Even at a 36% discount, Warren Buffett suggests IAG shares aren’t worth it
Heading up the FTSE 100 losses with a 25% dip in early morning trading, BA owner IAG (LON:IAG) continued the tailspin it began at the end of the previous week.
The drop began after the company announced a rights issue last week, in hopes of raising £2.5 billion in exchange for increasing its share count by 60%. While this was enough to see its share price dilute by 36%, and lose its footing at 134.00p, the looming Covid second wave has hit travel and hospitality equities hardest, and triggered further concessions in IAG shares on Monday morning.
After recovering slightly, the company’s shares now stand at 94.32p, down 14.68% since the opening bell 21/09/20 11:15 BST.
Billington shares bounce 10% on £21m worth of new contracts
Structural steel and construction safety specialists Billington Holdings (AIM:BILN) saw its shares rally 10% on Monday morning, on news that it had been awarded three new contracts with a combined value of £21 million.
These contracts were awarded to its structural steel division, Billington Structures, with one of the three contracts having been signed with a ‘global multi-national corporation for a value of £12 million.
The company added that the contracts are in the power, manufacturing and commercial office sectors respectively, and that they are set to be delivered between Q4 2020 and throughout 2021.
Responding to the update, company CEO, Mark Smith, commented:
“The award of these three contracts is great news for Billington and is a testament to our team in a continued difficult trading environment. We look forward to working closely with the clients to successfully deliver these projects.”
Following the news, Billington shares are now up 9.71% or 29.60p, rallying to 336.80p per share 21/09/20 10:09 BST. It currently has a 59.28% ‘outperform’ rating set by a poll of Marketbeat‘s community, with 115 votes for ‘outperform’ and 79 for ‘underperform’. It has a p/e ratio of 7.71, which means it is trading at a less expensive rate than most of its industrial sector products peers, who have an average p/e ratio of 21.06. Similarly, Marketbeat report that Billington has a dividend yield of 8.03%, and a payout ratio of 0.60%.Informa shares down as group swings into loss
Informa (LON: INF) has reported a pre-tax loss of almost £740m on Monday as the group was hit by the impacts of the Coronavirus pandemic.
The exhibition group has said it will carry out a cost-cutting plan to save £600m and cut jobs across the world.
Over the last six months, the group revealed £814.4m, compared to the same period a year earlier where revenue reached £1.4bn.
Since March, shares in the group have fallen 45%.
“The combination of our resilient subscriptions-led businesses and the actions we are taking position Informa securely through to the end of 2021,” said chief executive Stephen Carter.
“We remain confident that Informa will emerge from the pandemic with stability and security, delivering long-term sustainable growth and shareholder value.”
The company, which is the world’s largest exhibition group, has cancelled its dividend as well as raise £1bn pounds in equity.
Informa shares (LON: INF) are currently trading -2.94% at 369,40 (0933GMT).
Furlough: £215m voluntarily repaid by employers
New figures from the HMRC has revealed that 80,433 employers have returned money from the furlough scheme to the government.
Over £215m has been returned by employers who took payments either in error or that they did not need.
HMRC welcomes those employers who have voluntarily returned CJRS grants to HMRC because they no longer need the grant, or have realised they’ve made errors and followed our guidance on putting things right,” said the HMRC.
Companies including Redrow, Barratt and Taylor Wimpey have returned money that they claimed under the furlough scheme.
The HMRC said that an estimated £3.5bn of the furlough scheme could have been paid to fraudsters.
HMRC’s permanent secretary, Jim Harra, said: “We have made an assumption for the purposes of our planning that the error and fraud rate in this scheme could be between 5% and 10%. That will range from deliberate fraud through to error.”
“What we have said in our risk assessment is we are not going to set out to try to find employers who have made legitimate mistakes in compiling their claims, because this is obviously something new that everybody had to get to grips with in a very difficult time,” he said.
“Although we will expect employers to check their claims and repay any excess amount, what we will be focusing on is tackling abuse and fraud.”
Despite warnings of widespread job cuts that will follow the end of the furlough scheme, the UK government has rejected plans to extend the scheme.
Boris Johnson has said that extending the scheme will only keep people “in suspended animation”.
“The Coronavirus Job Retention Scheme will have been open for eight months from start to finish – with the government helping to pay the wages of over 9.6 million jobs so far,” said a spokesperson from the Treasury.
“But we’ve been clear that that we can’t sustain this situation indefinitely and must now focus on providing fresh work opportunities for those in need across the UK.”
FTSE 100 slides on second wave warnings
The FTSE 100 fell sharply on Monday morning as growing warnings from scientists caused shares across travel, hotel and pubs to slide.
London’s blue-chip index fell over 90 points, or 1.6%, at the open as scientists warn that Coronavirus in the UK has reached a tipping point.
Chief medical officer Chris Whitty has said: “The trend in UK is heading in the wrong direction and we are at a critical point in the pandemic. We are looking at the data to see how to manage the spread of the virus ahead of a very challenging winter period.”
On Sunday, the UK saw 3,899 new cases.
The FTSE 100 was dragged down by shares in Rolls Royce and IAG, which both fell over 10% whilst shares in JD Wetherspoons plummeted by 7%.
Shares in banks also fell on Monday. Barclays, Lloyds and NatWest have all fell over 5%.
Richard Hunter, Head of Markets at interactive investor, said: “With no confirmed vaccine for the coronavirus as autumn approaches, there is likely to be additional strain on government resources as they attempt to stave off a second wave, as the colder weather inevitably brings further cases to contend with.”
“Prospects for a sharp economic recovery have all but disappeared, as global growth receives the new threat of a resurgent pandemic. In addition, with talks for a further fiscal stimulus in the US seemingly in deadlock, investors have been choosing to vote with their feet over recent trading sessions given the deteriorating outlook.”
“In the UK, the pandemic also continues to add to concerns for general economic health, including the hospitality sector where further lockdowns would pile on additional pressure. The end of the furlough scheme will likely lead to another spike in unemployment and Brexit negotiations are at a critical point. The FTSE100 is now down 22% in the year to date,” he added.
Superdry shares plummet on £167m loss
Superdry shares (LON: SDRY) plummeted after the group posted a pre-tax loss of £166.9m amid the Coronavirus pandemic.
In the 52 weeks to 25 April, revenue fell by 19.2% to £704.4m whilst net cash increased by 2.2% to £36.7m.
The group has said it will not pay its full dividend this year.
Trading has slightly improved towards the end of the financial year when stores had reopened after lockdown and social distancing measures were in place.
Whilst stores and closed over lockdown and trading was hit, online sales did improve slightly.
Ongoing uncertainty means that the clothing retailer is not providing full-year guidance.
Julian Dunkerton, founder and chief executive, said: “As with all retailers, we have experienced significant disruption to our operations, and this has inevitably had an impact on our FY20 results, but I’m proud of how everyone in the business has stepped up during this exceptional time.”
“While our underlying profit has been impacted by trading performance during the year, including Covid-19 related store closures, I am particularly pleased by how strongly ecommerce has performed, with FY21 first quarter revenues nearly doubling year-on-year.”
“This has been complemented by our increased digital consumer engagement, which helped drive a stronger womenswear mix than we have ever seen before. I’m pleased that we have delivered a good increase in the full price mix, which is up 12pts year-on-year and has had a positive impact on gross margin,” he added.
The group remains uncertain about the upcoming year with impacts surrounding the pandemic.
“We remain cautious on the shape of the economic recovery, and the impact this may have on our ability to turnaround performance in line with our plan. Consequently, we recognise there is a material uncertainty, and are not providing formal guidance,” said the group
Superdry shares (LON: SDRY) plummeted 11.45% on Monday morning to 134,50 (0830GMT).
HSBC exposed in $80m Hong Kong Ponzi scandal
Leaked documents belonging to the so-called FinCEN Files – a collation of 2,657 banking documents, of which 2,100 have been classified as ‘suspicious activity reports’ – have revealed that HSBC (LON:HSBA) allowed the fraudulent transfer of $80 million into accounts based in Hong Kong between 2013 and 2014, despite being aware that the transaction was a scam.
The leaked files indicate that HSBC had facilitated an $80 million (£62 million) investment scam – known as a Ponzi scheme – just months after agreeing with regulators that it would improve procedures, following a US criminal prosecution related to money laundering by Mexican drug lords.
The bank was forced to pay a record $1.9 billion in December 2012 to settle the allegations that it had knowingly allowed for the transactions to go ahead. US prosecutors alleged that at least $881 million in drug-trafficking money had been laundered through HSBC accounts.
What did the FinCEN Files find?
The 2,657 leaked documents, containing more than 2,000 ‘suspicious activity reports’ or SARs, revealed how some of the world’s biggest banks have been knowingly involved in money laundering affairs despite legal obligations to interfere with criminal activity. SARs do not necessarily count as explicit evidence of financial crime, but banks are supposed to send them on to authorities when they suspect clients may be breaking the law. If evidence is found that the activity is indeed illegal, banks are meant to halt the transfer of money while a criminal investigation is launched. The SARs identified in the FinCEN Files were instead leaked to Buzzfeed and subsequently shared with the International Consortium of Investigative Journalists (ICIJ). BBC’s Panorama led the research for the BBC as part of a “global probe” into money laundering in the world’s top financial institutions, while the ICIJ had already fronted the reporting of the Panama Papers and Paradise Papers leaks, which had exposed the offshore tax evasion of scores of celebrities and wealthy individuals worldwide. The files have since been submitted to the US Financial Crimes Investigation Network, with documents spanning from 2000 to 2017 detailing transactions worth a cumulative $2 trillion. Speaking on behalf of the ICIJ, Fergus Shiel told the BBC that the FinCEN Files are “insight into what banks know about the vast flows of dirty money across the globe… [The] system that is meant to regulate the flows of tainted money is broken”.What did HSBC do?
The issue is more in what HSBC did not do. The investment scam that the bank had been made aware of was called WCM777, launched by Chinese national Ming Xu with the promise of a global investment bank that could guarantee 100% profit in just 100 days. Xu fashioned an alternative identity as an Evangelical preacher based in Los Angeles, using Christian iconography to recruit believers and poor from the Latino and Asian communities in the region. His seminars, webinars and social media campaigns managed to drum up more than $80 million in what Xu claimed was an investment opportunity in cloud computing software. Thousands of people became victims to the fraud, from American citizens to residents in Colombia, Peru, and even the UK. Regulators from California told the BBC that HSBC had been alerted to Xu’s potential illegal activity as early as September 2013, when the state first reported that WCM777 was fraudulent. The bank filed its first SAR related to the scheme when it was alerted to a potential scam involving $6 million being transferred to accounts based in Hong Kong. Bank officials stated at the time that there was “no apparent economic, business, or lawful purpose” for the transactions, and noted suspicions of “Ponzi scheme activities”. A second SAR was reported in February 2014, concerning more than $15 million of suspicious money transfers, and an additional report was filed in March 2014. Despite being aware of the allegations, HSBC did not formally shut any of Xu’s accounts until April 2014, after a US financial regulator, the Securities and Exchange Commission, filed charges against the bank. By then, the vast majority of the funds linked to the accounts had already been withdrawn. Xu was later arrested by Chinese authorities in 2017 and served a 3 year jail sentence for his involvement in the scam. He alleges that the bank “had not contacted him about his business” to date, and maintains that WCM777 was not a Ponzi scheme. Instead, Mr Xu claims that “his aim had been to build a religious community in California on more than 400 acres of land”.What else did HSBC do wrong?
Analysis from the ICIJ has also revealed that between 2000 and 2017, HSBC had identified “suspicious transactions” involving accounts based in Hong Kong which had a cumulative value of about $1.5 billion – with some $900 million linked to explicit criminal activity. According to the BBC, the bank’s reports failed, however, to identify “key facts about customers, including the ultimate beneficial owners of accounts and where the money came from”. This is all in spite of the Mexican drug-trafficking scandal back in 2012, which had seen the bank receive a slap on the wrist from US prosecutors for turning a blind eye to illegal activity in HSBC-registered accounts. A spokesperson for HSBC commented: “Starting in 2012, HSBC embarked on a multi-year journey to overhaul its ability to combat financial crime across more than 60 jurisdictions… HSBC is a much safer institution than it was in 2012”. HSBC stated that it had “met all of its obligations under the [agreement struck with US prosecutors]”, according to US authorities residing over the case.What does this mean for HSBC?
On the face of it, the FinCEN Files indicate that Britain’s largest bank allowed for millions of dollars to be transferred as part of a money-laundering scheme despite repeatedly being warned of a potential scam. This inevitably detracts from HSBC’s legitimacy and trustworthiness as a front-running financial institution. The scandal has shown that HSBC has – on more than one occasion – facilitated, and thus contributed, to the concerning culture of “dirty money” transfers around the world, of which regulators have no doubt only seen the tip of the iceberg. What’s more, the leaked files show that the system designed to flag up suspicious activity is, in effect, defunct. Repeated alerts about WCM777’s potentially criminal nature failed to spur HSBC to shut the accounts, even as the amount of cash involved continued to rapidly increase. Perhaps the most alarming lesson to be learned from the FinCEN Files is that HSBC is not alone in its negligence towards money laundering. A number of other big banks, including Barclays and JP Morgan, have also been incriminated. The documents have unveiled a culture among big banks, of essentially turning a blind eye to illegal activity, which has allowed for criminal groups to transfer and stockpile funds which help make their cause even stronger, and thus more difficult for authorities to dismantle further down the line. Even once they do, in many cases, the damage has already been done.FinCEN Reactions on Twitter
The FinCEN Files have already begun to stir up activity on Twitter ahead of the market reaction expected tomorrow morning. Some comments have been listed below:BOOM! Secret govt documents reveal how giant banks move trillions in suspicious transactions, enriching themselves while facilitating the work of terrorists, kleptocrats, and criminals. And the US government fails to stop it. https://t.co/rm9UFZJQg4@BuzzFeedNews #FinCENFiles
— Mark Schoofs (@SchoofsFeed) September 20, 2020
I’m told on very good authority that people within Deutsche Bank are in a panic. https://t.co/beQyCnUq69
— Scott Stedman (@ScottMStedman) September 19, 2020
So today the #FinCENFiles will be released. Hundreds of journalists have worked on exposing how corrupt governments, criminals and banks are around the world. So no surprises there. I doubt it will result on anything changing unfortunately. But be interesting to see
— Rob Nichols (@TheRealRobN) September 20, 2020
The underlying proposition of the initial batch of #FinCENFiles stories, that global financial surveillance (and a distinctly US-centric morality) should be being used to proactively, and globally censor and block transactions without judicial oversight is a deeply disturbing one
— Sarah Jamie Lewis (@SarahJamieLewis) September 20, 2020
Covid and work turmoil – what can bosses do to protect staff well-being?
Between companies suddenly going belly-up, mass redundancies, and working from home, the Covid pandemic has been a time of major change and anxiety for most of us. While many would like to keep pushing on, some are overcome by stress, and among that latter group are bosses, who are trying to balance financial prudence with staff well-being.
Trying to offer a helping hand is Sam Dunn, an author, former Senior Leader at GlaxoSmithKline and GW Pharmaceuticals, and now Head of Corporate Wellbeing at professional-focused mental health clinic, The Soke. Mr Dunn offers us some insights into how bosses can support the well-being of their staff, and in the process of doing so, likely offers as much help to bosses as he did to the staff themselves.
The consistency-flexibility duality
Mr Dunn talks about the seemingly contradictory give-and-take between the need for bosses to protect consistency while being flexible and understanding. These requirements, while opposing, are an unfortunate but necessary balancing act of setting standards while being compassionate, in the unprecedented territory of returning to work during a global pandemic. On consistency, Mr Dunn stated that this involves, “making suitable and effective provisions agreed at a corporate level for the safety of employees”. He says that there ought to be a standardised approach to hygiene, face coverings, work stations and facilities, which enforces not only reciprocity between staff in carrying out these behaviours, but invokes the sense that leaders are conducting themselves with a strong duty of care towards staff. This duty of care, and exacting standards, need to be understood by all employees. Staff feedback should also be encouraged, to allow for both dialogue with leaders and necessary adaptations to be implemented as and when necessary.On flexibility, Mr Dunn stated that it is about, “understanding and recognising that each individual employee that a leader manages is unique”. Apropos the dialogue suggestion, it is important that bosses spend time not only initially – but regularly – talking to each staff member, to ascertain how they are feeling, and what about the existing situation is and isn’t working for them.
He adds that the anxieties of each employee can manifest in forms ranging from the ‘gung ho’ to the extremely nervous and cautious. On this, he says that within a consistent organisational framework, there is scope for strict boundaries, but also room to be accommodating and understanding of each employee’s individual needs and situation.
Boss & staff well-being and the work from home phenomena
Mr Dunn identifies the change to home working and being furloughed, as a paradigmatic shift in work culture, which few of us were personally prepared for (even if we have the technical infrastructure to keep working). He says it has impacted confidence, self-esteem, career progression and in some cases we might even say productivity and well-being.
He says that these changes need not change the fundamentals key to good leadership. For instance, he says that spending time with staff, being open to have discussions and offering encouragement, are all essential as staff wrestle with the uncertainty of home working or transitioning back to the office.
Indeed, some might be keen to come back to office life – socialising, being focused behind a desk and escaping the house after months of confinement. Others, however, might be more hesitant – between childcare considerations, transport and food costs, and enjoying controlling their own pace at home without office pressure and long commutes. Regardless of which camp staff find themselves in, Mr Dunn says it is vital that bosses are understanding and ‘don’t expect too much too soon’.
He says part of the process might involve drawing up ‘back to work’ plans, which ought to be realistic and regularly reviewed, with the ultimate goal of guiding both staff and bosses back into a sound working environment.
He adds:
“Also, and this really makes a difference, leaders should collectively meet and share their insights from conversations with their employees looking for themes and patterns that affect groups of employees. HR, wellbeing or L&D folks can be a great help here to help collate and build a picture, identifying where work could be done to support groups of employees and at organisational level. For example, identifying development opportunities, running townhall meetings on specific topics, clarifying career pathways and so on.”
The transition back to the office, and potentially back home again if a second wave transpires, will be stressful for everyone. Maybe things will slowly pass back into the old normal but the bottom line is that all of this is as yet uncertain. With factors such as a potential Covid second wave, and the rise of remote working opportunities, some of the harsher realities of our current situation might be softened by greater understanding and support for both staff and bosses.