Sunak scheme add-ons see FTSE bounce from five-month low

Jamie Gordon
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Sunak scheme add-ons see FTSE bounce from five-month low
The phrase ‘out of the frying pan and into the fire’ springs to mind when watching the FTSE fall and then rise on Thursday, with the UK index taking some comfort from the day’s developments – even with the challenges that lay ahead.

Between the first bit of vaccine-related optimism in a long time, and Chancellor Rishi Sunak’s new assortment of support scheme patch-ups, the FTSE recovered from its five-month low, when it hit 5,726 points during the morning.

Speaking on the index‘s movements during the day, Spreadex Financial Analyst, Connor Campbell, said: “The midday rebound seemed related to good news out of the Oxford vaccine trials, with reports that it was prompting a ‘strong immune response’ in patients.”

“Then there was Rishi Sunak’s announcement that the government is extending the furlough replacement scheme, by launching a new grant scheme for companies in areas under tier 2 restrictions while making changes to the level of employer contributions and number of hours an employee must work for a firm to be eligible.”

This news saw the FTSE 100 bounce from its initial 50 point drop, up to an end of day rally of around 10 points, or 0.16%, to 5,785. More bullish was the FTSE 250. Having dropped by over 100 points to begin with, the index then mustered a 0.60% rally, up to 17,894 points. However, the broader outlook is less positive than today’s developments might suggest. With no clear news on when a vaccine can be expected, and changes in political policy making another potential lockdown difficult to price in, there is certainly room for further downward pressure between now and Christmas. Campbell adds on the day’s developments:

“Yet this had only a limited impact on investors’ disposition. The markets remain deeply worried by the scope and scale of rising covid-19 cases and subsequent restriction measures around the world, but especially in Europe.”

This worry was reflected in Eurozone equities, with the DAX dropping 0.12%, to 12,543 points, and the CAC trying its best to recover, but ultimately finishing with a marginal dip of 0.053%, down to 4,851 points.

Bitcoin bets 85% in favour of Trump victory says Cloudbet

Jamie Gordon
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Bitcoin bets 85% in favour of Trump victory says Cloudbet
While most pundits back a Biden victory, crypto betting operator Cloudbet has to date taken ‘hundreds of thousands of dollars’ in US election bets, most of which have put their Bitcoin on a Trump victory.

At one point, the Economist said there was a 90% probability that Biden would win more electoral colleges than his rival, as well as a 99% chance the Democrat candidate would win more votes.

In stark contrast, Cloudbet said that 85% of its users have their money on Trump retaining the presidency. Speaking on why this irregular pattern has emerged, the company’s statement read:

“There are a few theories about why this dichotomy exists. The betting public is possibly more right-leaning, and libertarian, and therefore more likely to be in Trump’s base. Or that people still remember 2016 and don’t believe the polls. At the time, the odds reached 1.14 for Hillary v +6.00 against Trump. He defied the odds then and could do it again?”

Using their own data on polling and betting odds, Cloudbet’s political page still favours a Biden victory. Though, while some predict a Democrat clean-up with more than 300 electoral colleges, Cloudbet currently sees team Biden claiming 287 college votes, versus 204 for the Trump GOP.
State-by-state electoral map, Cloudbet graphic
This number, while a seemingly decisive victory, is well down on the betting odds split from a week ago. Almost 30 more than its current level, the Democrats were expected to win 316 college votes, while the Republicans are also down by 3 from a week ago, where they were expected to win 207 colleges.

Cloudbet adds that other changes include shifts in sentiment in swing states such as Florida, where odds have swung back towards the direction of the GOP. The company says that:

“The state was looking decidedly blue from a market standpoint last week, with prices firming towards Biden and the Dems. That was fuelled in part by The Donald’s stance on Covid and his comments during his recovery from the disease, which may have alienated the state’s older residents.”

Since then, though, Trump has campaigned twice in Florida, and this appears to have brought the state back to swing status. In fact, Cloudbet now says that two-thirds of the Bitcoin bet on the Florida state outcome is in favour of the state remaining red.

Banks could net £26bn from businesses relying on bounce back loan scheme

Jamie Gordon
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4
Banks could net £26bn from businesses relying on bounce back loan scheme
On Thursday, the Treasury announced that businesses using the government’s COVID loan schemes saw their debt increase by a combined £4.62 billion over the past month. This figure, which includes the £2.18 billion added by the 100% government-guaranteed ‘bounce back’ loans, is only set to rise, with authorities pushing new regions into more stringent restrictions each day. As highlighted by non-profit research group, Positive Money, the latest numbers illustrate a worrying trend: banks are being offered fully-backed profit instruments off of the backs of desperate people (ironically, there’s nothing too abnormal about that). What is abnormal, though, is that many typically healthy businesses are now in need, only because they abided by the rules and closed their doors for lockdown – and they’re now paying the price.

Speaking on the issue, Positive Money’s executive director, Fran Boait, said:

“Burdening businesses with unsustainable levels of debt isn’t the right way to support them at this time. Many of these businesses will struggle to repay, and a growing private debt pile risks dragging down any economic recovery and even a financial crisis.”

“The government’s backing of bank loans has socialised the risks of lending, whilst privatising the rewards. Banks will be netting more than £1bn a year from interest payments on loans that are fully guaranteed by the state.”

“In this next phase of lockdowns, support to small businesses should be provided more in the form of grants and other instruments, rather than more piles of debt. The government must also follow Switzerland in ensuring that banks aren’t able to profit from interest payments on state guaranteed loans.”

In Switzerland, where the ‘Bounce Back Loan Scheme’ was pioneered, banks are not allowed to charge interest on fully guaranteed loans. In the UK, however, lenders are able to charge interest rates of 2.5% on these types of loans, which could see banks receiving over £1 billion per year in interest from indebted businesses. An investigation by the National Audit Office also added that through the Bounce Back Loan Scheme, the government could be handing lenders a total of up to £26 billion.

The result of this bank payday isn’t just an added burden on businesses trying to regrow, but also the potential for a second banking bailout in little over a decade. Having shouldered the cost of lenders’ mistakes after the 2008 crash, the struggles of UK citizens will now make up a sizeable chunk of lenders’ balance sheets over the coming years. Once again, it looks to many to be a reincarnation of ‘rugged individualism for normal people, socialism for banks’.

In fact, it’s probably worse than that. It’s now more like: ‘abide by government guidance, and pay a large corporation for the privilege of doing so’. Indeed, as stated by Ms Boait:

“The fact these loans are fully backed by the government means that we could be walking into another implicit bailout of the banking sector when they fail, with the public paying billions of pounds to cover banks’ losses and protect their balance sheets.”

“This would represent yet another transfer of wealth from the public to the banks. The government must learn the lessons of 2008 and make sure that any bailout, implicit or otherwise, involves conditions which would restructure Britain’s broken banking system so that it helps serve the public good.”

Alumasc shares surge 16% on record profits

Safiya Bashir
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0
Alumasc shares surge 16% on record profits
Alumasc shares (LON: ALU) surged almost 16% on Thursday after the group revealed record profits in the first quarter. The building products, systems, and solutions group saved £2.4m from last year’s restructuring and saw strong cash generation. The chairman of Alumasc said: “It is still too early to know the extent to which the strength in the UK construction industry, which underpins this performance, reflects pent up demand from the period of lockdown as opposed to the true level of ongoing demand. However, there is nothing abnormal in the strong patterns of demand that we have experienced, with new commercial ventures continuing to lag other subsectors of the market.
“Despite the uncertainty present in the commercial sector, Levolux continues to respond to the prior restructuring and remains on track to return to sustainable profit, as it has been in the financial year to date. “The strong bounce experienced by Alumasc in the UK has been supported by a lively export performance. Current orderbooks remain robust in general and include a growing list of export projects won in recent months, which are due to be delivered in the current financial year. “In addition to the growing emphasis on sustainability, there are early signs of the promised acceleration in infrastructure expenditure by the UK government, which is expected to boost demand in the coming months.” Alumasc shares (LON: ALU) are trading +15.97% at 92,20 (1629GMT).

MobilityOne shares surge on +52% revenue

Safiya Bashir
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0
MobilityOne shares surge on +52% revenue
MobilityOne shares (LON: MBO) surged over 15% on Thursday morning after reporting a 51.9% increase in revenue. Pre-tax profit for the six months ending 30 June 2020, grew from £0.42m to £1.07m, contributed by strong growth in mobile phone prepaid airtime reload, bill payment business in Malaysia and an increase in e-payment transactions amid the pandemic. MobilityOne’s other businesses, including the international remittance services in Malaysia and its e-payment solutions activities in the Philippines and Brunei, remained small and did not make significant contributions in this period. The company had cash and cash equivalents of £5.92 million and the secured loans and borrowings from financial institutions amounted to £3.47 million. MobilityOne has shown strong cash generation from operations in the period under review which has strengthened the Group’s financial position as of 30 June 2020. “The Group remains confident on the outlook for the remainder of 2020, taking into consideration the improved financial performance in the first six months of 2020 for the Group’s existing businesses as well as the prospects for the new initiatives being pursued,” said the group in a statement. MobilityOne shares (LON: MBO) are +17.05% at 12,00 (1034GMT).

Daily Mail owner raises profit outlook

Safiya Bashir
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1
Daily Mail owner raises profit outlook
Daily Mail and General Trust Plc (LON: DMGT) has raised its adjusted operating profit this year to £85m to £90m after an increase in advertising revenue. The owner of Daily Mail, Mail Online the i and the Metro, said that it expects group adjusted revenue for the year to be between £1.205bn to £1.215bn. Daily Mail and General Trust reported a stronger than expected September thanks to a growth in advertising revenue and its UK Property Information business, which “benefitted from an increase in property market transactions. This was aided by pent up demand, following some easing of lockdown restrictions, and the temporary reduction in UK stamp duty.” Despite the strong results, the group said that economic repercussions remain “uncertain” surrounding the pandemic. The group said that new restrictions could impact its property, events, and consumer media divisions over the next year. The company said that it had achieved this year’s results “without any government support, including furlough schemes.” Earlier this year, Daily Mail and General Trust Plc warned that results would be impacted by the pandemic. Chief executive Paul Zwillenberg said at the time: “Trading for the first five months of the financial year was in line with our expectations, but the impact of COVID-19 is likely to affect our business adversely.” “I am confident, however, that the group’s diversified portfolio and strong financial position, with more than £700m of cash and bank facilities available, will enable us to withstand a sustained period of global economic uncertainty and continue to invest through the cycle.” Daily Mail and General Trust Plc shares (LON: DMGT) are +3.70% at 700,00 (0920GMT).

Travis Perkins reveals growth in Q3 sales

Safiya Bashir
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0
Travis Perkins reveals growth in Q3 sales
Travis Perkins (LON: TPK) revealed a Q3 trading update on Thursday, where sales were boosted in the three months to the end of September. Thanks to a drive in home improvement projects over the past year, sales at the group grew by 3.9%. Total group sales were down by 3.4% due to store closures over June. Looking forward, Travis Perkins said that during Q3 the Group’s end markets have shown an encouraging recovery from the lockdown period. Uncertainty amid the pandemic and the ongoing Brexit negotiations, however, means it is difficult to forecast performance in the near-term. “Based on the assumption that current volume trends continue, including the ongoing strength in DIY sales, and that any further lockdown measures introduced do not have a significant impact on the Group’s end markets, the Group expects its EBITA performance for 2020 to be in the upper half of the current range of analysts’ expectations 3,” the group said in a statement. Nick Roberts, Chief Executive, commented: “We have reported a positive overall like-for-like sales performance in the quarter as our markets have continued to recover following the impact of the national lockdown earlier this year. This has been driven by a strong recovery in demand across domestic RMI markets, benefitting the Travis Perkins, City Plumbing, Wickes and Toolstation businesses who serve these markets. “Currently this domestic RMI trend remains strong. Whilst local trade activity has recovered well, our trade businesses continue to experience a lag in recovery from larger housebuilding and construction projects. However, there are signs of increasing workflow across these sectors as underlying demand strengthens as businesses have adapted to new and safe ways of working that enable them to keep sites open during periods of local lockdown. “During the quarter, we have made further progress in strengthening the core of our trade businesses, in addition to completing the disposal of Tile Giant.” Travis Perkins shares (LON: TPK) are trading +2.42% at 1.249,00 (0903GMT).  

Relx posts 70% fall in revenue from exhibition business

Safiya Bashir
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1
Relx posts 70% fall in revenue from exhibition business
Relx shares (LON: REL) dipped on Thursday’s opening after the group saw revenues from exhibitions fall 70%. The FTSE 100 company released a nine-month trading update, which revealed major disruption to business from the pandemic. Due to cancelled exhibitions across Europe and North America over the course of the year, the group expects a lower full-year revenue of between £330m‐£360m. Total costs for the year due to one‐off restructuring and cancellations are expected to total £530m‐£540m. Exhibitions are now running in China and Japan, however at a lower revenue. A highlight for Relx is the STM, Risk and Legal business areas, which together accounted for 84% of revenue and 87% of adjusted operating profit in 2019. They have “continued to see a gradual improvement” in underlying revenue growth rates since the end of the first half. Underlying revenue rose 2% at RELX’s scientific, technical and medical business, 3% at its risk and business-analytics unit and 1% at its legal division over the first nine months of the year. Relx shares (LON: REL) are trading -1.12% at 1.634,50 (0833GMT).

Rentokil shares up on a “strong” Q3 performance

Safiya Bashir
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0
Rentokil shares up on a “strong” Q3 performance
Rentokil shares (LON: RTO) opened higher on Thursday morning as the group posted a 10% rise in revenue. The group saw a growth in demand for hygiene services, which offset the lower demand for pest control sales. Rentokil revealed a 17.4% year-on-year increase in revenue to £343.4m for the period in the North America division. Andy Ransom, Chief Executive of Rentokil, commented on the results: “The Company performed very strongly in the third quarter and today’s results further demonstrate the resilience of our Pest Control and Hygiene businesses across the world. We have consistently delivered year-on-year revenue growth each month since the declines in April and May during the peak of the crisis. “This performance has been achieved through a combination of a return to more regular levels of service provision across our categories, continued high demand for one-time disinfection services and the benefit of acquisitions made in 2019. “It remains impossible to predict the future development of the COVID-19 pandemic. It could have a direct impact on our trading performance, including resurgence of global cases of COVID-19, new and continued Coronavirus restrictions, potential customer insolvencies and bad debt, as well as indirectly depending how demand for our services is impacted by the economic consequences of the pandemic. “In addition, we anticipate demand for disinfection services will reduce as businesses return to more normal trading conditions and as service frequencies potentially decrease.” The group has said it expects full-year expectations to be in line with expectations, despite disruption and uncertainty around the pandemic. The FTSE-100 firm will be providing full-year dividends in February. Rentokil shares (LON: RTO) are trading 2.40% higher at 529,40 (0814GMT).

Quinyx acquires AI platform Widget Brain to optimise workforce management

Jamie Gordon
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0
Quinyx acquires AI platform Widget Brain to optimise workforce management
Workforce management tech company, Quinyx, announced on Wednesday that it has acquired Widget Brain, a company that uses AI to automate and optimise workforce scheduling. The company said that the acquisition will allow it to help organisations automate their labour optimisation, by using Widget Brain’s to increase business performance, labour law compliance, and reduce overall labour spend.

“After several years of partnering with Widget Brain, we saw the benefits of a deeper integration of the company’s disruptive and forefront technology with our own software solutions,” said Erik Fjellborg, Quinyx’s CEO and founder.

He continued: “AI and automation is the future for companies needing ROI across their WFM process. This acquisition will catapult our product offering, accelerate our progress and offer ‘best-in-class’ WFM AI solutions to the market.”

Joachim Arts, Widget Brain’s CEO added: “We built an awesome piece of AI that helps our customers make better employee schedules. It’s really taking automation in operational decision-making to the next level. In Quinyx, we have found the perfect partner who is as passionate as we are about giving employees and employers the best schedules ever made.”

According to Quinyx, the Widget Brain service allows companies to create schedules which suit employees’ preferences, which results in higher retention and engagement.

They also add that the Widget Brain team and offices will be integrated with Quinyx. And that the acquisition will bring new brands, such as Facilicom and Royal Vopak, to Quinyx’s existing portfolio, which includes shared global customers like Domino’s Pizza and Wello.

Mr Fjellborg adds: “We already share a close relationship, customers and a common vision to help businesses revolutionise their labour scheduling. This merger was a natural fit and we cannot wait to leverage Widget Brain’s outstanding machine learning and AI know-how to deliver the best and most innovative offering to the market.”

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