That H2 profit weighting might be slipping into 2024

Macro & Overnight

China cut rates yesterday, the US is expected to pause, and the UK and ECB are still hiking; welcome to the world of uncoordinated monetary policy and increasing fiscal dominance.

The UK/US ten-year yield spread is widening, and £ vs $ is at its highest since April 2022.

UK Company News

DX  has announced the development of a major new Regional Hub in the East Midlands costing approximately £12m.

The marine service provider James Fisher reported solid year-on-year growth in revenue and underlying operating profit. It said that it was slightly ahead of its expectations. The energy division has continued its strong momentum in the artificial lift technology, well-testing and bubble curtains businesses. The defence business is improving despite timing changes in its submarine rescue contract services. Its sales pipeline remains robust, and confident in securing new projects in the second half. Net borrowings, as expected, increased in the period in hopes of showing progress in reducing its overall borrowing position in the second half. 

Games Workshop said its revenue will not be less than £440 million (2021/22: £387 million) and licensing income of £25 million (2021/22: £28 million). The Group’s profit before tax is estimated to be not less than £170 million (2021/22: £157 million).

M&C Saatchi highlighted that the more challenging trading environment has continued and has impacted the pace of business into the second quarter, particularly in the Advertising and Media specialisms. It expects a slight decline in like-for-like net revenue for the year but remains confident in delivering on for the FY PBT. But the outcome will be significantly weighted towards H2. 

Marks Electrical, the specialist online household appliance retailer, reported record full-year revenue of £97.8m (FY22 £80.5m), representing a growth rate of 21.5%. It maintained its market-leading profitability despite external cost headwinds and has net cash of £10.0m. Its Major Domestic Appliances (“MDA”) market share grew from 2.0% in FY22 to 2.5% in FY23. It said that its integrated gas, electric and television installation services are now offered on a next-day basis to over 65% of the UK population. Strong trading momentum has continued into the first two months of FY24, with revenue growth exceeding 30%.

Industrial materials supplier Victrex warned that volumes declined by 14%. Recent headwinds will continue over the summer and at least until the end of FY 2023 in September. YTD Group volumes are now tracking more than 20% down. Full-year adjusted PBT will now be between £80m-£85m. 

Robert Walters also had an unscheduled trading update lower guidance on net fee income as employers increase the time it takes to make hiring decisions.     

In advertising, industrial material supply and recruitment sectors, signs of slowing activity in some economically sensitive sectors are reported today. With UK rates looking like they need at least another 50 bps increase, this could be a Summer of warnings. The question for investors is, have low valuations already discounted the impact? 

Prognosticator.