easyJet shares remain steady despite full-year loss
easyJet shares (LON: EZJ) took a small dip on Thursday as the group released a trading statement for the last 12 months.
The budget airline said it is in line for a full-year loss for the first-ever time as passenger numbers have halved amid the pandemic.
For the 12 months to 30 September, the group expects to make a loss of between £815m to £845m.
Passenger numbers over the past 12 months plunged to 48 million due to travel restrictions and quarantine rules.
easyJet has warned that numbers will not return to normal for some time and has called on the government to support the aviation sector as it faces “the most severe threat in its history.”
The group’s chief executive, Johan Lundgren, said: “Based on current travel restrictions we expect to fly c.25% of planned capacity for Q1 2021 but we retain the flexibility to ramp up capacity quickly when we see demand return and early booking levels for summer ‘21 are in line with previous years.
“Aviation continues to face the most severe threat in its history and the UK Government urgently needs to step up with a bespoke package of measures to ensure airlines are able to support economic recovery when it comes.
“easyJet came into this crisis in a very strong position thanks to its strong balance sheet and consistent profitability. This year will be the first time in its history that easyJet has ever made a full year loss,” he added.
easyJet’s revenue plunged almost 75%, falling from £2.3bn last year to £620m.
In the first quarter of the next financial year, easyJet said that it expects to fly just 25% of capacity. The airline will focus on ash generative flying over the winter season in order to minimise losses during the first half.
easyjet shares (LON: EZJ) are steady following the trading update and are +0.12% at 524,04 (0845GMT).
Dow Jones recoups yesterday’s losses with future stimulus almost certain
The Dow Jones posted considerable gains on Wednesday, after an utterly cringeworthy ‘will he, won’t he’ from Donald Trump, which resulted in a pledge to back renewed Fed stimulus, should he retain office in November.
The update follows a back-and-forth of dangling and removing the option of stimulus during Tuesday trading, which saw the Dow Jones rise initially, before slumping by almost 500 points.
With Donald Trump pledging to support post-election stimulus, this pretty much guarantees that the US economy will receive a boost before year-end, with Democrat candidate, Joe Biden, also likely to back to stimulus should he enter office.
The position of the former Vice President was also fortified by recent polling data from Rasmussen, which showed that he was now up by 12 points on Trump
https://platform.twitter.com/widgets.js The significance of this data should not be understated, seeing as Rasmussen is normally Trump’s go-to for polls – though now appearing to forecast a perhaps intractable Biden lead.White House Watch: #Biden Takes 12-Point Lead… https://t.co/ZjDCIg3U5W #BreakingPoll #Election2020 pic.twitter.com/mErOMfxNVn
— Rasmussen Reports (@Rasmussen_Poll) October 7, 2020
https://platform.twitter.com/widgets.js Following these developments, the Dow is up by 1.51%, at 28,193, and just shy of the 28.2k mark it briefly touched on Tuesday. Speaking on the political developments and how they’ve affected the Dow Jones, Spreadex Financial Analyst, Connor Campbell, the gains: “[…] seem to be predicated on the fact that Trump wasn’t necessarily anti-stimulus, but rather anti-Democrat. The proximity of the election was always going to make it tough to get a deal done […] and effectively the President opted for politics over policy.”Rasmussen polls (Trump’s fav) Biden 52 Trump 40 Up from a 8 point lead last week. Trump is imploding. Get out our vote! 27 days!
— Amy Siskind (@Amy_Siskind) October 7, 2020
“However, he did claim he would push out a package the moment he was elected, with advisor Larry Kudlow stating on Wednesday evening that Trump is keen to support airlines and small businesses via the Airline Payroll Support and Paycheck Protection Program schemes.”
“At the moment it’s a lot of hot air, and may be setting up the markets for disappointment down the line. Nevertheless, US investors seem to be buying Trump’s pronouncements.”
Why 55% of investors think whisky might help them beat the COVID wobble
Almost 90% of investors have said they are modifying their portfolio approach, with many turning to alternative investments to spread risk, as COVID disruption sees the UK economy contract by a fifth. According to the 2020 Cask Whisky Buyer Report, we should be looking to a burgeoning asset class, which, in the right hands, could offer investors literal liquid gold.
New research by cask whisky investment specialists, Whiskey & Wealth Club, revealed that many investors favour established alternative assets, with 31% in favour of art, 28% in favour of antiques and 24% opting for wine. However, the key finding of their report is that, in the current climate, some 55% of investors are now interested in cask whisky investment.
Around 57% of those surveyed said they would consider investing in the amber spirit in an effort to diversify their portfolios, while more than two-thirds stated that the potential returns on cask whisky would be their leading motivation to invest.
Commenting on the report findings, Whiskey & Wealth Club founder, Jay Bradley, said: “The more ‘traditional’ alternatives, such as art and, antiques and watches are the most sought-after. Yet cask whiskey, is becoming popular as an ever-appealing prospect for investors looking to negotiate this period of financial uncertainty and meet their changing needs.”
The report also highlighted another interesting trend. While wine proved particularly strong towards the latter stages of the 20th century, and then again with Asian demand in the twenty-teens, whisky, like gin, appears to be having something of a renaissance with young drinkers. Indeed, of those surveyed, over 50% of those aged 25-34 were more likely to invest in the spirit over their older counterparts.
Whisky going from Glens to Global
This popularity is being reflected in whisky and fine spirit sales, with Whiskey & Wealth Club saying that demand has ‘soared’ in recent years, and is set to continue rising. Some of the key performance data they point to include the Scotch whisky secondary wholesale market being valued at $40 million according to IWSR; global whisky exports in 2019 hitting a record of £4.9 billion; and Irish whisky growing by 300% in a decade, with the US market alone worth $1 billion. This trend is also being reflected across ‘status spirits’ as a whole, with the IWSR quoting that the market is now worth $8.3 billion (excluding baijiu), and growing at an annual rate of 7%. Speaking on the potential of using spirits to hedge our way through hardship, IWSR CEO, Mark Meek, says: “Though we conducted our study prior to the current COVID-19 situation, when we look at similar past events, such as SARS and the 2008 financial crisis, luxury goods and status spirits in particular have always recovered to previous levels.” With the fine whisky market having previously been accessible to a select few, the sector is still developing and remains largely unexplored. Now that any investor is able to use brokers to purchase casks of premium spirits straight from distillers, the number of investors enjoying the sweet notes of whisky value appreciation is growing, and boutique distilleries are receiving much-needed injections of capital.Mr Bradley concludes: “As the cask whiskey buying market matures, the key differentiator is the cachet of premium spirit. Investing in a whiskey from a premium distillery or brand — with a limited run— offers the potential for significant return on investment. When it comes to whiskey, quality and rarity will always count.”
And with that, I await the arrival of my bottle of Lagavulin 2001 Distiller’s Edition. Which, though it may count as a status spirit, I have no intention of saving it. Of course, this remind me of a fun adage for any fine drink hedging gone awry: if all goes to pot, you can drink your investment, to momentarily forget your troubles.Greene King to axe 800 jobs as curfew “decimates” industry
Greene King has revealed to axe 800 jobs and close pubs, as the 10 pm curfew continues to wreak havoc on the industry.
The pub operator has begun consultation with 800 employees about a redundancy process, learnt Sky News.
Around 80 pubs are expected to close with one-third of the closures to be permanent.
Greene King is the UK’s largest pub retailer and brewer and employs 38,000 people across Britain.
Nick Mackenzie, Greene King’s chief executive, said recently that the government was not going far enough to help the pub industry amid the social distancing measures and curfew.
He said: “(The industry is) still dealing with the crippling aftereffects of the nationwide lockdown and the cumulative effect of the new restrictions.”
“With Public Health England figures showing only 5% of all outbreaks are linked to hospitality, it feels like pubs are being unfairly targeted when there is little evidence that they enable the spread of Covid-19,” he added.
One in four business owners in the hospitality sector believes that they could go under by the end of the year. The sector has urged the government to rethink the curfew in an open letter disregarding it as ineffective.
The letter was signed by British Beer & Pub Association, UK Hospitality and the British Institute of Innkeeping, as well as pub groups including Heineken and Greene King.
A Greene King spokesman has declined to comment.
One major flaw with Boris Johnson’s 5% mortgage deposit initiative
In something of a politically savvy move, PM Boris Johnson used the Conservative Party Conference to shift focus from the inevitably downbeat discussion of coronavirus, and back onto his galvanising and favourite adage – ‘levelling up’. The centrepiece of this new discussion, among transport links and £3.7 billion to renovate hospitals, was a pledge to drop mortgage deposit rates to just 5%.
This move is the core of the prime minister’s new ‘Generation Buy‘ initiative, which should, and likely will get a lot of support just because of its premise. That being, in the prime minister’s own words:
“A huge number of people feel totally excluded from capitalism, from the idea of homeownership, which is so vital for our society,”
“And we’re going to fix that – Generation Buy is what we’re going for.
He adds: “We need mortgages that will help people get on the housing ladder even if they have only a small amount to pay by way of deposit. It could be absolutely revolutionary, particularly for young people.”
Indeed, as stated by eminent sociologists such as Robert Putnam, and Oxford economist Paul Collier, home ownership is the cornerstone of citizens feeling enfranchised and a sense of belonging within the society they live in.
Once a person owns a property, they put a large part of their toil, time and money into an asset, and in return – in an ideal scenario – it offers them physical and financial security for themselves and their families – in short, it becomes a home.
This attachment to property, with all things being well, increases the likelihood of attachment to the surrounding place and people. This sense of mutual belonging, and shared enjoyment of owning property, can contribute to the fabric of a community, by ultimately creating a shared understanding between peoples who each benefit from owning a tangible chunk of the society they call home.
This privilege, being part earned and part afforded (by rights, laws, property prices) to people, makes them more likely to look favourably upon society, and in turn upon its peoples and its institutions (traditions, laws, culture etc).
If encouraging first-time buyers is a good thing, what’s wrong with Boris Johnson’s mortgage deposit idea?
According to the charity, Shelter, the main problem with the PM’s new scheme is that it sells ‘pipe dreams’ to ordinary people, with the average house price now more than eight times the average (and formally recorded) UK salary. In the words of the charity’s chief executive, Polly Neate:
“You have to question whether the prime minister is in touch with reality. He is talking about giant mortgages at a time when more than 320,000 private renters have fallen behind on their rent as a result of Covid-19.”
“The prime minister needs to stop selling pipe dreams and start facing reality. The only way we will make a dent in the housing emergency is by increasing the number of secure and genuinely affordable homes, and that means building decent social housing.”
Indeed, a consistent supply of new and affordable housing stock is needed, alongside restrictions on overseas buyers. This issue has some potential of being resolved, both with the PM’s housebuilding pledges, but also the infant ‘starter home’ scheme, which, if expanded, could hopefully act as a better-regulated revival of right-to-buy.
The problem that seems to have been missed by many, however, is that it is the banks that are issuing the mortgages (or not, in this case), and we therefore have to ask on what grounds are mortgages being rejected at such high rates.
Sure, deposit size is the issue being tackled here, but something not being discussed – and now a frequently asked question by mortgage providers – is the provenance of mortgage deposits.
As I was told by a solicitor, banks don’t just want to know if you have the money, but where it has come from – because that gives a lot of indication of whether there is more to come. If your mortgage deposit is courtesy of the bank of mum and dad, you’re far more likely to be rejected. What banks want is a deposit generated organically by working groups or individuals, with steady and reliable incomes, not one-off sums followed by promises.
Aside from the difficulties this poses to Boris Johnson’s triumphant-sounding but as-yet unrefined scheme, this kind of mortgage provenance pickiness could be a disaster for the next generation of homeowners.
With most previously existing social housing now privately owned, and home ownership half of what it was at its peak in 1980, the main way to pass on assets to the next generation is via inheritance. This will either be through cash or cash equivalents, or hard assets such as property being divided between siblings. And, if banks are reluctant to accept one-off lumps of cash not earned by a prospective mortgagee, this will disrupt the inter-generational passage of assets.
This, I believe, is an important consideration that must be taken onboard if ‘Generation Buy’ is to stand any chance of success.
Caledonia Mining asks Voltalia to build solar plant to power its Blanket Mine project
Having announced last month that it was trying to raise funds to invest in constructing a solar plant, on Wednesday Caledonia Mining Corporation (AIM, CMCL) announced it had appointed Voltalia (EPA:VLTSA) as the contractor for the project.
The aim of the project is for Caledonia Mining to have a solar power plant to supply electricity to its Blanket Mine project in Zimbabwe. Having agreed an initial design phase for the project, Caledonia said that once an Engineering, Procurement and Construction (EPC) contract has been drawn up, Voltalia will commence procurement and construction.
At present, the indicated commissioning for the 12MW solar plant is expected to be in the final quarter of 2021. Upon completion, the plant is expected to provide some 27% of the mine’s electricity demand, which Caledonia says will reduce the risk of any further deterioration in the quality of grid power.
The contractor, Voltalia, is a Paris-listed renewable energy provider, with ‘considerable’ experience in developing, constructing, operating and maintaining solar plants. The company already have operations in Burundi, Malawi and South Africa.
Speaking on the solar power fundraiser and shareholder considerations, the Caledonia Mining statement read:
“As previously announced, Caledonia raised the funds required to construct the plant by way of an at the market sales process on NYSE American conducted by Cantor Fitzgerald & Co on its behalf. Pursuant to the process, the Company issued 597,963 shares, representing considerably fewer issued shares than the expected 800,000 that it had initially applied to list.”
“The project is primarily intended to protect the Blanket Mine from any further deterioration in the electricity supply situation. Whilst the project is therefore being done for largely defensive reasons, it is expected to yield a modest return to shareholders after taking account of the dilutive effect of the equity issued to fund it.”
Following the seemingly positive news, Caledonia Mining shares dipped by 2.88% or 40.00p, to 1,350.00p a share 07/10/20 11:06 BST. This is p since the start of the year, but below its year-to-date high of 1,890p a share. The company currently has a dividend yield of 1.60%, and a p/e ratio of 4.69, below the basic materials sector average of 34.14.Sosander shares rise as revenue surges 52%
Sosander shares (LON: SOS) rose almost 6% on Wednesday’s opening as the group released a positive half-year trading update.
In the six-months ending 30 September 2020, the fashion retailer posted a 52% increase in revenue and sales momentum also gained strength.
“The revenue growth in the half represents a strong performance in a challenging trading environment, highlighting the Company’s in-depth knowledge of its customer base and its agility in quickly adapting to changes in the market,” said the company in a statement.
During the lockdown period, Sosander limited marketing spend and focused on cash cash preservation and trading its database of repeat orders and prospects. Repeat orders grew by 88% compared to the same period a year earlier.
The company also saw a 26% increase in new customers, despite reducing marketing spending.
The group has also begun trading on the Next and John Lewis websites. Initial sales have been positive and ranges have expanded since August.
Ali Hall and Julie Lavington, Co-CEOs commented: “We are delighted to have continued to demonstrate the strength of the Sosandar brand and agility of our model, growing our sales, product range and customer base during such a challenging trading environment.
“Our customer database, and their loyalty, is the backbone of our performance. The feedback from our customers throughout lockdown has been fantastic and it is clear that they love wearing Sosandar clothes, whatever the circumstances. Following the successful re-introduction of TV advertising and brochure activity in September, we will continue cautiously investing in marketing to underpin customer database growth throughout October and November.
“Notwithstanding the continued uncertainty, we continue to believe that we can take significant market share within our demographic, particularly as the lockdown period escalated growth in online retail. We remain confident in what the future holds for Sosandar,” they added.
Sosander shares (LON: SOS) are currently trading 4.33% higher at 15,65 (1142GMT).
House prices continue to surge post-lockdown – but will the growth continue?
UK house prices are continuing to grow as mortgage applications hit a 12-year high.
The average house price in September was £249,870 – a 1.6% rise from August.
According to Halifax, the market is surging as people are looking for more space following the lockdown. However, growth is not expected to continue. Due to the rising unemployment and impact of the recession, demand is expected to dampen.
The recent rise in house prices means that the average price of a home is now 7.3% more than a year earlier.
“Few would dispute that the performance of the housing market has been extremely strong since lockdown restrictions began to ease in May,” said Russell Galley, the managing director of the lender Halifax.
“Across the last three months, we have received more mortgage applications from both first-time buyers and home movers than anytime since 2008.
“There has been a fundamental shift in demand from buyers brought about by the structural effects of increased homeworking and a desire for more space, while the stamp duty holiday is incentivising vendors and buyers to close deals at pace before the break ends next March,” he added.
The housing market ground to a halt over the lockdown and has since bounced back. Thanks to the temporary cut to stamp duty and built-up demand, the market has continued to grow since social distancing measures eased.
However, the demand is not expected to continue for long and house prices may decline over coming months. Galley said: “It is highly unlikely that the housing market will continue to remain immune to the economic impact of the pandemic. And as employment support measures are gradually scaled back beyond the end of October, the spectre of increased unemployment over the winter will come into sharper relief.
“Therefore, while it may come later than initially anticipated, we continue to believe that significant downward pressure on house prices should be expected at some point in the months ahead as the realities of an economic recession are felt ever more keenly.”
Kromek shares plunge 17% as Covid widens loss
Kromek shares (LON: KMK) have plunged over 17% on Wednesday morning as the detection technology group released results for the year ending 30 April 2020.
Revenue at the group focusing on the medical, security screening, and nuclear markets fell from £14.5m to £13m. Loss before tax, including exceptional items, also widened from £1.3m to £18.2m.
Kromek said they started the year on a positive note and reported a record H1 2019/2020 revenue. This was dented by the impact of the pandemic, which caused disruption and led to projects being postponed.
The company has a positive outlook for the next financial year, with successful orders completed and new contracts won.
The group’s chief executive, Arnab Basu, commented on the results: “We entered 2019/20 in a stronger position than ever before, increasing revenues by 43% in the first half. However, the pandemic caused markets to shut down and materially impacted both our global customer base and supply chain resulting in overall revenues for full-year 2019 to be lower than the previous year. However, the mitigation measures and operational progress we have made during the year means we are well-positioned to rebound strongly.
“We have significantly expanded our production capacity and increased sales of our popular D3S platform that is being deployed in 22 countries, including new contracts with the US Government and European Commission.
“As a result, the Board is cautiously optimistic for the year ahead and will provide updates to the market as the outlook becomes clearer moving forward,” he added.
Kromek shares (LON: KMK) are trading -17.74% at 8,53 (0933GMT).
FTSE 100 remains unfazed as Trump ends US stimulus talks
The FTSE 100 rose 0.2% on Wednesday’s opening to 5,963 points despite Donald Trump abruptly ending US stimulus talks.
Whilst the Dow Jones industrial average fell by 1.3% towards close following Trump’s actions, London’s blue-chip index saw a rise.
Trump tweeted yesterday: “I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business.”
The US President went on to tweet plans to show economic support.
“If I am sent a Stand Alone Bill for Stimulus Checks ($1,200), they will go out to our great people IMMEDIATELY. I am ready to sign right now. Are you listening Nancy?” He was referring to Nancy Pelosi, Democrat speaker of the House,” he wrote.
He continued: “The House & Senate should IMMEDIATELY Approve 25 Billion Dollars for Airline Payroll Support, & 135 Billion Dollars for Paycheck Protection Program for Small Business. Both of these will be fully paid for with unused funds from the Cares Act. Have this money. I will sign now!”
His tweets also affected the price of US oil, which fell by 1.5% to just over $40.
Connor Campbell, a financial analyst from Spreadex, commented on the latest moves by Trump and the rise in the FTSE 100:
“In a surprising turn of events, the European markets didn’t follow the lead of the Dow Jones on Wednesday morning, instead bobbing about in the green.
“The Dow Jones immediately panicked, sinking 375 points to fall back below 27,800, having crossed 28,270 earlier in the session.
“Yet the European markets have openly fairly calmly this Wednesday. In fact, they’ve barely moved at all. The FTSE added 0.1% as it stuck its nose across 5950, with the DAX flat just above 12900 and the CAC lurking around 4900 effectively unchanged,” he added.