- Wall Street inches ahead before Trump Primary win announced
- Tullow talk of a “major inflection point” in their business
- abrdn restructures
- “Move along folks. Nothing to see here!” says Diversified Energy
- Revolution Bars warns on outlook
Steve Clayton, head of equity funds, Hargreaves Lansdown:
“Wall Street had a relatively quiet session yesterday, with modest advances by the S&P 500 and Nasdaq indices countered by a small decline in the Dow Jones Industrial index. America is looking for steers on how the Presidential election will go in November this year. Last night it got a fairly clear signal that it will be former President, Donald Trump leading the Republican campaign, as he trounced his sole remaining challenger in New Hampshire, a State that she really needed to win. Markets were generally strong under Trump and so far, Wall Street appears relaxed about a return of this most controversial of political figures. Asia saw China and Hong Kong rebounding after their weak run, with both markets rising by close to 2%, setting the tone for what futures markets are predicting will be a confident start for trading in the UK and Europe this morning.
Tullow talk of a “major inflection point” in their business in a trading update issued today. Having invested heavily into their fields in recent years, the group is now reaping the benefit of the cash flows created by rising production. Tullow say they are on track to hit their target of $600m of free cash flow over the next two years. Problems with field engineering encountered earlier in 2023 have now been resolved and the Jubilee field is now producing over 100,000 barrels per day, underpinning the group’s cash flows. Debt is falling as a result and now stands at $1.6bn, somewhat below the group’s earlier expectations. Having arranged a borrowing facility with Glencore, the group now has no further debt maturities this side of 2026, giving Tullow the headroom to bring borrowings sharply lower. It’s a much more secure position for the group than just a year or two ago when they were beset by operational and financial challenges. The market is relieved but not enthused this morning, with the shares rising 2% in early trading. Relief perhaps, but Tullow remains a poster child for the risks investors take when they invest in oil and gas exploration and production companies, for Tullow’s stock once traded well above £10 per share compared to today’s 31p.
abrdn plc, the asset manager formerly known as Aberdeen Asset Management, has issued a trading statement, accompanied by news of a cost-driven restructuring to save £150m per annum and restore the core business to what abrdn describe as “an acceptable level of profitability”. Outflows of assets under management continue. The headline numbers show £12.4bn of total outflows, which slightly overstates the underlying picture. The plan will be executed over 2024 with some elements falling into 2025. The group is targeting a recurring annual £150m benefit for a one-off cost of £150m. Most of the costs to come out will be non-staff, but around 500 roles will still be lost, mainly in Management and Support areas, rather than the core Investment team. No-one seems to have been expecting much different from abrdn and the stock is little changed this morning.
There has been something equivalent to a financial nuclear explosion over at Hinkley Point in Somerset, where it is revealed that the costs of building the new Hinkley Point C nuclear power plant have jumped by around £10bn in less than two years, the fifth budget increase in under a decade. With government plans to hit net zero including a significant increase in the share of nuclear power in the UK’s energy mix, this looks a bit ominous for our future energy bills. If Hinkley Point C is anything to go by, then the cost of the UK’s tilt toward nuclear looks to have increased by an amount roughly equivalent to the cost of HS2 overnight, with no-one really explaining why.
“Move along folks. Nothing to see here!” That’s the message today from Diversified Energy Company (DEC) which has seen its stock tumbling of late. A short seller, Snowcap, published a report yesterday challenging the company’s financial capacity and suggesting that dividends could be about to be slashed. That led to a double digit fall in the stock yesterday. Today the company has issued a statement refuting the arguments and highlighting previous reassurances the company has issued after earlier share price declines. Meanwhile over in the USA, where DEC operates tens of thousands of old, often largely depleted gas wells, there has been criticism of the company’s practices made in Congress. The shares are putting on an early rally, rising almost 3% in early trading.
Revolution Bars Group is sharply lower this morning after issuing a trading update with much good news in it, until the final paragraphs. Revolution operate various bar formats and in many cases saw a decent uplift in trading in the run up to Christmas. But it’s gone quiet in the New Year, and Revolution highlight that some of their formats are supported by a younger clientele, which has limited financial capacity to absorb increases in everyday costs. The Government has announced big uplifts to the minimum and living wages leaving Revolution facing some chunky increases in staffing costs, which they are not confident of earning back in higher sales.”
