UK unemployment falls below 5%
813,000 jobs lost since the beginning of the pandemic
Britain’s unemployment rate dropped for the second consecutive month to 4.9% from December to February, a period in which most of the company remained locked down.
This is according to figures revealed by the ONS on Tuesday.
According to poll of economists by Reuters, the jobless rate was supposed to go up to 5.1% from 5% in the three months leading up to January.
The ONS linked the fall to a large volume of men leaving the jobs market altogether. The so-called inactivity rate rose by 0.2 percentage points in the three months to February, echoing a rise during the first lockdown of last year.
The number of employees on company payrolls dropped by 56,000 during the same period, the first decline in four months, a further reminder of the precarious state of the UK labour market.
The total number of jobs lost since the beginning of the pandemic now stands at 813,000, over half of which were held by people aged below 25. The London hospitality industry was the most severely hit according to thee ONS.
Danni Hewson, AJ Bell financial analyst, commented on employment figures from the ONS:
“It might seem odd to be looking back when so much of the focus over the past couple of weeks has been on the future but it is important to understand the scale of the economic jolt the country has had,” Hewson said.
“Most of the data published by the ONS today is unsurprising but it does reinforce the huge challenges ahead. Whilst the unemployment rate fell a sliver for the three months to the end of February, early indicators suggest there was a further decrease in the number of employees on the payroll in March, down 56,000 from the previous month.”
“Once again the data confirms that it’s the under 25s bearing the brunt of lockdown restrictions – just over half of those falling off payrolls in the past year have been in this age bracket. But the playing field is levelling off; vacancies in sectors like hospitality were up in March as businesses geared up for lockdown release.”
Primark owner AB Foods reinstates dividend
Primark to forgo £700m of sales in H2
Primark confirmed on Tuesday that its operating profit fell by 90% to £43m in H2 as the budget fashion brand raised its estimate for the volume of sales that will be lost due to trading restrictions in the second half of the current year.
Associated British Foods (LON:ABF), Primark’s parent company, said in its trading statement that while many stores in the UK have set trading records since returning to business on April 12, trading across the continent has been mixed.
While many stores have reopened with restricted trading in place, a number have seen delays. Subsequently, Primark is expecting to miss out on £700m in H2, up from an earlier estimate of £480m.
Primark said its US operations had made a profit and that the reopening phase in Europe would be particularly cash generative as already paid-for stock is sold on.
The retailer plans to repay £121m from the UK government’s furlough scheme, set up to protect workers during the coronavirus pandemic, ABF said on Tuesday, while confirming that it will pay an interim dividend of 6.2p a share in July.
The outlook for AB Foods’ sugar, grocery and ingredients businesses in the second half was also muted after an “exceptional” first six months.
Chris Beckett, head of equity research at Quilter Cheviot, commented on Primark’s bounce following the reopening of the UK:
“Primark was clearly going to be a big beneficiary from the economic re-opening after a £3bn hit to sales experienced during the pandemic. But while we saw pictures of queues outside many stores last week, it is pleasing to have confirmation that Primark stores generated record sales in England and Wales, some 40% of their total global selling space, in the first week after reopening, showing strong pent-up demand from consumers for value-for-money clothing,” Beckett said.
“Over half the stores in England and Wales broke their own sales records, showing the strength of demand from consumers to spend their cash. Unlike in previous re-openings, Primark has seen more demand for fashion ranges rather than more essential items like nightwear, and per-person spending has improved.”
Avast raises its guidance as firm maintains ‘positive momentum’
Avast revenue up 10.5% during Q1
Avast (LON:AVST), the cybersecurity company, raised its guidance for the year after it posted an increase in its profits during Q1.
The company, which listed in London in 2018, confirmed revenue of $237m during Q1, a rise of 10.5% from the year before.
Avast‘s adjusted earnings before tax, interest, deprecation and amortisation also jumped by 10.3% to $134m.
The company said in its trading update released on Monday its small business unit had maintained “positive momentum”, while its consumer direct division had continued to deliver growth.
In March Avast renewed its contract to promote Google’s Chrome browser with the distribution of its antivirus products for the next year.
Avast also refinanced a $480m and €300m senior secured term loan, which it said would extend its loan maturity to March 2028 and reduce interest costs.
Having sold its Family Safety mobile business, Avast is now expecting to release its revenue growth for the year towards the end of its 6%-8% guidance.
During pandemic Avast benefited from raised demand for cybersecurity services, and has previously announced a dividend for 2020 of 11.2 US cents per share.
The firm will pay its shareholders in June and will publish its half-year results in August.
“Avast has made a good start to the year with continued demand for the company’s security, privacy and performance solutions,” said chief executive Ondrej Vlcek.
“The business is trading in line with expectations as we successfully execute on our stated goals to drive customer engagement and monetisation. We look forward to the remainder of the year with confidence.”
Octopus Renewables secures financing of Cerisou Wind Farm
Octopus Renewables has received a €43.2m fully amortising debt facility
Octopus Renewables Infrastructure Trust (LON:ORIT) confirmed on Tuesday that it has successfully secured debt finance for its ready-to-build wind farm in Cerisou, France which was acquired in October 2020.
The new €43.2m fully amortising debt facility, provided by Societe Generale, will fund the construction, commissioning, operation and maintenance of the 24 MW Cerisou project.
This debt facility will allow the Octopus Renewables to invest the amounts previously committed to the project into other investment opportunities.
Construction at Cerisou is on schedule to begin in H2 2021, with the project expected to be fully operational in the second half of 2022.
The term loan facility is amortising over 23 years from the commercial operations date of the project, with a flat 1.30% interest margin above EURIBOR over the duration of the loan. 90% of the project’s notional interest rate exposure under the term loan has been hedged. Alongside the term loan facility, Societe Generale is providing a Debt Service Reserve Facility and a VAT Facility to the project.
Phil Austin, chairman of Octopus Renewables Infrastructure Trust plc, commented:
“The Cerisou project was the Company’s first wind farm acquisition in France and is now successfully financed with favourable terms agreed with one of France’s leading banks. This facility once again demonstrates the Investment Manager’s commitment to an active approach to asset and portfolio management.”
While investment director Chris Gaydon added:
“The competitiveness of the financial and commercial terms achieved with Societe Generale will allow the Company to optimise returns and cash yield as well as maximising operational flexibility. The construction of the Cerisou project is on track and we look forward to it being fully operational next year.”
Is the current Tesco share price undervalued?
Tesco Share Price
Having plummeted in February, the Tesco share price (LON:TSCO) is trading at 234.5p. Compared to a year ago the supermarket is down by nearly 30%. Going as far back as five years ago, Tesco shares were valued at 236.36p per share, only slightly above today’s valuation. The supermarket’s low price could tempt buyers who are looking for value, however, its lack of growth over long periods could also give cause for concern.
Results
Only last week Tesco released its results for the year ending February 27. The FTSE 100 company confirmed it made a profit before tax of £825m, 19.7% lower than the year before, despite its sales in the UK growing by 7.7% to £39.4bn. A major factor was the extra costs due to Covid-19, which included £892m worth of bonuses for staff, as well as the company returning £535m of business rates relief to the government. The supermarket chain said it had taken customers from a number of its competitors as its sales grew significantly at the beginning of the first national lockdown and more recently when consumers were stockpiling goods.
Post-lockdown
While the company weathered the storm that was Covid-19, what matters now is its preparedness and performance as the UK gradually comes out the third lockdown. First of all, with a 27% market share, Tesco remains firmly positioned as the market leader, with Sainsbury’s on 15% in second place, despite the best efforts of discounters Aldi and Lidl over the last few years. Secondly, the company has said the aforementioned additional costs will only continue until the first quarter of 2021-22. If the company is correct then its balance sheet could see a reduction in costs of around £675m.
Finally, Tesco could begin to gain a competitive advantage based on its focus on supplying meat alternatives to meet growing demand from its customers. The UK’s largest supermarket has committed to boosting sales of meat alternatives by 300% within five years, by 2025. It is a market that reached $8.6bn in 2020, with analysts expecting the industry to grow to $17bn globally by 2024.
Juventus and Man Utd shares surge as clubs reveal plans to join European Super League
JP Morgan has confirmed it will finance the breakaway
The Juventus share price (BIT:JUVE) is up by 17.85% on Monday evening after the Italian giant confirmed plans to join the European Super League, along with 11 other European football clubs.
While Manchester United (NYSE:MANU), another member of the group trying to pull away from UEFA competetions, saw its share price close nearly 10% higher at $17.69.
On Sunday evening twelve football clubs, including six English teams, disclosed their intention to be part of a breakaway entity, forming a European Super League.
It is expected that membership of the Super League will significantly bolster member club’s finances. A pot of €3.5bn, it is reported, will be shared by 15 clubs upon joining, and would allow the club’s to offset cash flow shortages caused by the pandemic, in addition to supporting infrastructure investment plans.
JP Morgan, the US investment bank, will underwrite money in loans for the teams involved.
The clubs have pledged €10bn as a “solidarity” payment to the European football pyramid over 23 years, which is claimed to be more than the current offering by UEFA.
In the case of Juventus and other Italian clubs, struggles with securing significant broadcast revenues are thought to have played a factor in their decision to secede. Serie A’s deal with DAZN, worth €2.5 billion deal, or €840 million per season, to broadcast the majority of games between 2021 and 2024, was less than previous years.
In February 2020 the Juventus share price was valued at €1.24. A month later it had plummeted by over 50% to 61 cents.
Some speculative members also saw their share prices rise, such as Germany’s Borussia Dortmund, whose shares rose 8 per cent despite the club confirming they would not take part in the new league.
The news of rising share prices can be seen as a positive reaction by investors according to FXStreet, given the fact that many of the clubs in question are cash strapped.
GSK Share Price: is the company’s generous dividend in doubt?
GSK Share Price
Less than a year ago the GSK share price (LON:GSK) was sitting at 1,742.2p per share, more than 30% above its current price of 1,339.2p. After a long drawn-out slide over the past 12 months, the pharmaceutical company has seen the early stages of a recovery since March, which was helped after it emerged that activist hedge fund Elliot Management had taken a large stake in the company. However, over the past five years, GSK’s share price is down, and so investors could view the company with some scepticism.
Elliot Management
Following GSK’s laggard performance during the past year, Elliot Management, the activist hedge fund, took a multibillion-pound stake in the company. The move creates question marks over the GSK’s future, some of which could lead to positive outcomes for shareholders. GSK close 5% higher last Thursday after the New York-based firm, run by billionaire Paul Singer, disclosed its investment.
The investment came on the back of widespread disillusionment by shareholders with the company’s hierarchy, namely chief executive Dame Emma Walmsley, who made the decision to break apart its consumer health business from its pharma and vaccine division.
Since Walmsley took the helm in April 2017, GSK shares are down by nearly 20%. While rivals AstraZeneca and Pfizer, who are both producing Covid-19 vaccines, saw double digit increases in the value of their stocks. Walmsley’s position could come under threat although Elliot has remained coy regarding its intentions.
While there are mixed feelings about Walmsley, with some shareholders hoping for new leadership, while others back the CEO, any personnel changes over the coming months could go some way to influencing the company’s outlook.
Dividend
Even as there has been volatility in its earnings, GSK has maintained its total dividend of 80p per year for the last five years. The group intends pay the same amount in 2021, but beyond that point will introduce a new policy with the overall payout “expected to be lower than at present”.
As the company refocuses on its drugs production, which is an expensive endeavour, it could well be forced into a less generous shareholder payout in thee future.