Weekly review

Equity view

Government contractor Capita on Friday said it had sold its Trustmarque IT services business to One Equity Partners for £111m as part of its £700m disposals programme. Taking into account cash-like and debt-like items, Capita expects to receive net proceeds of around £115m at completion. An additional £3m is receivable “contingent on certain future events”.

Medical solutions firm Convatec has agreed to acquire US-focussed medical device company Triad Life Sciences in a deal worth as much as $275.0m. Convatec said on Friday that the transaction, which was expected to close during the first quarter, represented an entry into the "large and rapidly growing" wound biologics segment - currently estimated to be worth around $1.8bn per year globally.

Specialist finance provider Paragon Banking Group said on Friday that its trading performance had been strong and in line with the expectations during the first quarter of its financial year. Paragon stated total new lending increased 35.7% to £708.0m in the three months ended 31 December, while the volume of new buy-to-let mortgage advances increased 36.8% to £408.5m and commercial Lending volumes increased significantly, with new advanced 37.3% stronger yearr-on-year at £298.8m.

Pharmaceutical company Indivior hailed the results of a study aimed at assessing the ability of its buprenorphine asset to reduce respiratory depression and apnea associated with the synthetic opioid fentanyl. Indivior said on Friday that the primary endpoint of the study was to determine the effects of escalating fentanyl dosing on respiratory depression as measured by minute ventilation with the maximum decrease in VE, induced by the highest dose of fentanyl, being almost 60% less with a steady-state plasma buprenorphine concentration of 2.0 ng/mL compared with placebo.

Real estate investment trust Tritax Big Box said on Thursday that it had successfully accelerated its development programme as part of an effort to capture strong occupier demand. Tritax Big Box stated strong occupier demand and historically low levels of available space had combined to create "rental tension" across the UK.

Global investment manager M&G has agreed to acquire a majority stake in responsAbility Investments, a Swiss impact investor focused on private debt and private equity across emerging markets. M&G said on Thursday that it had agreed to acquire approximately 90% of the issued share capital of responsAbility, and expects to acquire the remaining 10% in due course.

Brewer and distiller Diageo on Thursday reported a rise in first-half sales and profits as people quaffed more spirits at home during the Covid pandemic, but warned of persistent headwinds from the virus and supply-chain constraints. The company said net sales rose of 15.8% to £8bn, underpinned by favourable industry trends of spirits taking a large share of the market, with a “particularly strong” performance in scotch, tequila and beer.

Drinks maker Britvic reported better-than-expected first-quarter revenues on Thursday, driven by growth in the GB segment. Total revenue rose 16.5% to £373.9m on a constant currency basis versus the prior year, and was and 12.8% higher on a two-year basis. Analysts had been expecting revenues of £358m.

Software firm Sage said on Wednesday that total revenues had grown in the three months ended 31 December thanks to a £31.0m jump in recurring revenues. Recurring revenue grew 8% to £429.0m, underpinned by a 21% rise in Sage Business Cloud revenue to £280.0m and continued strength in new customer acquisition. Software subscription revenues grew 13% to £336.0m, increasing subscription penetration from 68% to 73%.

Budget airline Wizz Air on Wednesday reported a third-quarter operating loss of €213.6m and warned of a higher loss in the final fiscal quarter loss due to the Omicron Covid variant. The Hungary-based carrier said it expected an improvement in spring. Omicron hit trading late in the third quarter and Wizz said it expected “demand in January, February and part of March to be impacted by ongoing travel uncertainty”.

CMC Markets backed its full-year guidance on Wednesday as it said its performance in the third quarter was in line with expectations. The online trading platform said it delivered "sustained" performance across both leveraged and non-leveraged operations, while continuing to invest in the development of the UK non-leveraged platform.

Property investment and development firm Derwent London has exchanged contracts to sell its 70,700 square foot freehold interest in New River Yard EC1 to a private property company. Derwent London said on Wednesday that the disposal price for New River Yard, which consists of four office buildings, was £67.5m before costs, and before rental top-ups.

Motor engineering firm TI Fluid Systems said it expected to post annual revenue of €2.95bn in a “robust performance” despite chip supply shortages. The company, which makes automotive fluid storage, carrying and delivery systems for light vehicles, expects its 2021 revenue growth to exceed global light vehicle production growth by approximately 3% for the year to December 31.

Rio Tinto has resolved its long-running dispute with the Mongolian government over the $6.93bn expansion project for the company’s Oyu Tolgoi copper-gold mining project. Mongolia owns 34% of Oyu Tolgoi, which is one of the world's largest-known copper and gold deposits. Rio controls the remainder through its 51% stake in Toronto-listed Turquoise Hill Resources and operates the mine.

Exploration and production firm Capricorn Energy said on Tuesday that it will return approximately $700.0m to shareholders as production growth at its newly acquired Western Desert Assets in Egypt beat expectations. Capricorn stated production from its Egyptian assets had increased roughly 8% between their acquisition in September and the end of the calendar year, averaging 36,300 barrels of oil equivalent per day net to its working interest.

Pharmaceutical services provider Ergomed said in a trading update on Tuesday that adjusted EBITDA for 2021 was set to be ahead of current market expectations, reflecting what it called “excellent” operational execution and profit focus across the business. The AIM-traded firm said revenue in the key United States market grew 59.5% over the prior year on a reported basis, and 71% on a constant currency basis.

Computacenter on Monday forecast annual profits to be slightly in excess of £250m after a better-than-expected fourth quarter despite a higher pound and supply shortages. Total revenue for the Group grew by 23% including the effects of acquisitions made since the beginning of 2020, and by 27% in constant currency. The group recorded the highest growth in sales at its services unit for the last 20 years, coupled with continued strength from Technology Sourcing product sales which was more broadly based in 2021 than the previous year.

Thermal energy and pumping specialist Spirax-Sarco Engineering said it has bought Cotopaxi, a consulting and optimisation specialist, for £13.3m. UK-based Cotopaxi, which comprises a team of 38 energy engineers and software specialists, was established in 2009 by its current managing director and provides its global customer base with consulting, digital connectivity and monitoring of energy intensive processes, including steam.

Russian gold producer Petropavlovsk has appointed Stanislav Ploshchenko as chief financial officer based in Moscow with immediate effect, succeeding Danila Kotlyarov. The company said Ploshchenko has more than two decades of experience in finance including CFO positions at major publicly-listed companies. He began his career at Commerzbank before joining steel and coal producer Mechel, initially as head of corporate finance and then for seven years as CFO.

Student accommodation developer Unite said it had bought a 270-bed development site in Nottingham's city centre. Total development costs for the scheme, which would open for the 2024/25 academic year, were estimated to be £34 million, the company said.

Economic news

Retail sales slipped below seasonal norms in January, an industry survey showed on Thursday, as the rapid spread of Omicron hit trade. According to the latest Distributive Trades Survey from the Confederation of British Industry, the weighted balance for the volume of sales expected at this time of the year was -23% in January, the weakest reading since March 2021 and down sharply on December’s balance of -2%.

UK car production fell to its lowest level since 1956 last year, according to the Society of Motor Manufacturers and Traders, with just under 860,000 new cars leaving British factories in 2021. Production was 6.7% lower than in 2020, when the first wave of Covid and associated lockdowns forced several factories to shutter, and a full 34% below its pre-pandemic level.

UK manufacturers are poised to ramp up prices as they battle rising costs and labour shortages, a closely-watched survey showed on Tuesday. According to the latest Industrial Trends Survey from the Confederation of British Industry, output volumes slowed in the three months to January, to 14% from 29% in December.

UK government borrowing fell more than expected in December thanks to improved tax revenues, according to figures released on Tuesday by the Office for National Statistics. Public sector net borrowing, excluding state banks, fell by £7.6bn from December 2020 to £16.8bn, coming in below consensus expectations of £18.5bn, as tax receipts rose. This marked the fourth-highest December borrowing figure since monthly records began in 1993.

Calls by a senior Conservative backbencher to scrap a planned UK National Insurance rise have been dismissed by the prime minister. Speaking on Radio 4’s Today on Monday morning, former Brexit minister David Davis said the proposed 1.25% rise would remove around 10% of disposable income from "ordinary families".

Unite is to ballot staff at the Financial Conduct Authority over potential industrial action, the union confirmed on Monday. It said management had refused to negotiate with the workforce over a proposed cost-cutting programme that risked turning the FCA into a “bargain basement” regulator.

Analysts at Morgan Stanley sounded a 'bullish' note on the outlook for the FTSE 100, highlighting its greater 'defensive' properties relative to rivals, higher dividend yields versus global peers, exposure to energy and record low expectations for growth in the profits of its constituent companies. On just over two-thirds of the occassions that global equities had fallen over the past two decades, the MSCI UK index had outperformed MSCI Europe.

The UK economy faltered in January, a closely-watched survey showed on Monday, after the rapid spread of Omicron weighed heavily on the service sector. The flash IHS Markit/CIPS UK Composite Output Index fell to an 11 month-low of 53.4, compared to December’s final reading of 53.6. Most analysts had expected a rise, with consensus at 54.0.

International events

US consumer sentiment deteriorated in January to its lowest level in more than a decade amid worries about Omicron and inflation, according to a survey from the University of Michigan. The Michigan sentiment index fell to 67.2 from 70.6 in December and 79.0 on January 2021. The index of current economic conditions printed at 72.0 in January, down from 74.2 the month before and 86.7 in the same month a year prior.

Russia´s foreign affairs minister appeared to sound a less cool response to Washington's response to Moscow's "proposals" for security guarantees. According to Russia's state news agency, TASS, Sergei Lavrov said that "if it depends on the Russian Federation, there won't be a war. We do not want wars, but we won't allow our interests to be flagrantly stepped on and ignored."

Russia gave a cool response to Washington's answer overnight to its demands for security guarantees, but according to reports kept the door open to dialogue. Kremlin spokesman, Dmitry Peskov, said: "Based on what our colleagues said yesterday, it's absolutely clear that on the main categories outlined in those draft documents [...] we cannot say that our thoughts have been taken into account or that a willingness has been shown to take our concerns into account."

Initial jobless claims fell for the first time in four weeks in the seven days ended 22 January, slipping 260,000 from the prior week's upwardly revised print of 290,000, according to the Labor Department. The decline, which comes after jobless claims hit a three-month high a week earlier, seemingly implies that some of the Covid-19 Omicron variant-related disruptions that had been weighing on the labour market's recovery may be fading.

The US central bank didn't spring any immediate surprises on investors following its two-day policy meeting. Nonetheless, in his post-meeting comments, the Fed chairman, Jerome Powell, displayed considerable caution in his responses to journalists - leaving all policy options open.

The German government cut its economic growth forecast on Wednesday, after restrictions introduced to curb the spread of Omicron weighed heavily. The economy ministry said the start of the year would "still be subdued due to the coronavirus pandemic, especially in the service sectors". It now expects the economy to grow by 3.6% in 2022, down from its earlier guidance for growth of 4.1%.

US mortgage applications fell 7.1% in the week ended 21 January, the sharpest decline in two months, with the refinancing index plunging 12.6% and the purchase index slipping 1.8%, according to the Mortgage Bankers Association. The fall comes as the average fixed 30-year mortgage rate increased to 3.72% from 3.64% - a level not seen since March 2020, as Treasury yields continued to march towards two-year highs.

There was a way out of the current crisis in Ukraine, a former US ambassador to Nato during the Clinton administration argued recently. Writing in the Financial Times on Monday, Robert Hunter said that at the 2008 Nato summit in Bucharest, George W. Bush forgot that the alliance's 'open door' policy only meant that countries could apply to join Nato, not that they ever would.

US consumer confidence deteriorated in January as short-term expectations weakened, according to a survey released on Tuesday. The Conference Board’s consumer confidence index declined to 113.8 from 115.2 in December, but was above expectations for a reading of 111.8.

German business sentiment unexpectedly improved in January, according to a survey released on Tuesday by the Ifo Institute. The business climate index rose to 95.7 from 94.8 in December, coming in comfortably ahead of expectations for a reading of 94.7.

The arrival of the Omicron variant in the US brought activity in the country's services sector to a near standstill, the results of a closely-followed survey revealed. IHS Markit's services sector Purchasing Managers' Index declined from a reading of 57.0 for the month of December to 50.8 in January - an 18-month low.

Gold prices pushed higher on Monday, fuelled by ongoing geopolitical concerns and rising inflation. The safe-haven asset saw prices hit two-months high last week, before falling back slightly. But as tensions between Russia and Ukraine continued to mount over the weekend, the precious metal once again started to push higher and by 1330 GMT on Monday US gold futures – which began the year trading around $1,800 an ounce – were ahead 0.3% at $1,837.9.