Market Prognosis

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

January 16, 2023

Working capital problems ahead?

Macro & Overnight

Markets remain in risk-on mode. There is a positive interpretation of all data.

The UK economy grew by 0.1% in November, no doubt boosted by the World Cup.

Rightmove reported an increase in the asking price of UK homes coming onto the market for sale in January. Not what the Daily Mail headlines would have you believe.

One cloud on the horizon is Japan, attempting to normalise its extremely abnormal interest rate and yield curve control policies.

JGB yields have ballooned to 0.55%, more than double what they were a month ago. It might not sound like a big deal, but the second-order effects might become a concern.

UK Company News

It is a quiet day for UK company news. A notable comment from MPAC regarding the working capital impact of supply chain disruption affecting its net debt. This issue highlights the challenges industrial companies will face in retaining balance sheet strength and return on capital metrics if “just in case” logistics become the standard. Many companies have large and growing order books, but the ability to convert these into free cash needs to be clarified.  

Ashtead Technology, the subsea equipment rental provider, said that solid performance reported in H1 and Q3 has continued into the final quarter with the extension of projects and new contract wins, leading to the business trading strongly through the normally seasonally quieter Q4. It sees profits for the FY comfortably ahead of market consensus.

Avingtrans supplies components, modules, and systems to the energy, medical and industrial sectors and reports trading in line with market expectations for 2022. 

IQE, the supplier of compound semiconductor wafer products to the semiconductor industry, reported trading in 2022 has been largely resilient to the challenging macro environment. It said that photonics revenues partially offset anticipated softness in wireless markets (probably Apple). The company expects to see some destocking which may impact demand in the near term. However, it remains confident in its diversification strategy and longer-term growth targets.  

MPAC high-speed packaging and automation solutions supplier expects to report full-year revenue and underlying profit before tax in line with market expectations. It says that it remains well-placed due to the resilience of end markets. Supply chain challenges have resulted in higher levels of working capital in H2 than previously anticipated and will impact year-end net debt accordingly.

Quixant, a supplier of technology products principally for the global gaming and broadcast industries, reports that positive trading across both the Gaming and Densitron businesses continued slightly ahead of market expectations. This result is despite the backdrop of substantial supply and economic disruption.

Prognosticator

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