The Ongoing Saga of Getting Brexit Done

Macro & Overnight

The proposed Windsor Framework, the latest instalment of the epic seven-year-long Brexit series,  dominates headlines as the latest attempt to reset UK and EU relations. It is early days, but it is noteworthy that no major politician has resigned or even rubbished the plan.

Any normalisation of relations with the EU is a precursor for the UK to become investable again in the eyes of global asset allocators.

The Atlanta Fed lifted its GDPNow model estimate for US Q1 GDP growth to 2.8% from 2.7%.

This increase follows housing and employment data indicating a continuing strong economy.

There remains scope for US rates to rise, further boosting the value of the $.

UK Company News

AO World, the online electrical retailer, updated by increasing profit guidance for the year to March. It sees a resilient underlying customer base that has driven higher-than-expected retail gross margins.

Ocado, the online grocery technology provider, reported FY results. Group revenue was broadly flat at £2.5bn, with strong growth in Solutions offset by a decline at Ocado Retail. 

International Solutions revenues more than doubled to £148m as the number of live sites trebled. Cash outflows were reduced, and capital expenditure will be lower, reflecting lower investment in new locations. Ocado reported a loss of £74m, compared with a profit of £61m in FY21, due to cost pressures and capacity investments to support Ocado Retail growth. Following the June equity raise, it has a cash balance of £1.3bn, supporting its ambitious growth plans. 

Benchmark, the aquaculture biotechnology business, had Q1 results with revenues 36% ahead of the prior year and EBITDA margins of 22%. It sees an encouraging outlook for the year.

Intertek, the international trade inspection and testing business, had FY results. Outside China, LFL revenue grew 6.5% at constant rates. Recent acquisitions performed well. It is entering 2023 with confidence, given the re-opening of China. It sees mid-single-digit LFL revenue growth at constant currency, with margin progression and a strong free cash flow performance. 

The Independent Directors of Kape, the digital security software provider, announced that after consulting with major institutional shareholders and having been advised by Shore Capital and Citi, they believe the recent offer for the company materially undervalues Kape and its prospects. 

McBride, manufacturer and supplier of private label domestic household cleaning/hygiene markets, saw H1 results in line with its growth ambition. Volume growth of 2.6% in the first half reflected market share gains and more cost-conscious consumers. Input costs continue to increase, albeit slower than previously experienced. But inflationary pressures have driven a c.20% increase in shipping costs. Net debt at the half year increased to £169.4 million from £164.4m in June. The Group has a £175 million sustainability-linked RCF committed until 10 May 2026. The company is pursuing other means of boosting liquidity. 

Uniphar, the Dublin-based healthcare services business, reported FY gross profit growth of 11.7% and EBITDA growth of 13.4%. It entered the current year with solid momentum and is trading in line with expectations. Forward revenue guidance is for Commercial & Clinical: Mid-single digit; Product Access: Double-digit and Supply Chain & Retail: Low-single digit. 

Prognosticator