STV studio deal

Macro & Overnight

The DXY has pushed higher following Fed minutes showing the extent of the dissent within the FOMC regarding the rate pause last month. The dollar has risen 3% since its low point in mid-June.

Despite UK rates pushing higher, the £ was broadly unchanged, with JP Morgan’s 7% peak rate forecast grabbing the headlines.

UK Company News

Currys FY profits were at the top end of the guided range, but it was a challenging year for the Nordics business. Trading to date has been consistent with the Board’s expectations. It has taken action to maximise operating cash flow through continuous margin improvement and mitigate risk. These include agreeing to the previously announced temporary covenant relaxation and lowering cash contributions to the pension scheme. Currys cites high inflation and unforgiving competition as its key issues. 

Hunting H1 trading has exceeded management’s expectations, driven by strength across most international markets. Consequently, EBITDA is likely $ 48m- $ 50m (about 10% ahead). Its order books remain robust across all product lines, $530m-$550m compared to $473m on 31 December 2022. The North American segment reports a performance materially ahead of expectations, primarily due to international orders for South America. |Net debt is expected to be $51m-$52m at 30 June 2023. The company’s Capital Markets Day is confirmed for 13 September. It also increases EBITDA guidance for 2023 to $96m-$100m with total cash to be between $nil and $25m, as larger projects complete in H2. Outlook for 2024 is improving. Management now anticipates EBITDA to be in the range of $125m-$135m for 2024.

Investors have been tracking US onshore rig count declines as the key performance indicator for Hunting’s Titan business. They missed the strong growth in all forms of hydrocarbon activity in LATAM and Asia Pac, which is coming through in Hunting’s improving results.  

Peel Hunt said that the macroeconomic backdrop has continued to be challenging, and investor sentiment has remained low. However, during the first quarter of FY24, it supported its corporate clients concerning several announced M&A and ECM transactions. This has included acting as a named financial adviser on approximately a quarter of firm offers made for UK-listed companies during the period and as a book-runner on the largest UK IPO this year. As a result, the group’s performance for Q1 is in line with market expectations, with full-year revenues expected to be second-half weighted. 

Victrex reported ongoing macroeconomic weakness and destocking across several end markets. However, it anticipates that ASP will be above £84/kg. In turn, together with easing energy costs, it is experiencing gross margin improvement during the second half but is slightly held back by lower asset utilisation. Outlook is unchanged. 

Workspace reported resilient levels of customer demand and stable occupancy at 89.2%. Its LTV is at 31%, based on the 31 March 2023 valuation. Its average cost of debt is 4.0%.

STV has acquired Greenbird Media for initial cash consideration of £21.4m, which will be materially earnings enhancing. It sees significant revenue and cost synergies across the enlarged STV Studios business of at least £750k p.a. from 2024. (See note here) 

Prognosticator