Pound returns to pre-mini-Budget levels, second quarter GDP revised upwards, Cineworld sees admissions falling, Dignity swings to a loss

“The pound may have returned to the levels it was at when Chancellor Kwasi Kwarteng stood to address MPs a week ago but that doesn’t mean we’ve miraculously returned to a pre-mini-Budget world,” says AJ Bell Investment Director, Russ Mould.

“The currency’s recovery is predicated on more rapid and aggressive rate hiking from the Bank of England with all the implications that has for borrowers and, in particular, anyone with a mortgage.

“There are signs of a slowdown in Nationwide’s house price data for September, but these numbers belong to a different world from the one we are in now and all participants in the housing market will be nervously watching future readings for signs of how much immediate impact is being felt on property transactions.

“Also potentially helping sterling this morning was an updated estimate of GDP which suggested modest growth in the second quarter as opposed to a modest fall and signs the new Government may be recognising we are in a crisis, despite their protestations to the contrary, as Liz Truss and Kwarteng prepare for a meeting with independent fiscal watchdog the Office for Budget Responsibility.

“Though given the OBR offered a draft forecast ahead of the mini-Budget, this does rather ring of closing the stable door after the horse has bolted.”

Cineworld

“Shareholders in Cineworld already face being virtually wiped out in any debt restructuring but the creditors who will end up controlling the business didn’t have much to be happy about either in Cineworld’s latest update.

“Alongside first-half results showing a recovery in revenue and profit, unsurprising given the comparison was with a Covid restrictions blighted period, it is revealed that Cineworld has continued to haemorrhage cash and the company has revised down its expectations on admissions.

“While some of this may relate to a downward trend for the wider industry, the strong results posted by smaller rival Everyman recently suggests it may have something to do with Cineworld being unable to spruce up its venues to attract cinemagoers as so much of its capital was tied up servicing unsustainable debt.”

Dignity

“To quote the phrase ‘nothing is certain in life except death and taxes’, a funeral operator like Dignity should be a reliable business. However, a turbulent few years has offered investors in the business precious little certainty.

“Apparent sharp practice has been jumped on by regulators and competition in the market has affected margins.

“Today’s results show that recent efforts at a turnaround at the group will require further patience from investors as it disappointingly swings to a pre-tax loss.

“This does reflect a normalisation of the market in the wake of the pandemic, but it is not a great sign that it required such an extraordinary sequence of events to be profitable in the first place.

“Dignity needs to offer a greater weight of evidence that its strategy of sacrificing profit today for market share gains in the future is paying off. For now, the market seems unconvinced.”

These articles are for information purposes only and are not a personal recommendation or advice.