Five things to know this morning, including Ten Entertainment, Galliford Try, Games Workshop

Financial markets remain volatile in what is a big week for investors as central banks prepare latest rate decisions.  

GLOBAL MARKETS 

Nervousness about a potential escalation of military tensions in Ukraine combined with rising interest rates from the Federal Reserve have rattled European markets this morning, with the DAX in Germany shedding more than 1%. The FTSE 100 is nursing lighter losses, trading just below the flatline, supported by gains for defence company BAE Systems (LSE:BA.) as well as the housebuilders and oil majors. 

Russian President Vladimir Putin is mobilising more troops for Ukraine and said the West wants to destroy Russia ahead of announced referendum plans on Ukraine joining Russia in the coming days. His speech sent the Russian rouble lower and oil prices sharply higher amid escalating tensions after a partially successful counterattack by Ukraine. 

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The pound has fallen to the lowest level since 1985 against the US dollar ahead of the Fed’s interest rate decision tonight and the Bank of England’s rate decision tomorrow. Markets anticipate a 75 basis point hike from the Fed and the BoE amid a synchronised global shift towards higher interest rates to curtail spiralling price levels.

UK PUBLIC SECTOR NET BORROWING 

The UK public sector borrowed £11.8 billion in August, significantly higher than the Office for Budget Responsibility’s May estimate of £6 billion, and above the £2.9 billion borrowed in July. Public spending was higher than expected with debt interest payments hitting £8.2 billion versus forecasts for £4.9 billion. 

Pressure mounts on new chancellor Kwasi Kwarteng who gets set to unveil his mini-budget on Friday. Critics fear the new government’s planned expansional fiscalism through increased spending and tax cuts could increase public debts further and exacerbate the economy’s inflationary pressures. The Bank of England is also in the spotlight on Thursday, as it prepares to announce the extent to which it is willing to raise interest rates to combat inflation with markets pricing in a jumbo 75 basis point increase.

TEN ENTERTAINMENT 

Shares in Ten Entertainment Group (LSE:TEG) are rallying by around 5% after it reported half-year adjusted pre-tax profit up 12.9% to £15.7 million versus a loss of £10.8 million in the same period last year. Total sales hit £63.2 million, sharply rising from £10.6 million in the first half of 2021. The ten-pin bowling group said it is on track to meet full-year guidance. 

This is a company that had an extremely tough time during the pandemic when its bowling alleys and arcades were forced to close, resulting in a £17 million loss in 2020. Despite the return to international travel this summer, demand for its domestic entertainment activities have remained robust, helping to support its top and bottom-line growth so far this year.

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In order to uphold demand in the face of the cost-of-living crisis, Ten Entertainment froze bowling prices at 2019 levels, helping to drive footfall and revenues. It still managed to grow its operating margins, which hit a record 24.8%. The company has enjoyed a number of price target upgrades this year. However, shares have still struggled with the volatile equity market backdrop, propelling losses for the stock which is down 20% year-to-date.

GALLIFORD TRY 

Galliford Try Holdings (LSE:GFRD) announced plans to launch a share buyback programme, purchasing up to £15 million of ordinary shares to return cash to shareholders. It also raised its final dividend payment by 66% year-on-year to 5.8 pence. Full-year profit before tax and exceptional costs surged 68% to £19.1 million on revenues at £1.24 billion versus £1.13 billion last year.

In terms of its outlook, the construction company said it is confident, with its high quality £3.4 billion order book positioned across chosen sectors with 90% of full-year 2023 revenue already secured. This week Galliford announced a £1 million cost-of-living package to support its staff. 

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This is an impressive full-year performance for Galliford Try, with strong growth in revenue and profit figures even in the face of major pressures from cost inflation. It managed to return significant cash to shareholders via the dividend as well as a planned share buyback programme. In the first half of the year, Galliford Try reported a pre-tax loss of £2.6 million due to exceptional costs relating to its acquisition of Nmcn’s water business last October. Shares in Galliford Try have shed more than 10% year-to-date, underperforming the FTSE 100 but outperforming the FTSE 250.

GAMES WORKSHOP 

Games Workshop Group (LSE:GAW) said trading in the three months to 28 August was in line with the board’s expectations. Three-month core revenue came in at £106 million and profit before tax hit £39 million. It declared a dividend of 30 pence per share, taking dividends declared in 2022/2023 to £1.20 per share. 

Investors have had a rough ride lately with shares down 35% year-to-date and 40% over the last year. It has grappled with a series of price target downgrades from the analyst community this year. Games Workshop has been dealing with the pressure from freight costs and currency exchange rates with traders struggling to get excited by its quarterly update which met expectations today.

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Over the long run this stock has still proven to be a worthwhile holding, with shares up 260% over the last five years even after the 2022 market turmoil, sharply outperforming the FTSE 100 and FTSE 250.