Market Prognosis

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

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April 19, 2023

Windfall taxes spur move to Norway for Kistos

Macro & Overnight

UK inflation is proving stickier than expected and twice the rate in the US, presenting a problem for the BoE, which must decide whether to act independently from the Fed in its interest rate policy should the Fed decide to pause rate hikes.

UK Company News

Audioboom, the podcasting company, delivered a Q1 update with revenue in line with expectations and operational costs down 14%. While its advertiser count increased significantly, revenue per 1,000 downloads was down 15%, illustrating the difficulty of monetising this rapidly growing medium. 

Cake Box delivered an FY update. Its revenues are up c.5% year-on-year despite tough comparatives following the easing of pandemic lockdowns. Lower costs, particularly freight, led to an improvement in Group margins. It added ten new franchise stores in H2, bringing the total number of stores opened in the year to 20. There are now 205 stores. Group’s net cash position stood at £6.3m at period end. 

This a solid update for a business where a few self-inflicted wounds impacted its growth trajectory. The Board has rebuilt the management team around founder CEO Sukh Chamdal. Click here to listen to Sukh discussing his business in ITCOM episode 2. 

Hunting issued an AGM update. Titan has traded in line with expectations during the quarter. Its margin has strengthened in the reporting period, driven by higher facility utilisation and some improvements to pricing. Overall it aligns with the previous market guidance of c.10% for the year. Working capital will peak during H1 2023, with net debt in the range of $30m – $50m by June. Management targeting positive year-end cash. International sales continue accelerating as US drilling techniques are adopted globally, particularly in South America and the Middle East. 

Hunting is an attractively valued play on the catch-up required to search for and invest in new hydrocarbon assets globally. 

The Kainos update showed that trading in the period has continued to be very strong across all three divisions as new and existing clients have maintained high levels of investment in digital solutions.  As a result, for the year ended 31 March 2023, the Board expects results to align with current consensus forecasts.  

Kistos has acquired Mime Petroleum for $1 plus 6m warrants in Kistos ord shares at 385p, exercisable until 2028. Mime focuses on development and production projects on the Norwegian Continental Shelf. Kistos has evaluated several transactions in the UK and Dutch sectors. However, commodity price volatility and fiscal uncertainty have made agreeing on deals in the UK and the Netherlands challenging.  

While typically complicated, this transaction looks like another example of transformational capital allocation for Andrew Austin, founder of Kistos. You can hear Andrew discussing Kistos and its strategy on ITCOM episode 10.  

Plus500 onboarded 28,201 New Customers in Q1, up 12%, and the number of Active Customers was up 5% at 137,053. It expects its performance to be in line with current market expectations. The company bought back c $50m shares but retained cash balances of over $950m. 

CMC and IG have warned about more challenging trading, but Plus500 demonstrates its ability to find new customers more effectively on a highly tech-enabled cost base. 

 

Prognosticator 

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