Economy grows 6.6% as UK continues recession recovery
New figures from the Office for National Statistics (ONS) have revealed the UK economy to surge by 6.6% in July.
Whilst it was lower than the 8.7% growth in June, the growth shows a steady path to recovery.
The economy remains 11.7% the peak lows amid the Coronavirus pandemic, as the UK fell into the worst recession on record.
The latest figures come as the furlough scheme is coming to an end. There is growing pressure on the government to extend the scheme or provide support to those who still cannot work amid Coronvirus and social distancing rules.
Darren Morgan, director of economic statistics at the ONS, said: “While it has continued steadily on the path towards recovery, the UK economy still has to make up nearly half of the GDP lost since the start of the pandemic.”
In the latest figures, the service sector grew by 6.1%, the production grew by 5.2%, and construction surged by 17.6%.
Rishi Sunak commented on the update: “While today’s figures are welcome, I know that many people are rightly worried about the coming months or have already had their job or incomes affected.”
“That’s why supporting jobs is our first priority and why we’ve outlined a comprehensive Plan for Jobs to ensure nobody is left without hope or opportunity.”
“We’re helping people return to work with a £1,000 retention bonus for jobs brought back from furlough. And we are creating new roles for young people with our Kickstart scheme, introducing incentives for training and apprenticeships, and supporting and protecting jobs in the tourism and hospitality sectors through our VAT cut and last month’s Eat Out to Help Out scheme,” he added.
Ashmore reveals profit rise amid assets under management decline
Ashmore (LON: ASHM) has revealed full-year results for the year ending 30 June.
Pre-tax profits at the asset manager rose 1% to £221.5m, despite a fall in assets under management amid the Coronavirus pandemic.
Assets under management fell 9% to $83.6bn. The group has proposed a final dividend of 12.10 pence, leading to a total dividend of 16.90 pence.
Shares fell by 0.2% in early trading on Friday.
Mark Coombs, the group’s chief executive, said: “Ashmore has delivered a solid operational and financial performance over the past year, against a backdrop of significant market dislocation in the third quarter as a result of the worldwide Covid-19 pandemic.”
“The group’s business model, based on a consistent global operating platform, has proven its resilience in this challenging period and, after the initial negative impact in the third quarter, the investment processes are delivering outperformance as markets recover and client flows have continued to stabilise.
“The economic and social effects of the virus will continue for some time and the medium to long term impact remains uncertain. However, the huge diversity of emerging markets means that countries will be affected and will respond differently, thereby providing a wide range of potential return scenarios for active managers,” he added.
Ashmore shares (LON: ASHM) are trading +0.1% at 392.00 (0939GMT).
Five step plan to help your SME weather the COVID recession
It’s official, we’re in a recession, and new government restrictions on social gatherings and regional lockdowns could be indicative of a worrying reality: the current situation may be bad for an SME but hoping for a rapid improvement is fanciful.
Indeed, in June the IMF predicted that the global economy would contract by 4.9% in 2020. Among the worst-hit in the global cohort will be the UK, with the service-industry-laden economy set to fall by 11.5%, and as much as 14% should a second wave come to full fruition.
And the downturn isn’t all we have to concern ourselves with. With the WEO forecasting an underwhelming 5.4% global growth in 2021, the UK now slumping into recession and vaccine hopes somewhere in the long grass, we ought to think that the grey clouds might be here to stay. So, how can we adapt?
Five steps for staying afloat
The following suggestions are drawn from advice offered by Cameron Gunn, Senior partner at business consultancy firm, ReSolve Group, and Andrew Millet, Founder of accountancy firm, Wisteria.- Maximise Accessibility: With a mixture of official government policy and general anxiety affecting consumer behaviour on the high street, any effective SME will look to access their customers through non-physical channels. While an obvious piece of advice, it is worthy of being repeated: expand your online, deliveries and communications capabilities. Having an online store allows customers to browse and purchase goods from the comfort of their own home; a strong delivery framework allows products to be taken reliably to a customer’s home or workplace; and good communications – such as Microsoft Teams or Zoom – allow staff to communicate face-to-face with one-another and with clients.
- Covet Loyalty: In a time where consumers are counting pennies and looking to brands they trust, it is vital your SME looks both attractive and rewards returning customers. Both of these considerations can be achieved by way of different offers and deals for new and existing customers. But perhaps the best way to do it is to follow the example of a company such as Pret A Manger’s subscription scheme – which incentivises customers to use their service, and then keep using it. By offering a monthly subscription service, a customer feels like they’re snatching up an ostensibly good offer, but in fact it’s something of a quid quo pro arrangement. What an SME gains is not just a customer who keeps coming back to make the most of their subscription, but someone who regularly incorporates a product into their routine and lifestyle, and thus will inevitably showcase said product(s) to their peers.
- Expand Your Offering: Though a recession might not seem like the ideal time to spend cash wildly on new ventures, stagnancy can also see an SME fall behind the crowd. To avoid this, a two-pronged approach can be employed: extension and adjacency. Extension strategy is nigh-on self-explanatory – take your current offering a step further and add new opportunities to customers (for instance as a restaurant owner, you might consider loyalty schemes, deliveries, or themed events). A more daring route is adjacency strategy, which means looking at your current offering, and then attaching something related but ultimately new to what you’re doing (once again, if you run restaurants, you might consider opening a bar). One way this latter option might be achieved is via mergers and acquisitions, which allow a business to expand and create alliances without investing in something entirely new.
- Keep Your Business Watertight: Again, this a measure of basic prudence and good business practice, but one that ought not to be overlooked. According to Andrew Millet, having strong corporate governance embedded in an SME’s culture, as well as up-to-date audits, can help a company survive a downturn in its performance. Not only can good financial management help a company to conserve cash and reduce costs, but also track the staff and products of each business division, and weigh up their respective expenses versus returns.
- Get the Word Out: While it may seem counter-intuitive to spend more on advertising, it is important to ring-fence a healthy marketing budget. Not only should an SME spread the word about any new products or deals on offer, but in times where consumers are being careful about spending, creative marketing might be the difference between your brand being chosen over a competitor. It also shows that your company is upbeat and open for business – though of course it is important not to focus more on style than substance.
Various Eateries seeks AIM admission to capitalise on COVID aftermath
Various Eateries, the group which operates restaurants in the UK such as Coppa Club and Tavolino, announced on Thursday that it plans to seek admission to trading on the AIM – the alternative investment market of the London Stock Exchange.
The company said that it expected the entire share capital of the company to be admitted to trading between the end of September and the start of October 2020. It added that once this occurs, it hopes to raise £25 million by way of a placing of its Ordinary Shares on Admission.
The Various Eateries statement then went on to lay out what it viewed as the company’s strengths. The first of which, its leadership, is made up of Founder, Hugh Osmond; Chairman, Andy Bassadone; CEO, Yishay Malkov; CFO, Oli Williams; and Chef Director, Matt Fanthorpe. Between them, the leadership team have experience leading Pizza Express, My Kinda Town, Strada, Côte Bistro, Bill’s, The Ivy, Gordon Ramsay, Itsu, McDonald’s and Jamie’s Italian.
Its second strength, its statement claims, is its established core brands – Coppa Club and Tavolino – which operate from ten sites, five of which are in London. Third, it lauds exciting growth opportunities, with the company Directors stating that a combination of reduced competition and increased site availability will give the Group an exciting pipeline of acquisition opportunities. The chance to grow the Coppa Club and Tavolino brands will be contingent on the company being admitted to the AIM, which will give it greater access to the funds necessary to realise its future acquisitions and working capital ambitions.Various Eateries is raring to go
Speaking on the situation as it stands, and the company’s eagerness to take the step onto the AIM, Founder Hugh Osmond commented:“I believe that Covid-19 is the biggest event to hit the UK economy outside of war-time. Whilst I deplore the terrible effect it has had on our industry, we are confident that there will be major opportunities for a well funded group with strong management to build a fantastic business in the aftermath of Covid. We are also confident that we have one of the most experienced teams ever assembled in the hospitality sector, 2020s-appropriate brands, and an established platform business and I am firmly of the view that the opportunity is as big as it was in the early 1990s when I jointly led the acquisition of PizzaExpress.”
“The funds raised will be principally used to take advantage of the opportunities and accelerate growth. Our senior team has an established track record of acquiring, converting and opening sites and, with, what we perceive to be, the availability of premium sites at attractive rents, I believe the prospects for Coppa Club and Tavolino are exciting.”
“There are also a number of well-known brands out there that are struggling to navigate the pandemic and various other industry pressures. Should the right opportunities present themselves, we would consider supplementing our organic growth through acquisition, offering distressed brands a more sustainable future as part of the Group.”
Mr Osmond added that the company’s brands are designed to cater to changing consumer preferences, with Coppa Club providing all-day flexible spaces and outdoor areas, as well as separate bar, lounge and restaurant areas. Similarly, Tavolino is described as ‘a modern all-day Italian bistro’, led by a team who have led some of the UK’s most well-known sit-down restaurants of the last two decades.Games Workshop shares rally over 11% as it rolls the dice with online sales focus
Wargame manufacturer and retailer Games Workshop (LON:GAW) saw their shares rally over 11.55% on Thursday morning, following news that the company had outperformed in sales during the three months to the end of August.
The company stated that trading during the period was ahead of Board expectations, with estimated sales of around £90 million considerably ahead of the £78 million recorded for the same period last year.
Similarly, the company booked an estimated operating profit of £45 million, up from £28 million year-on-year. Further, Games Workshop expects royalty income for the three month period to come in at £3 million, 50% higher than the £2 million sum for the same period a year prior.
The company attributed this success to an expansion in its online sales and trade channels, which likely allowed the group to tap into the demand for stay-at-home entertainment. It did add, however, that its retail outlets are still in a process of recovery, with the long-term impact of the pandemic remaining unclear.
Restating its hesitant celebration of the recent period’s trading, the company statement read:
“The Board recognises that this performance is better than the prior year but is also aware that it is still early in the financial year. A further update will be given as appropriate.”
In an effort to confer a fair share of this recent success back to its shareholders, the company said it would be paying a dividend of 50 pence per share on 23 October 2020 for those who have registers by 18 September.
Following the update, Games Workshop shares are now up by 8.02% or 700.00p, to 9,425.00p per share 10/09/20 12:20 GMT. Analysts’ consensus 12-month price target for the stock stands at 9,500.00p per share, with today’s price representing a 110% increase on where it stood a year ago today.
The Group’s p/e ratio is 39.89, their dividend stands at 0.32%.Greatland Gold shares stagnant before exploding higher on positive Havieron results
Australian mining company Greatland Gold plc (AIM:GGP) watched its shares sit still in early trade on Thursday before closing the day significantly stronger on a positive update from Newcrest (ASX:NCM) at Greatland’s Havieron deposit.
The company said that the newly-identified Breccia zone has continued to be expanded with further drilling, with the Northern Breccia zone now measuring 300m X 100m X 300m and highlighting a bulk tonnage target.
The company stated that infill drilling results had shown that higher grade zones demonstrated ‘massive’ sulphide mineralisation. It added that these new results also indicate the potential for additional mineralisation at the Northern Breccia region.
Recent tests yielded five assay segments with estimated gold contents ranging from 116.2m and 2.6g/t, to 29.8m at 6.7g/t. Similarly, the group recorded copper assays including 0.65% at 607m and 0.33% at 551m.
Greatland continued, saying that it was still on track to deliver an initial resource at Havieron in Q4 2020. It added that potential commencement of decline at the project might occur between the end of 2020 and start of 2021, with the potential to achieve commercial production around two to three years after that.
Greatland Gold response
Commenting on the new data, company CEO, Gervaise Heddle, stated:“The expansion of the new Northern Breccia zone is an important development that highlights the potential for a bulk tonnage mining operation at Havieron. Significantly, excellent results from step out drilling to date indicate the presence of higher-grade, massive sulphide mineralisation within the breccia bodies, which are yet to be fully defined by drilling and remain open at depth.”
“As Newcrest’s ongoing exploration programmes continue to define the extent of the mineralised system, we are also pleased to confirm the expected delivery of an initial resource at Havieron in Q4 2020. Alongside the progress at Havieron, we are continuing with our exploration plans at our other assets in the Paterson region and look forward to providing the market with further updates.”
Investor notes
Following the update, Greatland Gold shares fluctuated between rallying and dipping, currently down by 0.26% or 0.045p, to 17.26p a share 10/09/20 11:30 GMT. Greatland Gold shares closed Thursday higher at 19p. Shares in the miner are now up over 990% in 2020 alone. The company currently has one ‘Buy’ rating and a p/e ratio of -170.09. Opinion is split down the middle on whether the company deserves an ‘Underperform’ or ‘Outperform’ rating, though a 12 month target price of 12.00p would indicate a potential 29.40% downside.Dunelm skips final dividend but posts strong summer sales
Dunelm (LON: DNLM) has reported a 13.3% fall in pre-tax profits for the year ending in June.
However, the retailer remains confident and it saw strong trading for July and August of this year, sales grew by 59% and 24% respectively.
Dunelm will not be paying a final dividend this year.
Chief executive Nick Wilkinson said: “We made good progress before the onset of Covid-19, building our digital capabilities, extending our product choice and value, and broadening and deepening our customer base.”
“Whilst the year to date performance has been materially ahead of our initial expectations, it is very difficult to provide any meaningful guidance on the future outlook given the uncertainty in the wider economy and the potential impact of further regional or national lockdowns.
“However, we remain confident in our ability to adapt to the environment and are well positioned to continue to grow market share,” he added.
Analysts at house broker Peel Hunt said in a note: “The short-term strength in online sales (up 130% in current trade) and stores (up double-digit LFL) is unlikely to end in three weeks as our forecasts might suggest.”
“However, we are more interested in how Dunelm’s customer base is broadening, driven by rising brand awareness and increased digital interactions. Store only customers are also shifting online, which should lead to a rising base of active customers shopping more categories, more frequently.”
Dunelm shares (LON: DNLM) are trading -2.32 at 1,429.08 (0929GMT).
Dixons Carphone shares jump on strong online sales
Dixon Carphone shares (LON: DC) rose over 9% in early trading on Thursday as the group revealed strong sales and increased online demand.
In the 17 weeks to the end of August, the group reported a 12% rise in electrical sales across Ireland and the UK, as well as a 16% like-for-like rise in international revenue.
Whilst in-store sales plunged 90% over the course of the pandemic and led to the group revealing plans to shut all standalone Carphone Warehouse stores, online sales in Greece and the Nordics surged by 115% and 49% respectively.
Following its strong performance in the Nordics, Dixon Carphone has said it is considering a stock market listing for its Nordics business.
Alex Baldock, the chief executive, said that the decision would “shine a light on the value of the Nordics business whilst retaining it as part of the group”.
“We’ve started the year well, but nobody knows what the future holds and, like many, we remain cautious in our outlook,” Baldock added.
The mobile market remains tough, despite the rise in online sales.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, praised the group Shoplive platform, which allowed customers to book online appointments from home.
“That helped online sales triple while stores were closed, and it’s very encouraging to see that since Dixons Carphone flung open the doors once again, online sales tills have continued to ring at double the rate they did last year,” she said.
Dixons Carphone shares (LON: DC) are trading +7.08% at 87.70 (0914GMT).
Morrisons shares fall on dent to profits
Morrisons shares (LON: MRW) fell this morning after the supermarket revealed a dent in profits.
Despite an 8.7% growth in like-for-like sales for the first six months of 2020, pre-tax profit fell 25.3% to £148m due to costs related to COVID-19 safety measures.
Total revenues at Morrisons were down 1.1% £8.73bn.
The safety costs surrounding COVID-19 cost the supermarket a total of £93m – which was offset by business relief rates to cost a reduced £62.
During the lockdown period, the group hired an additional 45,000 employees.
The supermarket will pay an ordinary dividend of 2.04p. Shares sank 4.5% in morning trading.
Chief executive David Potts said: “From the start of the pandemic we stepped up and put the company’s assets at the disposal of the country to help feed the nation.”
“Morrisons is at the heart of local communities and responded quickly when it mattered most, and we are very grateful for the British public’s appreciation of all the vital work our colleagues are doing. I believe we are seeing the renaissance of British supermarkets.
“We are now looking forward to holding on to what we created in the first half, building on our colleagues’ inspiration and innovation, and sustaining the momentum of a broader, stronger Morrisons. I’d like to again thank every Morrisons colleague for their incredible efforts: you’ve earned your key worker status several times over.”
Speaking of the results revealed by Morrisons today, Richard Hunter, head of markets at Interactive Investor, said: “Contrary to popular belief, the pandemic was not an automatic home run for the supermarkets and the 25% drop in pre-tax profits for Morrisons is proof positive that additional sales come at an additional price.”
“Overall, the reduction in profit for the period and an overall decline in revenues are understandable, but unfortunately both light of expectations,” he added.
Morrisons shares (LON: MRW) are currently trading -4.15% at 186.90 (0900GMT).
AstraZeneca shares slip as vaccine trial put on hold
Shares at Cambridge-based pharmaceutical firm AstraZeneca (LON:AZN) have slipped 1.55% as its coronavirus vaccine trial is put on hold after a participant suffered a suspected adverse reaction.
The firm has suspended all clinical trials of its proposed COVID-19 vaccine – which had been in the final stage of human tests – while it routinely reviews the incident before the study is allowed to resume.
The exact nature of the participant’s reaction has not been revealed, but AstraZeneca has indicated that they are expected to make a full recovery.
The company is currently one of the leading agents in the race to develop a vaccine for the novel coronavirus, and had been on track to release one by the end of the year until the delay was announced.
It is not yet clear how costly the setback will be, but a spokesperson confirmed that delays to the initial estimate should be expected.
AstraZeneca is said to be “working to expedite the review of the single event to minimise any potential impact on the trial timeline.
“As part of the ongoing randomised, controlled global trials of the Oxford coronavirus vaccine, our standard review process triggered a pause to vaccination to allow review of safety data.
“This is a routine action which has to happen whenever there is a potentially unexplained illness in one of the trials, while it is investigated, ensuring we maintain the integrity of the trials”.
Clinical trials are often paused due to events of this nature, but few studies have attracted as much media attention as this one, and the setback will no doubt leave many anxious that AstraZeneca may be falling behind.
Shares at the company slipped 1.55% to 8219.00p at BST 13:05 09/09/20, but have already made a significant recovery after a nearly 8% plummet when markets opened this morning.