Art Investment Q&A With Julian Usher of Red Eight

UK Investor Magazine
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Art Investment Q&A With Julian Usher of Red Eight

Unlike any other investment, when you invest in art you get the benefits of a beautiful piece to hang on your wall as well as the promise of plentiful profits when you do finally sell. We spoke to Julian Usher, Head of Sales of London’s Red Eight Gallery, to discover how he fell in love with the art world and how he’s helping investors enter this thriving market.

Julian, you’ve worked in the art world for a number of years. What drew you to the sector?

I started out in the City as an FX Broker and went on to trade oil in one of the last open outcry pits before computer automation in the late 90s. I then retrained in Executive Search and worked for some of the largest financial institutions before founding Gibson Rose Search & Selection which I ran successfully for 14 years.

Moving into the art world was a breath of fresh air as it’s all about building and developing personal connections. I have always had a love of art, and it was almost serendipitous when an opportunity became available with one of Mayfair’s largest galleries just when I was ready for my next move.

After a few years I was invited to work with Red Eight Gallery which at the time was an ambitious young startup disrupting the art world. As well as being able to fulfill our investors financial goals, working at Red Eight Gallery also allows me to help collectors find artwork they absolutely love. That’s hands down the best part of my job.

What excites you about the art market as an investor?

To put it bluntly, if this were any other industry it wouldn’t be sustainable. Every single artist has a market within the art world. If we look at Banksy for argument’s sake, if his artwork was any other commodity it wouldn’t be sustainable to keep rising in price so dramatically every single time there’s a new auction. If this was any other type of commodity, there would have been a crash by now.

Why do you think it should be on investors’ radars in 2021?

Firstly, with the prospect of ongoing volatility due to the COVID-19 pandemic, art investment is a fantastic method of capital protection. It is an asset class that is not correlated to everything else that is going on in the world. The art market is not correlated to the rise and fall of stocks and shares, it’s not correlated to what the banks are showing, and it’s not correlated to the current pandemic. The reason for this is that art is so subjective. There is always someone who is going to buy your artwork for more than the price you paid for it.

Additionally, investors who enter the art market can enjoy market-beating returns. In 2020 at Red Eight Gallery we showed our investors average returns of 24%, beating

the returns on gold, classic cars, wine, watches, and so on. Having said that, we also have many collectors who come to us looking to acquire beautiful art works to display in their homes or offices which is another unique benefit that you don’t get with any other asset types.

Does art investment tend to be a longer-term strategy? How quickly can investors profitably exit the market?

At Red Eight Gallery we have structured the company to be able to exit investors sooner than most. We have several different exit routes, but typically the longer you hold onto your artwork the higher return you can expect. We always advise our clients on when is the best moment to enter and exit the market by constantly monitoring the landscape of the art world. We also make sure that our clients are investing in the right profile of artist, whether that be emerging artists, well-established or blue chip artists, in alignment with their investment goals.

What makes Red Eight Gallery different from other art investment companies out there?

As a young company coming into an established market, we were aware from the beginning that we needed to do things differently. One service that I know no other gallery in the world offers is our corporate leasing sector. This means we’re the only gallery that can treat our artworks like a buy-to-let property. Investors can enjoy the benefits of a capital growth product, their artwork, showing a regular income.

For example, this asset could generate a 5% guaranteed net return per annum by leasing the artwork out to one of our corporate clients such as serviced office spaces, high-end restaurants and top hotels. As well as generating this annual returns, artwork that is leased also continues to grow in value year on year until you decide to liquidate your portfolio. Thanks to this unique corporate leasing model, Red Eight is able to provide investors with two streams of returns, one of which can be accessed while still retaining full ownership of the asset.

As well as multiple income and exit strategies, another key element to look for when deciding on which gallery to invest with is their ability to source artwork at below market value wherever possible. Here at Red Eight we have the insider connections and expertise to ensure our investors get the very best prices every time.

How is the art market performing right now given the twin headwinds of Brexit and the Covid-19 pandemic?

Paradoxically, the Covid-19 pandemic has been beneficial for the art market since it’s encouraged new investors to look elsewhere. In terms of the artwork that is available, there has also been a flourishing over the lockdown period when a lot of artists were doing nothing but sitting at home and creating.

This has been especially exciting for emerging artists with many having the time to take their careers a bit more seriously. The emerging talent that is coming through at the moment is seriously impressive. Overall, it’s a vibrant and buoyant market right now and it is a great time to start investing in art. In terms of Brexit I don’t see it significantly affecting the art market since there is no correlation to other markets and the value of art work tends to be heavily subjective. In terms of everything that is going on in the world right now, everyone that owns a piece of artwork can rest assured that their money is safe.

For more information on investing in art, please visit www.redeightgallery.com.

Telit Communications shares surge on u-blox merger proposal

Jamie Gordon
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Telit Communications shares surge on u-blox merger proposal
Media speculation has been corroborated by Telit Communications (AIM:TCM) regarding chatter about a preliminary merger proposal it received from Swiss semi-conductor manufacturer, u-blox (SWX:UBXN). Under the terms of the proposal, Telit Communications shareholders would receive u-blox shares with a value of £2.50 per Telit share. This, based on the proposal‘s assumptions, would result in shareholders owning around 53% in the combined company.

Telit said that its Board were considering the merger proposal, alongside its financial adviser, Rothschild & Co, and further announcement would be made as further developments emerge.

The company added that the proposal assumes any such merger would be structured as an offer for Telit by u-blox, but added that there can be ‘no certainty’ that the proposal or any similar will be granted. Its statement added:

“In accordance with Rule 2.6(a) of the Code, u-blox is required, by not later than 5.00 p.m. on 18 December 2020, to either announce a firm intention to make an offer for the Company in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer for the Company, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies.”

“This deadline can be extended with the consent of the Panel on Takeovers and Mergers in accordance with Rule 2.6(c) of the Code.”

Following the announcement, Telit Communications shares jumped 17.95%, up to 198.40p on Friday 20/11/20. This price is its highest since 2017, where it peaked at around 371.00p a share, but ahead of its six-month high of 106.00p. Conversely, u-blox shares dropped by 8.17%, to 53.65 CHF, though still ahead of its year-to-date nadir seen around Halloween, at 45.12 CHF.

Fusion Antibodies shares down on H1 trading update

Safiya Bashir
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Fusion Antibodies shares down on H1 trading update
Fusion Antibodies shares (LON: FAB) plunged 16% on Friday morning’s opening after releasing a trading update for the six months ended 30 September 2020. In the period, revenue increased by 9% from £1.75m to £1.90m. The specialists in pre-clinical antibody discovery said that trading for the period had been in line with the expectations. Losses for the period remained the same as the year previously at £0.47m. The board is not recommending the payment of a dividend in relation to the first half of the current financial year. Commenting on the interim results, Paul Kerr, chief executive of Fusion Antibodies, said: “I’m pleased to report that our revenues have grown despite the fact that the period has been dominated by the COVID-19 pandemic. We have expanded our R&D programme to include a COVID-19 target along with our oncology targets, with the goal of using our Mammalian Antibody Library, which will be branded as “OptiMAL(TM)”, to produce neutralising antibodies against the virus, and have raised capital for that purpose. “We have remained operational throughout changing levels of government restrictions and have taken the steps to sustain the business in the coming months. I would like to thank our shareholders and staff for all their valued support to enable us to continue to grow in these challenging times.” Fusion Antibodies shares (LON: FAB) are trading -8.80% at 114,00 (0958GMT).

Nationwide reports rise in profits on mortgage demand

Safiya Bashir
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Nationwide reports rise in profits on mortgage demand
Nationwide reported a 17% rise in pretax profit to £361m. The lender had a resilient performance for the first half of the financial year, which was boosted by strong demand for buy-to-let mortgages. Chief financial officer, Chris Rhodes, commented: “It is pleasing to see the benefits of our conservative approach feed through into the results for the half-year.” “Our margin has stabilised, costs have reduced and profit is stable compared to the same period last year, despite a rise in impairment charges associated with the pandemic and the current uncertain economic outlook.” The housing market came to a standstill over lockdown, however, has since recovered and mortgage approvals in September were 39% higher than the year previously. Chief executive Joe Garner said: “It is very hard to predict what will happen to the economy, jobs and the housing market in the near future as a result of the pandemic and Brexit. “While there are many uncertainties ahead, Nationwide faces into them from a position of considerable strength. We have steady profits, stable income, a strong balance sheet, and a strong capital position.” Looking forward, Nationwide has warned of the many uncertainties ahead. Earlier this month, the group warned of the likely slowdown in the housing market. Robert Gardner, Nationwide’s chief economist, said: “activity is likely to slow in the coming quarters, perhaps sharply, if the labour market weakens as most analysts expect, especially once the stamp duty holiday expires in March.”

UK retail sales beat analysts’ expectations

Safiya Bashir
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UK retail sales beat analysts’ expectations
UK retail sales have grown for a sixth consecutive month in October. October saw retail sales grow by 1.2%, which was ahead of the 0% expected, according to the Office for National Statistics. Since February, retail sales have increased by 6.7%. Online sales have jumped by 52.8%, whilst in-store sales were down by 3.3%. “Despite the introduction of some local lockdowns in October, retail sales continued its recent run of strong growth,” Jonathan Athow, the deputy national statistician for economic statistics. “Feedback from shops suggested some consumers may have brought forward their Christmas shopping, ahead of potential further restrictions. Online stores also saw strong sales, boosted by widespread offers. “However, the slow recovery in clothing sales has stalled after five consecutive months of increased sales.” The only sectors that are below pre-pandemic levels are clothing stores and fuel. Analysts have warned that this could be the last growth in sales ahead of the new restrictions. Lisa Hooker, consumer markets leader at PwC, said: “There was a recovery in almost every category of the sector, and measuring the period to 31 October, these figures don’t include the last minute rush to the high street after the second lockdown was announced. “In fact, the only category to show a material decline in sales was fashion, with less demand for occasionwear and workwear continuing to hit an already beleaguered part of the market. “The closure of non-essential stores and slump in consumer sentiment earlier this month will severely hamper the sector with little over a month to go to Christmas and Black Friday just a week away. “Looking ahead to December, with online delivery capacity already stretched to its limits, retailers will be hoping for a swift lifting of lockdown restrictions and that consumers continue to show they can bounce back into spending mode, as they did after the first lockdown was lifted in June.”

UK debt hits record highs

Safiya Bashir
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UK debt hits record highs
The UK’s national debt has hit the highest rate since the 1960s. Recent figures from the Office for National Statistics show that Britain borrowed £22.3bn in October, which is £10.8bn more than a year ago. The ONS said: “The extra funding required to support government coronavirus support schemes combined with reduced cash receipts and a fall in gross domestic product (GDP) have all helped push public sector net debt as a ratio of GDP to levels last seen in the early 1960s.” The cost of the pandemic continues to rise and borrowing between April and October is the highest level in that period since records began in 1993. “We’ve provided over £200bn of support to protect the economy, lives and livelihoods from the significant and far reaching impacts of coronavirus,” said Rishi Sunak, commenting on today’s figures. “This is the responsible thing to do. But it’s also clear that over time it’s right we ensure the public finances are put on a sustainable path,” he added. The level of borrowing fell from the month prior, where the UK government borrowed £28.6bn. Overall, Britains debt has grown to £2.06 trillion in October. This year it has grown by a record level. The public sector net debt is around £2,076.8bn, which around 100.8% of gross domestic product (GDP).  

Sage posts 20% subscription growth

Safiya Bashir
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Sage posts 20% subscription growth
Sage has reported an 8.5% rise in revenue to £1.6bn. The software company also saw subscription growth rise by 20.5% to £1.1bn. Operating profit was down 3.7% from £406m to £391m in the year ended 30 September 2020. The growth in revenue was mainly thanks to the growing demand and number of new customers in Northern Europe and North America. Steve Hare, the chief executive, said: “We’ve delivered a strong performance in FY20, achieving recurring revenue growth in line with the guidance we gave at the beginning of the year, despite the COVID-19 pandemic. “I would like to thank all of our colleagues and partners for their continuing commitment to our customers, communities and each other during this period. We’ve also made good strategic progress, delivering against our customer, colleague and innovation commitments. “While the near term remains uncertain, these foundations position us well to support customers as they adopt digital business models, and I am confident that our additional investment in Sage Business Cloud, and in particular cloud native solutions, will deliver stronger growth and drive the future success of the Group,” he added. Looking forward, Sage is expecting recurring revenue growth for the next financial year to be in the region of 3% to 5%, weighted towards the second half of the year. The group plans to invest more in its cloud business.

Sonos shares crank up 30% on ‘record’ results and $50m stock buyback

Jamie Gordon
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Sonos shares crank up 30% on ‘record’ results and $50m stock buyback
Sitting atop the Nasdaq as trading closed on Thursday, home audio innovators Sonos (NASDAQ:SONO) saw their share price rocket on a double-barrelled packet of good news for its investors. The company swung from a $29.6 million loss to $18.4 million income year-on-year during the fourth quarter. Similarly, revenue jumped by 16%, to $339.8 million, while adjusted EBITDA spun around, from a $2.8 million loss to $46.4 million in earnings. The situation was equally peachy for SONOS shareholders, with diluted EPS flipping from a $0.28 loss to a $0.15 profit year-on-year. The big news for stakeholders, though, was that the company have completed a $50 million share buyback programme – in which it repurchased 3.8 million shares – and now the Board have authorised an additional buyback programme for the same amount of shares to be purchased again. Funded by cash and cash equivalents, the buyback will see outstanding Sonos shares absorbed from the open market, which, inevitably, has given the company’s share price another reason to surge higher. Speaking on the company’s updates, and what he sees as a paradigm shift in the business, CEO, Patrick Spence, said: “We reached an inflection point in the fourth quarter that demonstrates the power and profitability of our model. As our customers recognize, Sonos products operate seamlessly together, with more products improving the experience. That’s why year in and year out, our existing customers add more products to their systems – every new household that we gain starts that cycle anew.” “Fiscal 2020 was the 15th year in a row we grew total households by at least 20%, while our existing customers once again showed strong repurchase habits, accounting for a record 41% of total product registrations. We deliver a consistent cadence of new, innovative products and services, and we have only started the process of realizing the lifetime value of our customers, both old and new.” “In fiscal 2020, we delivered a record 8.2% adjusted EBITDA margin, or 10.6% excluding the effect of tariffs, and we project delivering 12% to 14% adjusted EBITDA margins next year, which is ahead of our prior targets,” continued Mr. Spence. He added that, going forwards, the company will remain committed to delivering ‘innovative new products’ and supporting its partnerships. Over the long-term, he believes the company can deliver strong profit margins, cash flow, revenue growth and increased shareholder value. Following the news, Sonos shares soared by 29.84%, up to $22.19 19/11/20. This is not only well above its year-to-date nadir of $7.92, but ahead of its previous all-time-high, of $20.95 back in August 2018.

Nasdaq dodges the over-extended equities correction

Jamie Gordon
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Nasdaq dodges the over-extended equities correction
Tech and growth stock-heavy index, the Nasdaq Composite, escaped the market correction on Thursday, as virus fears crunched over-extended value equities. European equities fell sharply during the morning, with the DAX and CAC falling 0.88% and 0.67% apiece. Following was the FTSE, who, having suffered 5% losses by Kingfisher and Johnson Matthey, extended yesterday’s losses, and fell 0.80%. Speaking on the sour mood across equities, IG Chief Market Analyst, Chris Beauchamp, said: “After the soar-away gains of the past two weeks, equities now look much more richly-valued, and thus vulnerable to an outbreak of bad news.” “This is precisely what we got in the form of spreading infections in the US but also in Japan, a worrying sign indeed for a country that had been successful earlier in the year in controlling the spread.” “Even reports of success for AstraZeneca’s new vaccine were not enough, the impact of these vaccine announcements having been on a declining trend since the first, excitedly-received news from Pfizer almost three weeks ago.” “There appears to be little desire to chase equities at these levels, and perhaps rightly so, with markets looking priced for perfection and still vulnerable to some short-term turbulence. Over the pond, the Dow Jones shed 0.13%. Interestingly, though, the Nasdaq bucked the trend, and bounced by around 0.60%. This was partially led by some modest gains from big tech stocks, with Amazon, Apple and Facebook all rising by around 0.40%, while Microsoft bounced by 0.85% and Alphabet rallied 1%. Other interesting developments came from Sonos, soaring 28%, while hot stocks NIO bounced 7%. In the meantime, Black Friday and the Christmas holiday have seen Wayfair and Etsy soar, up around 6% apiece.

Halma shares rise on “resilient performance”

Safiya Bashir
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Halma shares rise on “resilient performance”
Halma shares (LON: HLMA) opened almost 2% higher on Thursday after the group revealed a “resilient performance” for the six months ended 30 September 2020. Revenue and adjusted profit before tax for the period was down 5% to £618mln and £122mln respectively. The group has raised its dividend by 5% to 6.87p per share. Despite a revenue decline in mainland Europe and the Asia Pacific, Halma reported growth in the US and China. Andrew Williams, chief executive, commented: “Halma’s proven strategic, financial and organisational model has contributed to a resilient performance in testing circumstances, with our financial performance improving as the first half progressed. Throughout the pandemic, we have maintained our focus on employee safety and wellbeing, while working hard to ensure the continued delivery of critical safety, health and environmental solutions for our customers. This was achieved thanks to the tremendous commitment and capability of our colleagues across the Group. Our rapid response to the many new challenges of recent months enabled Halma to not only weather the storm, but to be well positioned to meet the challenges and opportunities ahead. “We have had a good start to the second half, with order intake ahead of revenue and up on the same period last year. Our improving trading performance, together with our strong cash position, will enable us to accelerate strategic investments in the second half of the year. As a result of our progress so far this year, we now expect Adjusted profit before tax for FY 2020/21 to be around 5% below FY 2019/20, compared to prior guidance of 5% to 10% below FY 2019/20.” Halma shares (LON: HLMA) are trading +1.85% at 2.393,41 (1530GMT).
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