Market Prognosis

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

July 5, 2023

Record UK share suspensions

UK Company News

AO World FY results showed revenue down 17% but a step change in profitability as it exited some business lines, delivered on operational efficiencies and reduced overheads ahead of plan. It simplified its UK operations and ceased trading in Germany. In FY24, it is confident in its ability to deliver 5% EBITDA margins and return to top-line growth in the medium term. AO has a 16% total market share and a 30% online share. 

AO World is a case study of trimming the growth sails into changing market conditions to pivot to profitability at the expense of top-line growth. AO World shares have doubled from their lows over this reporting period.  

Equals H1 update saw revenues up 43% to £45.0 million. Gross profit margins now exceed 50% trading remains at least in line with expectations for FY-2023. Adjusted EBITDA margins should be approximately 20% for 2023. 

Equals strong update shows supportive evidence from FX and payment providers for the arrival of CAB PAyments onto the market. 

Mattioli reported revenue up 3%. It sees current macroeconomic conditions and recent legislative changes likely to drive continued demand for advice. However, inflationary cost pressures and investment in strategic initiatives may impact margins in the short term. 

Mattioli has made several acquisitions in a short period. While scale is desirable in an AUM-driven business, there is always scope for growing pains to emerge. 

Numis Q3 revenue was below the first-half run rate, reflecting a deteriorating market backdrop across the investment banking industry.  M&A revenues remain strong despite more challenging markets, but cyclically low deal volumes impacted capital markets revenues. Conditions are expected to remain difficult through the remainder of FY23. 

PayPoint announced that its auditors had informed them they could not complete the work necessary to release its Preliminary Results tomorrow.

Naked Wine said their results were also delayed yesterday afternoon for similar reasons. 

There is growing tension between listed companies and their auditors about the timing of results with the attendant risk of shares being suspended for missing deadlines. Year to date, there has been a record 83 UK company share price suspensions, 17 of which occurred at last week’s quarter-end deadline. This is bad news for the companies concerned but is significantly unhelpful when the UK is fighting for its reputation as an international standard capital market. 

Topps Tiles Q3 updated that its total sales growth was 7.6%. In the quarter, gross margins continued to improve sequentially quarter on quarter, as inflationary pressures on COGS and shipping costs reduced.

SIG H1 update Group LFL revenue was flat year-on-year, with the continued favourable tailwind from lower input price inflation being offset by lower volumes. As expected, price inflation moderated during H1 compared to the impact during 2022, as we annualise some of the significant prior year price increases. Whilst trading in recent weeks makes it more cautious about the timing of any improvement in demand conditions, the second half will benefit from ongoing productivity initiatives.  

A clear message within the building sector is that inflationary pressures weaken as demand conditions become less certain. 

Prognosticator 

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