UK’s core inflation remains sticky
Macro & Overnight
UK inflation for July was 6.8% versus 7.9% the prior month. Core inflation was unchanged at 6.9%.
As yesterday’s average earnings numbers foretold, the UK (and Eurozone) have stickier core inflation than the US, reflecting more rigid labour markets and baked into the cost of living escalation clauses in minimum wage and entitlements. Higher rates will not lower this factor, but they will make it more likely other things break.
UK Company News
Calnex, the network testing provider, said that its customers continue to adopt a cautious approach to investment decisions. The precise timing of orders remains unclear, but its ability to source the components continues to improve. It is confident the FY outcome to be in line with current market expectations.
Capital Drilling reported H1 revenue up 11.7% and EBITDA up 10.0%. The value of its strategic investments increased to $42.1m from $38.7m at year-end. Cash generated from operations was $38.2m, with net debt at $66.5m increased by 82.7% to fund the second mining services contract. The rig count increased from 123 to 125. Revenue guidance for 2023 remains at $320 to $340 million. Tendering activity remains robust.
Concurrent Tech announced an acquisition and placing, which has conditionally raised £6.5 million. Its target, Stryker, supplies major defence companies in the USA and including Boeing, Northrop Grumman and Raytheon, with rugged systems constructed using plug-in cards (“PICs”) sourced from Concurrent Technologies and others. The acquisition of Stryker will further its strategic ambitions in the rugged systems market.
Marshalls H1 rev -13% l4l profit before tax of £33.2 million was a reduction of 26 per cent on 2022. Decisive action has been taken to streamline manufacturing capacity. Net debt is at £184.6 million. The challenging trading environment is expected to persist in H2 and into 2024.
Restore’s revenue was broadly unchanged at £139.6m (H1 2022: £140.3m), with adjusted EBITDA1 down 5%. It has made a non-cash write-down of £32.5m against the legacy investment in Datashred. However, Restore remains highly cash generative, with net debt2 reducing to £97.9m and a leverage ratio of 1.8x. Trading remains in line with the Board’s revised expectations to achieve an adjusted FY profit before tax of £31m.
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