Market Prognosis

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

December 5, 2022

Weaker $ provides respite to markets

Macro & Overnight

The OPEC+ meeting over the weekend resulted in little.

The EU’s price cap on Russian crude at $60 seems designed more for headlines than meaningful policy.

Oil prices remain above the recent lows, and European gas prices are starting to firm.

The US $ remains easier as Friday’s hotter-than-expected jobs data have not upset the end-of-year recovery sparked by Powell’s “dovish” speech. This Dollar correction continues to ease financial conditions globally.

China watchers will be keen to see trade data on Wednesday for clues on the costs of lockdowns and any further evidence of opening up.

UK Company News

Equals, the payments group focused on SMEs, updated that full-year results should be ahead of current market expectations. Revenue growth remains robust despite unfavourable global macroeconomic conditions. This growth is likely coming at the expense of the legacy clearing banks, which can’t keep up with the technology and people arms race in the sector. 

Induction Health, the digital health platform, made progress in powering remote consultations, capturing patient-reported data and empowering patients to self-manage their care. However, they also warn that this year will see delays in funding the NHS digitisation programmes. This is counterintuitive at a time when the NHS is facing industrial action. The digitisation of healthcare is like wading through treacle. Induction is lowering guidance and focusing on underlying profitability and cash. 

Games outsourcer Keywords has conditionally agreed to acquire Helpshift, Inc., a consumer-facing digital support platform, for up to $75m. Based in San Francisco, with offices in India and the UK, Helpshift provides customer support automation tools for clients, including Supercell, Tencent and Zynga. This acquisition should deliver revenues of approximately $20m and EBITDA of around $2m in 2022. Revenues are expected to grow strongly in 2023 and beyond. This deal looks logical, albeit they are paying for some growth.  

RBG, the professional services group, saw robust performance year-to-date, despite the market headwinds. RBGLS is on track to exceed the Board’s expectations for the full year, despite Convex having some transactions slipping into Q1 2023. The professional services businesses will be marginally ahead of the Board’s expectations for the year. However, litigation finance activities in LionFish will now have a non-cash write-off of GBP4.0m in 2022 and will, therefore, miss the Board’s previous expectations of GBP2.3m profit. The actual cash loss associated with the Lionfish cases amounts to GBP1.1m over the life of the investment. But as a result of the case losses in LionFish, the Group expects adjusted EBITDA to be materially behind current market consensus expectations. 

Serica, the independent oil and gas company with operations centred on the UK North Sea, has warned that its North Eigg exploration well has been disappointing. Serica’s full-year production is expected to be within the existing guidance range. Commodity prices, particularly gas, have remained strong during the second half, although somewhat lower in October and November. The company said: “we believe in the importance of the UK Oil & Gas sector […] We are now considering opportunities in other countries alongside those in the UK as we continue to seek to expand our portfolio and create value for all of our stakeholders.” Another indication that post the recent tax changes, the UK North Sea might struggle for investment.  

Drinks manufacturer AG Barr has announced the acquisition of Boost, a functional beverage business with products in the fast-growing energy, sports and protein beverage categories. The business outsources production, warehousing and logistics with products predominantly sold via the independent retail channel. Revenues last year were £42.1m (PBT £1.9m). The initial consideration is £20m, funded from the Group’s cash, plus an additional £12m, dependent on future revenue and profit performance. All sounds very interesting but seemingly gone are the days when a drinks function was to quench thirst.  

 

Prognosticator

 

 

On This Day ...

… in 1848, US President James Polk made a speech in which he said, “The accounts of abundance of gold are of such an extraordinary character as would scarcely command belief were they not corroborated by the authentic reports of officers in the public service.” In so doing, Polk sparked the gold rush of the following year. The consequences of this episode included the admittance of anti-slavery California to the Union, helping tip the political balance towards Civil War a decade later.

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