Proactive Investors -
- FTSE 100 down 28 points at 7,683
- S4 Capital tumbles after second warning in two months
- Royal Mail (LON:IDSI) owner lifted by broker upgrade
S4C warning a knock to "already fragile confidence"
S4 Capital's warning continues to weigh, with shares down 24.6% at 72.00p.
Jefferies (NYSE:JEF) said a second warning on revenue growth within two months will be a knock to the already fragile market confidence in S4's all-important march towards longer-term margins of >20%.
The broker has lowered its financial year 2023-25 revenue and Ebitda forecasts by 2% and 12% respectively.
While it thinks the intention to initiate a dividend stream in 2024 is a confident signal, and the valuation remains compelling, S4 "needs to provide comfort on near-term earnings momentum as a priority."
Jeferies has cut its diccounted cash flow based price target from 195p to 160p
Biden's green subsidies make investing in UK less attractive
A bit more on the Make UK survey which also showed manufacturing chiefs warning that Joe Biden’s subsidies have made investing in the UK harder to justify.
Three quarters of businesses surveyed by Make UK said incentives in the US, EU and other countries were making investments in Britain more difficult to rationalise.
The US president has pumped billions into green subsidies through the Inflation Reduction Act, which offers incentives for businesses investing in areas such as electric vehicle manufacturing and clean power.
The EU has pledged to spend €50 billion a year on its green transition as it seeks to rival Biden’s plans with its own Green Deal.
But the UK government has so far refrained from joining in the big money support, preferring a project by projcet approach.
The Government has struck bespoke deals with the likes of Port Talbot-owner Tata Steel and Mini to support their transition to net zero but has failed to put in place an overarching scheme.
More than half of companies surveyed by Make UK said they would invest more if Britain had a formal industrial strategy in place.
Manufacturers hiring plans on hold
Plans by manufacturing firms to recruit more staff have stopped amid a slowdown in orders, new research suggests.
A survey of more than 300 manufacturers showed they were "battening down the hatches" amid warnings of a sharp slowdown in activity and a potential recession.
Make UK and business advisory firm BDO said their study showed that a positive picture of the first half of the year has gone sharply into reverse.
As a result, Make UK has cut its manufacturing growth forecast for 2023 with output set to fall this year, while the forecast for next year is within the margins of no growth at all.
Goldman cuts year-end FTSE 100 target
After its strong run last week, just where could the FTSE 100 end 2023.
Goldman Sachs (NYSE:GS) reckons the blue-chip index will close the year at 7,900, slightly lower than its previous 8,000 target.
The investment bank notes this implies a 3.0% price return and 7.3% total return.
"We think FTSE 100 remains largely immune from the domestic growth concerns," it said.
However, as an asset class, bonds now provide a reasonable alternative to equities; both UK and US 10Y bond yields are above 4%, Goldman thinks.
"We see globally equities trading in a 'Fat & Flat' range and tend to highlight companies either with very strong growth prospects or those returning cash to shareholders via dividends/buybacks," it said.
On this last point, the UK has a lot to offer, Goldman believes with high buybacks supported by one of the highest free cash flow yields globally.
It thinks the recent rise in energy prices could continue to support this amongst energy stocks which provide a substantial share of the buybacks.