Microsoft strong results halts share price fall
Amidst the turmoil of the US market sell-off, Microsoft (MSFT) has posted impressive quarterly results driven by strong performance from its cloud service business Azure. Demand for cloud storage is only going to increase as increased digitisation leads to more data creation and Microsoft seems well placed to profit from this trend.
Overall revenue and operating profit were up 20 per cent and 24 per cent respectively in the second quarter. Azure and other cloud services were the fastest growing division, growing 46 per cent. LinkedIn was also up 37 per cent thanks to the buoyant US labour market.
CEO Satya Nadella was bullish about Microsoft's progress in the gaming and metaverse markets after it agreed at $68bn purchase of Activision Blizzard last week. On the earnings call he said he wants Micrsofot to “make it easier for people to play great games wherever, whenever, and however they want, and also shape what comes next for gaming as platforms like the metaverse develop”.
Brokers are now expecting 2024 EPS of 920 cents for Microsoft, up around 60 per cent from 574 cents in 2021. The share price was up slightly on the day of results to stop a fall that has been in line with the wider US sell off. AS
CMA investigates Stagecoach take over
The Competition and Markets Authority has launched an investigation into a proposed merger between National Express (NEX) and Stagecoach (SCG), which is expected to create the UK’s largest road transport provider.
Under a CMA interim enforcement order, both companies have been banned from disposing of material UK assets at the current time. According to a trading update, this is so both businesses maintain their current form as the regulator carries out its review.
The enforcement order will delay the proposed sale of Stagecoach's inter-city coach businesses. However, both groups said the intervention will not materially affect day-to-day operations.
They added that they “continue to believe the Stagecoach coach disposal represents a comprehensive solution to any competition concerns that might arise from their overlapping coach operations”. JS
Further reading: All aboard: National Express and Stagecoach to merge
Quilter tests its platform appeal
Diversified asset manager Quilter (QLT) reported net inflows of nearly £4bn as the company saw the benefit of its Quilter investment platform aimed at independent financial advisers. The newly Quilter channel saw improved productivity with inflows per adviser increasing to £2.3m, up from £1.8m. The 4 per cent net increase in assets-under-management is inching closer to the company’s target of 6 percent annual growth. The shares price has backtracked since the summer and seems to be related to sentiment around the markets, rather than the substance of the company's operational performance. JH
Brewin Dolphin maintains strong inflows but outlook could prove tougher
Investment advice company Brewin Dolphin (BRW) achieved a record first quarter of inflows for the three months to 31 December, with total assets under management rising 14.8 per cent in 2021. The FTSE 250-listed firm reported strong fund flows within its discretionary services, with total discretionary assets up 4.4 per cent over the three months to 31 December. It’s advisory service meanwhile saw assets fall 5.6 per cent over the period, driven by outflows as performance was flat. According to Panmure Gordon, the shares trade on a price / earnings ratio of 13.4 times - lower than some of its peers. The secular growth opportunity is there but analysts caution on the immediate market outlook MM
Further reading: Brewin costs spiral upwards
Wizz Air hit by travel uncertainty
Wizz Air (Wizz) had a turbulent run-up to Christmas. While revenue rose in the three months to 31 December, losses grew ever larger, and the short-haul operator expects things to deteriorate further over the next three months.
According to a trading update published today, customer numbers are on the rise: 7.8m passengers were carried last quarter, up from 2.3m the previous year. Wizz Air reported 10m passengers during the same period in 2019, before the pandemic hit.
Despite the pick-up in travel, however, Wizz Air’s operating loss has reached €213.6m, up from €141.9 the previous year. Average revenue per passenger also sank by 21 per cent to €52.35.
Omicron and renewed travel restrictions impacted Wizz Air’s performance late in the quarter. On top of this, the group - which focuses on central and eastern Europe - has suffered from low vaccination rates in key markets this year. Not everything can be blamed directly on Covid, however: the group’s operating expenses have also more than doubled, with fuel proving particularly expensive.
Looking forward, the group expects its operating loss for the final quarter of 2022 to be “slightly higher” than quarter three. Even if the losses in the final quarter reach just €214m, this would imply full year losses of over €550m. Consensus estimates for the full year currently sit at -€513m.
Despite its difficulties, Wizz Air is still looking to expand. It has hired more than 1,500 people since the start of last summer, and employee numbers have surpassed pre-pandemic levels. It has also placed an order for up to 196 new aircrafts, with the bulk of deliveries from 2025 onwards. JS
Sensyne shares bounce on funding deal
Sensyne Health (SENS) said on Wednesday it had arranged enough funding to see it through its ongoing sale process.
The company, which has developed artificial intelligence programmes that remotely monitor patients, is issuing £11.35m of loan notes repayable at 1.25-times face value, which also offer buyers warrants to subscribe to more than 29m shares, or about 17.7 per cent of the company’s shares, at the nominal price of 10p per share.
Sensyne Health has called a shareholder meeting as it needs approval from 75 per cent of them to disapply pre-emption rights for the shares being offered with the loans.
Without the funding, it will not have enough cash to trade beyond next month or complete the sale process, it said.
Sensyne’s shares rallied on the funding news, climbing by more than 20 per cent to 19p per share. They are still down 77 per cent so far this year, though, after plunging by 72 per cent on 14 January when the company first revealed details of its proposed refinancing. MF