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Tag: business

  • Analyst Note – Renishaw. ‘What cost of insuring against future forex downturns?’

    A financial forecast, like a weather forecast, is not always going to be positive. A business might face significant headwinds including unfavourable foreign exchange rates which affect the purchase price of its exports. Additionally it can have to overcome the hurdle of tariffs from overseas trading partners, in which instance it has either the option of raising the price of goods to reflect the additional cost of selling to that country or absorbing the cost of tariffs and posting it as a business expense.

    Engineering company Renishaw in its Half Year results stated it had addressed US tariffs on imported goods with higher pricing, comprising 1.4% of growth reported – tariff costs of a £15m offset by surcharges and pricing, with only a small decline in profit margin.

    Renishaw’s revenue forecast for the year was for between £740m and £780m, with adjusted profit before tax predicted to fall between £130m and £157m.

    Statutory vs Operational Profit

    While its profit before tax increased 11.5%, a record for the period, statutory profit before tax actually fell 20.0%, representing £18.0m in “redundancy and impairment costs, relating to previously announced restructuring activities, and other one-off costs.” Operating profit grew 11.4% from £51.6m in H12025 to £57.5m in 2026.

    Although operating margin grew just 0.6%, overall revenue grew 7.1% over the figure for the same period in 2025, from £341.4m to £365.6m in H1 2026. Although the cash flow conversion fell 32% from 100% in 2025, to 68%, the business asserted its

    “Strong balance sheet with cash and deposit balances of £249.9m (FY2025: £273.6m), reflecting full-year dividend, working capital investment and restructuring outflows.” 

    Admin expenses over revenue were 2.3% greater yoy and comprise “continuing third-party support and maintenance costs in relation to our ongoing IT transformation, which will lead to productivity benefits in future years.” 

    Distribution expenses grew 6.6% and were attributable to higher pay and benefits. This being said, it posted 4.4% of “organic margin growth” from a combination of fixed cost reduction, productivity initiatives and operational synergies.

    Playing with Financial Instruments

    This organic growth margin was 4.4% higher than the growth at actual exchange rates, mostly thanks to an £8.0m reduction in forward currency income compared to FY 2025.

    It explains, ”The preceding period witnessed significant value-add from contracts which locked in favourable exchange rates” after a period of volatility in currency markets “arising from the September 2022 UK ‘mini-budget’.

    Swaps and futures are financial instruments a business can use to ensure its financial forecast is rosy. Trading these instruments, though, on the secondary market can result in a loss if the mark-to-market value being demand-led can result in a loss where institutional trading levels cause volatility, or price fluctuations, where it is difficult to post a gain relative to the transaction cost and the margin traded against the contract value.

    On the other hand, where constant currency revenues are reported, it is likely that currency futures were used to help protect against unfavourable forex rates. 

    And interest rate swaps (IRS) can help the business to “hedge” against future disadvantageous borrowing rates, which are usually pegged to the Bank of England (BOE) base rate. Where ‘swapping’  a borrowing rate with your financial counterparty offers gains, from a pricing perspective they may benefit from a lower yield that the resale value of its own debt might enjoy an increase – bonds are priced in inverse relation to the yield, which represents the value-at-risk in relation to the repayment of principal.

    Renishaw cites 4 structural growth drivers:

    • increasing precision of manufacturing services.
    • rising industrial automation to address skills deficits
    • electrification and digitalisation of industries
    • decarbonisation of manufacturing.

    Globally, its salesforce utilises new technologies, and customer demand-side targeting, to gain market share, with key business divisions powering growth in the semiconductor, defence and electrification arenas.

    Position encoder products witnessed strong growth over the last reporting period, attributed to nascent metrology and additive manufacturing systems and software. “Pleasing growth” was seen in new sensor product lines, e.g. enclosed optical and inductive position encoders.

    If you break the H1 revenue gains into business segments, Position Measurement orders book grew from Q1 2026 £52.1m to £58.4m for the Q2 reporting period. Forward orders in Industrial Metrology represented a revenue growth from that segment from £102.0m to £110.1m; and from the Specialised Technologies segment from £16.7m to £26.3m.

    The H1 2026 report states “Growth was broadly based, with all three reporting segments delivering growth, and Specialised Technologies performing particularly strongly.

  • Comparing Special VAT Regimes

    VAT Returns – what’s your Flavour? 

    The individual practice may qualify for a flat-rate VAT scheme based on the industry standard rate as a percentage of VAT-inclusive payment receipts to the value of total VAT-inclusive turnover for the first year of registration (a 1% discount is offered for the year of registration).  

    Entry to the flat-rate VAT scheme will be dependent on the business’s VAT-exclusive taxable turnover not being expected to exceed £150,000 in the ensuing 12 months. If a trader has limited costs, the flat rate will be 16.5% of VAT-inclusive turnover. A limited cost trader is one whose purchases of goods are less than either: 2% of turnover, or £1,000 p.a. As regards input VAT, if it is incurred on the acquisition of larger fixed assets (those with a VAT-inclusive cost over £2,000), this can be paid back through the VAT Return. 

    Under the Annual Accounting Scheme, the trader pays 90% of the preceding year’s VAT liability (or of an estimate if this is the business’s first year of trading) in nine equal instalments over months 4 to 12 of the VAT year i.e. per quarter. The residual balance is processed two months after the end of the reporting period. Alternatively, the trader may opt to pay 25% of the preceding year’s liability, with the residual balance due with the return within the same timeframe. 

    Traders only qualify for the Annual Accounting Scheme if all returns and VAT payments are up to date or where instalments have been scheduled with the tax authority. A further condition is that VAT-exclusive taxable turnover is not forecast to exceed £1,350,000 in the ensuing year. One advantage of the scheme is that paying a fixed amount on each instalment helps manage liquidity risks to the business, and reduces admin overheads. 

    The Cash Accounting Scheme enables businesses to override the tax point rules where VAT can become due either on the delivery of goods or services, or at the point the invoice relating to those services is issued. VAT can instead become due only on the basis of tangible payment receipts. As with the Annual Accounting Scheme, future turnover must not exceed £1,350,000 for the next year. 

    Advantages of the Cash Accounting Scheme are that output VAT does not become an HMRC liability until payment has been made, helping scheme members to tie their reporting obligations to cashflow rather than salesbook forward orders, with an inbuilt protection against default or delinquency on outstanding accounts due to the merchant, as the liability does not come into force until payments have actually been received. 

  • Making Tax Digital – Your SME Opportunity

    You can put off filing your digital tax return until tomorrow, but if you defer it indefinitely you could face a punitive fine from HMRC.

    The Making Tax Digital initiative doesn’t have to mean you need to hire a professional accountant, but if fees upfront are transparent and enable you to pick and choose your service offerings, this can be an opportunity to streamline and assess the profitability of discrete business divisions.

    Looking at your different categories of expense as a percentage of revenue will help you to identify an increase or decrease in distinct overheads and determine how effectively your capital is allocated. Return on capital employed is a ratio of net profit over capital tied up in the business, plus any non-current liabilities i.e. sources of finance – bridging, mezzanine and other loans with a duration, or tenor, of more than a year.

    Using profitability ratios to compare business performance to industry benchmarks, and/or successive reporting periods, enables you to quantify efficiency – unit turn on equipment, offset in acquisition cost by depreciation charges, with accumulated depreciation recorded as an outstanding liability in the Statement of Financial Position. You can also offset employee productivity as a percentage of revenue.

    To meet reporting deadlines on accruals, which need to be reversed at the beginning of the succeeding financial year, it helps to be linked in to an accounting practice which is committed to accurate and timely reports. Accrued income is an asset of the business; accrued expenses are classed as a current liability and should be recorded within the accounting period to which they refer, regardless of whether payment has yet been received. This enables a more accurate understanding of the business’s financial posiiton.

    Prepaid expenses are also an asset recorded as such on the SFP. Income which was pre-payed before an invoice was posted can be entered as such in the relevant daybooks until it is due, but to reconcile cash book statements showing the payment as made, prepaid income is classed as a liability until receipt can be recorded during the reporting period to which the prepayment applies.

    People with an active subscription to an accounting software programme might be tempted to use a D-I-Y approach to managing their cash book, but for peace of mind, and to ensure an accurate snapshot of your business’s profitability and financial position, you may be better off out-sourcing the technical aspects of financial reporting, and most accountants and/or bookkeepers will work in a collaborative process with you to guarantee completeness and relevance of documented business processes.

  • Getting Value for Money on Storage Space with Accountancy SaaS 

     

    An accountancy firm without clients is like an empty suitcase – just dead weight. 

    First you need to cost in the transportation cost – how much your logistics provider will charge to migrate data and integrate it across relevant platforms.  

    Then there is a value-add charge encapsulating your weighted load. If you’re carrying excess baggage, redundant or missing data – what will be the cost and how can it be redistributed? 

    The workload at an accountancy practice can be divided among relevant stakeholders, with clients connected via an online system with priority tasks, and those clients who pay for more of your itemised services, assigned in a workflow allocation process which takes full account of upcoming deadlines based on the business’s reporting date.  

    Managing Accruals and Prepayments 

    Accruals must be fully addressed in a timely manner, that they are registered within the accounting period they relate to, and so that deferred income is carried over once payments have been processed in the cash book and bank account. 

    Another core component of bookkeeping practice is prepayments – classed as an asset when the business has prepaid the expense; and a liability where the prepaid income has been received but cannot be recorded in the ledger as such until such payment is timetabled based on its relevance to the current reporting period; that the payment can be reversed from an outstanding liability, and logged in the normal way at the commencement of the next reporting period. 

    Returning to our suitcase analogy, items are weighted based on the cost, in the context of turn on an asset. Are you getting value for money from your service providers on items assessed in terms of the cost of processing them? If you switch provider, can you guarantee a more cost-effective result? 

    Weighted Packet Margins May Surprise 

    Prior expectations of profitability are another example of excess baggage. While profitability ratios can be used to inform stakeholders of the efficiency with which a client business deploys its capital and accumulated credit owed to major debt holders, and the net vs gross profit ratios can indicate how a business is able to manage the costing on its current liabilities, – or expenses – financial reporting always logs the result at a time lag relative to the Statement of Financial Position (SFP) and the Profit and Loss Account (PLA). 

    And for this reason it is vital to keep updated accounts which are regularly refreshed, to ensure a snapshot of the business’s profitability, assets balance sheet and expenses management (itemised as fractions of net sales revenue), can be taken which reflects the payables and receivables control accounts in that forward orders, and credit purchases, are factored into the sales conversion pipeline. 

    Human Capital 

    Employees are a vital part of the business’s intangible capital assets. Skilled workers can mean the difference between returning and non-returning customers. So whatever the percentage increase in sales revenue attributable to marketing campaigns at cost, maintaining your brand identity and integrity requires re-investment, in relevant skills training and offering a sufficient reward – whether in the form of a commission, a bonus, or simply a competitive salary. 

    Matching pensions contributions, whether from salary sacrifice schemes or fixed-percentage contributions rate, is an important component of being able to invest in employee retention and ensure employee loyalty to the organisation, where they may  be transposed “sideways” to other internal roles, predicated on expertise and continuing relevance of their accumulated skills set, to the retainer organisation. 

    How to Meet Your Payroll Obligations 

    I am comfortable processing payroll and handling HMRC liabilities based on income bands and National Insurance categorisation. The new secondary threshold, over which a 15% NI contribution is mandated (up from 13.8%), of £5000 rather than £9,100, is especially onerous for managing the workforce in hospitality and can eat into marginal profits. Thereafter the Secondary Threshold will be increased in line with the Consumer Prices Index (CPI). 

    It is important to factor in that the Employment Allowance has been increased from £5000 to £10,500 to help eligible businesses offset costs. And additionally that the previous restriction that prevented businesses with a Secondary Class 1 NICs liability of over £100,000 p.a. from claiming the allowance has been removed. 

    I am also qualified to manage expenses with reference to VAT, particularly on charge-backs from capital expenditure on non-current assets. VAT owed from sales is straightforward to calculate, and liabilities can be matched relative to cash received back from HMRC on applicable purchases. 

  • Barratt Redrow analyst note

    Following its financial update for the 17-week period from 30 June 2025 to 26 October 2025 (the ‘period’), issued on 5 November 2025, the stock is down -4.70% over the week commencing Monday 8th December.

    With a strong forward orders book and integrated sales divisions, thanks to the Barratt-Redrow merger completed last year, the company has a clear blueprint for future expansion and is targeting an ambitious number of 22,000 home completions per year.

    All comparatives are to the 17-week period from 1 July 2024 to 27 October 2024 unless otherwise stated.

    Trading performance 

    The forward order book, including joint ventures, totalled at 10,669 as of 27 October 2025, compared to 10,706 homes over the equivalent period of 2024; net value of £3,281.4m for 2025, vs a comparable figure of £3,206.0m in 2024. This indicates that new homes sold have a higher realised value, although the company iterates its commitment to affordable housing, stressing the important role of the government in providing growth-enabling decisions and in timely consideration of planning permission on undeveloped sites.

    The company said in a statement coinciding with the earnings report said,

    “Based on unchanged guidance for FY26, at 26 October 2025 the Group was 60%3 forward sold with respect to FY26 private home completions (FY25: 62%4 forward sold), of which 64% are either completed or exchanged (FY25: 65%). “

    Its land bank is comprised of 87,000 owned plots with an additional 12,300 plots contracted or controlled. It stated its expectation that land acquisition to be in line with replacement levels, alongside a growing ratio of the current level.

    As of June 2025, a further additional c.145,000 strategic plots are available for development, “complemented by Gladman’s promotional land portfolio of c. 114,000 plots.”

    Including Joint Ventures (JVs), the group posted 228 net private reservations per week, (FY25: 225), with a net private reservation per week of 0.572 (FY24:0.59). operating from a mean of 402 sales outlets (FY 25: 443). Streamlining its operations has been a positive consequence of operational synergies between wholly owned business divisions.

    In a forward-looking statement, the group emphasised, “We remain on track to deliver £100m of cost synergies with confirmed synergies now at £80m, an increase of £11m from the £69m confirmed at 29 June 2025. An incremental £45m of cost synergies will be delivered in FY26.”

    . 

  • Capium Accounting Software – user review 

    I have found this software to be very useful in managing workflow and stacking tasks in order of priority. It gives you a comprehensive oversight of upcoming deadlines and enables you to automate tasks with email and document templates, letting you get client sign-off on for example capital expenditure on assets, regular filings such as the trial balance process and with multiple user accounts for clients, onboarding is simplified for greater efficiency. 

    Clients are sorted into different “baskets” by the nature of the service offering. These include Trust Tax Return, Work & Testing, Partnership Tax Return, Company Tax Return, Company Accounts, and Confirmation Statement. These services are all billable with a workflow management stream allowing reminders to be set and tasks assigned to staff members, or shared with clients, for collaboration, using checkboxes for the nature of the service offering to the client. 

    You can set deadlines from a specific date, and the system will flag the task as overdue if this is not met. You can also sort by priority, from low to normal to high priority; and to set the frequency of a recurring task. In the “My admin” menu, you can access a client list to look at individual accounts and ensure a holistic approach to client relationship management.  

    Client access can be restricted if you do not make a policy of sharing all bookkeeping records, although for documents which require client sign-off or content input such as the directors’ statement, there is an esign facility as part of the package. The software integrates with the client bank account, letting you see updates in real time. It uses a Trust Layer or API to link to bank accounts and access bank feeds of all transactions, with input data reported using an automated service. 

    You can drag and drop placeholders, add tags for easy reference, and upload sales invoices. The non-current assets register helpfully automates depreciation calculations where you specify either a straight-line or a carrying balance approach. 

    In the context of VAT submissions, you have different VAT settings and you can bridge the account to link to other accounting systems such as Xero, QuickBooks and Sage where you can view VAT details prior to submitting, after checking the appropriate settings have been applied to the client. Payroll is another service offering, with a flexible pipeline allowing you to process subcontractors and freelance workers in line with regulatory requirements. 

    Finally, tailored reports let you collate and manage accruals for approval whilst preparing the trial balance, which you would file with Companies’ House after client sign-off. The mode of input can be comprised of several funnels: bookkeeping, Quickbooks, CSV, Xero, manual and free agent. 

    In the process of client onboarding, regulatory requirements on KYC and AML compliance are handled by experienced third-party provider Verify, which provides a checklist of billable services with a small service fee per item, plus VAT. So an AML check costs the practice £4, a credit check costs £2, an international ID check is £2, and the same fee for a company check. The biometric check however costs £8.50 due to the added complexity of verifying biometric ID. Support tickets are enabled and a support line to address outstanding issues which obstruct the onboarding process. 

  • Analyst note Costain

    Costain Group Annual Report states they “received prestigious recognition for our approach when we obtained the London Stock Exchange’s Green Economy mark.

    “This identifies companies that generate at least half of their revenue from products and services that contribute to the green economy. The mark is only held by around 6% of companies on the LSE.”

    Note that a £10million share buyback program concluded in November 2024. Over the previous financial year, cash from operations FY24 was £42.7m (FY23: £69.6m), “resulting from increased operating profits offset by year-end timings of certain cash receipts at the end of FY23 and FY24, together with some end of contract outflows in FY24.”

    The adjusted free cash flow in FY24 of £27.1m (FY23: £70.2m) was lower than the same period last year largely “due to the timing of year-end working capital and higher tax and expenditure payments” with internal adjustments as funding was diverted into updating infrastructure, requirements for new business systems; and increased cash flows on adjusting items, with turn on non-current assets offset against “reduced pension fund deficit contributions.”

    Liquidity considerations aside, the adjusted operating profit margin was 3.4% compared to 3.0% FY23 yoy, with 4.4% growth in H2 as Costain states it saw greater operating efficiency and productivity in the Natural Resources division, with higher marginal profits.

    Total revenue from transport fell from 943.1m in 2023 to 845.8m in 2024, at a higher operating margin of 3.5% from 3.0%. Road and rail takings fell, although integrated transport projects experienced expansion of 92.7% The net business forecast is for an optimistic 5% growth rate for FY 2025 after an initial target of 4.5% over the course of 2025.

    As regards sustainability targets, their Scope 1 emissions reported 4,772 down from 4,875 (-2.1%) and Scope 2 (-3..16%) was 888 down from 1,299. Scope 3 emissions saw just a 1% increase from 281,765 FY23 to 278,248 FY24. In terms of accountability, Costain reports that 100% of relevant contracts were working in accordance with PAS 2080.

    Its ambitious target is for a 6% yoy reduction in Scope 1 and Scope 2 emissions, the same percentage for the absolute emissions value. In some ways accepting the limitations of its capacity to cap emissions is preferable to mis-reporting it, which happened recently with UK energy company Drax, whose share price fell over 10% in a day immediately after regulators signalled an investigation into whether the provenance of wood chips for biomass pellets was actually sustainable, and the emissions reporting for the diesel ships transporting wood chips from the US did not comprise a Scope 2 or 3 emissions estimate.

    Costain is targeting a dividend payout of 3x adjusted earnings. Payments were resumed in FY23 with a full-year dividend of 1.2p per share for the year, in line with the pension payments required for the year under the “dividend parity arrangement.” The board has approved a final dividend of 2.0p per share.

    The company is transparent about its desire to capitalise on the problems caused by climate change, and highlights the risk-based opportunities for its diverse business lines –

    “There is a high potential in the water sector – the capacity of sewage needs to be increased to deal with additional strains placed on it by rainfall intensity coupled with increased demand,” and considering the enhanced “maintenance and modification to improve the drainage capacity or resilience of its assets.”

    It highlights the initiative of a carbon tracker which will provide unified measures of resource usage across different project lines, and demonstrate areas of improvement relative to industry benchmarking.

  • Last Week’s Financial Round-up 08/09/25

    Gold pricing reached a new peak above $3500, alongside an 8.10% expansion in equity from Fresillo, a Mexican silver mining company incorporated in the UK which was one of the week’s high performers and infrastructural investment represents an effective counterpoise to gold contracts.

    According to the Times, growth obstacles for UK listed companies comprising “tax rises, slowing wage growth and sticky inflation” are affecting several service providers.

    Bunzl, for example, which sells PPE and sanitary equipment to healthcare and health and safety providers, as well as packaging, was poised to take advantage of new overseas markets as M&A revenue and adjusted operating profit for the year increased 7.9% with conversions indicated 3.1% revenue growth on an 8.3% operating margin.

    In its annual report, Costain reported cash from operations in FY24 was £41.7mn, (FY23: 69.6mn), resulting from “increased operating profits offset by year-end timings of certain cash receipts at the end of year FY23 and FY24, together with some end of contract outflows in FY24.”

    The company cited the “timing of year-end working capital” as well as “higher tax and capital expenditure payments” on investment in new systems and “higher cash flows on adjusting items”, although meeting the pension contribution deficit may have a detrimental effect on liquidity.

    Inflation proxy indicators

    Indeed, the CPI for July stood at 3.8%, up from 3.6% for June. The RPI, excluding the costing change in fuel and energy, was 4.8% for July, an increase from 4.4% yoy growth for June. The Producer Price Index (PPI) provides forward-looking outlooks of upcoming price increases based on slack vs actively engaged capacity, and acts as a measure of manufacturing inflation.

    The Purchasing Manager Index (PMI) provides an indication of future orders and growth outlook based on forward-looking pricing on manufactures and services.

    Trump’s foreign policy this month have not affected appetite for US 10-year Treasuries, which were stable as the return on Treasury bills, which must be held for 10 years until maturity, increased by 1bp from 4.27to 4.28.

    The coupon paid out on UK 10-year gilts rose from a yield of 4.84 the preceding week to 4.90 correct as of 2 September, reflecting market speculation surrounding suggested tax cuts to be announced in the Budget on 26 November, which may contain a new wealth tax to meet the current spending shortfall.

    Note that the Sentix Investor Sentiment Index, published today on forexfactory, was at -9.2 vs a forecast of -2.2; whereas the forecast for August was actually positive, and forward-looking analysts put the prediction at 6.2 where the actual value, predicated on a diffusion index based on surveyed investors and analysts, was -3.7.