Pound jumps on inflation figures, Games Workshop’s blunt update hits the right note, Berkeley branches out to build-to-rent and Spectris warns on profit

“Inflation hitting the Bank of England’s 2% target might not be the magic moment desired by investors. The pound jumped on the news, implying little chance of the Bank cutting rates at its meeting tomorrow. Few thought it would happen anyway, but today’s figures make it even less likely,” says Dan Coatsworth, Investment Analyst at AJ Bell.

“The key negative point was services inflation coming in higher than expected and this data point really matters to the Bank, particularly as it had forecast a lower figure than what we got (5.3% forecast versus 5.7% actual). That shifts the focus to August as the date for the potential first cut from the Bank of England and a lot can happen between now and then, with a late summer easing in monetary policy certainly not a done deal.

“A stronger pound is typically bad for the FTSE 100 given its army of constituents that earn in dollars.

“Vodafone continues to find ways to shed weight as it streamlines for what it hopes will be a fitter future. The sale of an 18% stake in India’s Indus Towers raises €1.7 billion which will be used to pay down debt.”

Games Workshop

“Games Workshop is like the quiet uncle at a family wedding. An entity of few words; when it does speak, any comment is to the point and without waffle.

“Its latest trading update contains just a handful of lines on sales and income, and clarity on dividends and staff rewards paid during the year. There is no insight into trading, no comment on new developments, and no guidance for future earnings.

“Under normal circumstances, shareholders would be livid about such treatment. But anyone invested in Games Workshop seems to be used the bluntness of its announcements and takes the view that no news is good news when it comes to details on the business.

“The numbers spoke for themselves, with profit expected to beat market expectations. Licensing income is really picking up, which is important to Games Workshop’s strategy of trying to sweat its assets and find more ways to commercially exploit its intellectual property.”

Berkeley

“Known as one of the most high-quality London-listed housebuilders, Berkeley is branching out with plans to tap into the London rental market by building homes to let. This seems a logical move given the strong dynamics behind this market.

“It will take time to build up this side of the business but it could eventually provide a useful source of diversification given the rental space tends to be steadier than the wider property market. Berkeley’s moves tend to be widely followed in the industry, thanks to its late founder Tony Pidgley’s reputation as a shrewd operator.

“The broader results were resilient, with Berkeley’s careful stewardship of its cash enabling the company to continue rewarding shareholders with returns of capital.

“Investors were largely unmoved by the slight increase in guidance for the current financial year, although this may reflect a recent strong run for the shares and also the modest drop in margins and profit reported for the full year.

“The company noted the supportive political environment – with both main parties making housebuilding a priority.”

Spectris

“A profit warning from precision equipment manufacturer Spectris extended the year-to-date losses for the share price to 20%.

“What may set alarm bells ringing is the guidance for a heavy weighting to the second half of the year. There is a danger that Spectris cannot make up any first-half shortfall and ends up being forced to warn on profit again.

“Because the issues relate to the introduction of a new software system this is under the company’s control but given its problems of late this may not inspire a huge amount of confidence. The company is also facing external headwinds including weaker demand in China and a significant reduction in activity around battery development – linked to a slowdown in the electric vehicle market.

“With the company having completed a planned rationalisation of the business with the sale of its Red Lion Controls unit it’s not obvious what could get investors interested in the story again. The combination of a slimmed down operation and a beaten down share price might attract opportunistic M&A interest. Spectris itself tried for a merger with rival Oxford Instruments in 2022.”

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