. 

Structural steel fabricator Severfield provided an upbeat statement with opportunities in the industrial and distribution, transport infrastructure, nuclear, data centre and commercial office sectors. Inflationary pressures remain a challenge but continue to be well-managed. The progressive update note here. The more in-depth Spotlight piece is also worth a read.  

Unlikely named energy supplier Telecom Plus (trading as Utility Warehouse) delivered another strong update. Net customer growth remains at record levels. As the pressures on household budgets mount, it offers the lowest-priced energy on the market, along with savings on mobile, broadband and insurance bills. TEP is on track to deliver another one million customers in the next 4-5 years. 



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