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February 23, 2023

Two in two days

Macro & Overnight

Oil prices weakened further, US $ rose, and 10 yr Treasury yields have nearly reached 4%.

Disinflation is OK, but deflation, not so much.

Intel slashed its dividend by 65% last night, only a few weeks after having said reassuring things about its importance.

 

UK Company News

After last night’s close, Oil services contractor Wood Group announced that it had received three unsolicited approaches regarding a possible cash offer from Apollo Management. The most recent approach was at a 48% premium to the undisturbed price. This is the second revealed bid approach from US private equity of a UK mid-cap company in as many days, following Hyve’s approach from Providence Capital yesterday. 

Power generator Drax put pressure on the UK government regarding its carbon capture plans by saying that following the introduction of the US Inflation Reduction Act, it was increasingly excited about the opportunities to deploy BECCS in the US. Drax feels that in response, the UK Government should accelerate its policy support for BECCS to make the UK a world leader in carbon removals. Drax is the UK’s largest renewable power source by output, providing 11% of the annualised total and up to 19% of peak days and 70% of in-day peaks. Such figures illustrate the intermittent nature of the UK’s energy supply regime. 

Greencoat UK Wind, the renewable infrastructure fund invested in UK wind farms with 45 operating wind farm investments, updated the market. It continues to see an attractive investment pipeline onshore and offshore and remains well positioned to deliver more value-accretive acquisitions. It is targeting a dividend of 8.76p per share for 2023, a 13.4% increase reflecting December’s RPI. 

Genus, the animal genetics company, reported an H1 revenue increase of 13% with an operating profit up 9%. The critical Pig Improvement Company’s volumes increased by 23% in China. Expectations for the 2023 fiscal year remain unchanged. The CEO also announced his retirement. 

Kitchen trade supplier Howden Joinery Group reported revenue 10.8% ahead of last year and 46.4% up on 2019, reflecting the strengths of its local, trade-only, in-stock business model. It has sector-leading gross margins of over 60%, allowing disciplined pricing to recover cost increases. Profit before tax of £405.8m was 4.0% ahead of 2021 and 55.7% ahead of 2019. It opened 30 new depots in the UK, bringing the total to 808. It is on track with plans for 2023 to capitalise on the significant ongoing opportunity to gain further market share. Its sales in the first few weeks have been encouraging. Howden has implemented a price increase from the start of the year to recover rising input costs. 

Morgan Sindall reported a strong performance in 2022. This highly successful contractor said in its outlook that there are early signs that inflation, particularly labour inflation, has plateaued and is starting to fall in some areas. 

Pollen Street is an alternative asset manager investing in financial and business services sectors across both Private Equity and Private Credit strategies. Today’s update showed that the total AuM has increased to £3.4 billion.   

Spectris, the precision measurement company, announced full-year results with sales growth of 14%, improved operating margins and an order book up 36%. It is confident of delivering organic growth in 2023, consistent with the medium-term objective of 6-7% alongside continued margin expansion.

Tracsis reported that trading for H1 has been in line with the Board’s expectations. The provider of software, hardware and data analytics services for the rail and wider transport industries’ said that expectations for FY 2023 remain unchanged.

Consumer lending company Amigo‘s restructuring continues, and results today illustrated the cost of discontinuing its old business model and the steps needed to restart lending. It has made significant headway but must raise £45m in new equity by May 26th.   

Prognosticator  

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