Protesters tell Bank of England to back up its Green Recovery promises

Jamie Gordon
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Protesters tell Bank of England to back up its Green Recovery promises
Members of the public gathered outside of the Bank of England on Thursday to protest the bank’s failure to back up its green recovery promises with action.

Protesters amassed on Threatneedle Street as the Bank of England announced its decision on QE and interest rates, as well as its Financial Stability Report. Many were seen holding Andrew Bailey masks and speech bubbles with the Governor’s statements about the need to decarbonise and seize the opportunity for a green economic recovery. While others called on Bailey to, “put your money where your mouth is”, with others reminding the bank of its environmental report, which stated that economic stability could not exist without climate and environmental stability.

However, despite the protests, the latest Bank of England FSR made no reference to climate risks, other than to say that it would be delaying its climate stress tests until 2021.

What has been done wrong?

Despite pledging to support the ‘Build Back Better‘ initiative, research posted by Positive Money indicates that the majority of the bank’s financial support is currently going towards high-pollution sectors, who also feature some of the biggest companies laying off high numbers of staff.

Research from the New Economics Foundation also noted that £11.4 billion of the Bank of England’s QE programme had gone towards high-carbon companies, while research form Positive Money indicated that more than 56% of the bank’s Covid Corporate Financing Facility had gone towards bailouts for airlines, and oil, gas and chemical companies.

Rachel Oliver, head of campaigns and organising at Positive Money, said:

“Andrew Bailey understands that environmental breakdown poses an existential threat to economic and financial stability, but he is failing to put his money where his mouth is. It is hugely disappointing that the Bank of England is putting climate on the backburner when it has such a huge opportunity to do something about it.”

“Not only is the Bank of England failing to protect people and planet, it’s also putting corporate elites ahead of the rest of us, giving billions of pounds of no-strings-attached bailouts to firms which have splashed out on dividends while slashing tens of thousands of jobs.”

“If the government truly wants to ‘build back better’, it needs to make sure all of the powerful tools at our central bank’s disposal are geared towards supporting a fairer and greener recovery. Doing so is the only way to make sure the coronavirus crisis isn’t followed by an even bigger climate crisis.”

What can the Bank of England do better?

Campaigners are calling for the bank to attach social and environmental conditions to its corporate bailouts, in order to combat both unemployment and environmental degradation.

According to a YouGov survey commissioned by Positive Money in July, some two thirds of the public supported socially and environmentally conditional financial bailouts.

Perhaps what could have been done is, alongside pledges to retain jobs, companies could have incentivised via a ‘negative’ payback initiative. Whereby, they would pay back more or less money to the Bank of England, on the basis of how much of their operations become decarbonised in the next five years – for instance, the relative scale and commitment BP puts into its renewables push – with the worst performers paying back what is owed, plus interest, and potentially even an additional levy.

In addition, there needs to be a greater push to increase company’s financial responsibility and self-reliance. While maximising profit is an understandable goal, there needs to be greater consideration for posterity. Much as individuals have had to supplement government support with their own savings, the far more able multinational companies ought to be to carry their own weight during an economic downturn, and this is certainly achievable if they assign a portion of their earnings every year into an internal crisis fund for rainy days. Such policies, I believe, should be mandatory, and another conditionality for receiving government support. Alas, the Bank of England reneging on its promises, and today’s protests, are a reminder of what can only be seen as a – thus far – missed opportunity, and the bank needs to do better if and when another round of financial support is called for.

ITV cancels its dividend as earnings half and ad revenue takes ‘severe’ hit

Jamie Gordon
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1
ITV cancels its dividend as earnings half and ad revenue takes ‘severe’ hit
FTSE 100 listed British media company ITV (LON:ITV) announced it would cancel its dividend with first half trading being adversely affected by the coronavirus pandemic. With a mixture of reduced advertisement, broadcast and studio revenues, the company announced both its adjusted and statutory EBITDA had halved year-on-year, down 50% and 49% to £165 million and £159 million respectively.

These drops were led by the company pausing the majority of its production activities in mid-March, which resulted in a 17% decline in ITV Studios revenues during the first half, down to £630 million.

Similarly, total Broadcast revenue was down 17% to £824 million, while total external revenue dropped 17% to £1.22 billion during the half year.

The real kicker for the company, however, was what it described as its ‘most severe’ decline in demand for advertising across its categories, with total advertising revenues plummeting 43% in Q1 and 21% in Q2. The situation was equally bleak for ITV shareholders, with the company stating that in light of economic uncertainty, the Board of the company had decided to cancel its interim dividend to conserve cash. Further, and with another hit to shareholders’ dividend cover, adjusted and statutory EPS dropped by 53% and 90%, to 2.9p and 0.5p respectively.

With a glimmer of positivity, teh company reported that total viewing had increased by 4%, with ITV Family light viewing up 8% and online streaming up 13%.

This positive news is somewhat offset, however, when we consider that the latter figure refers to a wider trend in online viewing, which is by-and-large a threat to ITV’s long-term viewership. Further, the company noted that Family share of viewing was down 4% during the first half, to 22.6%, due to the BBC’s high news output helping it to gain viewership during the period of uncertainty.

ITV response

Commenting on what she described as ‘one of the most challenging times in the history of ITV’, Chief Executive, Carolyn McCall, said:

“While our two main sources of revenue – production and advertising – were down significantly in the first half of the year and the outlook remains uncertain, today we are seeing an upward trajectory with productions restarting and advertisers returning to take advantage of our highly effective mass reach and addressable advertising platform, in a brand safe environment.”

“We have made good progress in our digital transformation. The majority of our colleagues are working seamlessly at home thanks to the investment we have made in technology and systems and this has helped us continue to deliver on our strategic objectives. The success of the Hub investment plan contributed to driving online viewing up 13% and monthly active users up 15% in H1. We continue to successfully roll out Planet V with around 35% of our VOD inventory now delivered through this platform, which is on track to be live with most of the major agencies by the end of the year. BritBox is ahead of target on subscribers in the UK and we have announced plans to roll out BritBox internationally.”

“The future is still uncertain due to the pandemic but the action we have taken to manage and mitigate the impact of COVID-19 puts us in a good position to continue to invest in our strategy of transforming ITV into a digitally led media and entertainment company.”

Investor note

After dropping following today’s update, ITV shares have since recovered, now up 0.67% or 0.41p, to 61.31p per share 06/08/20 13:10 BST. This is far below its median 12 month target of 92.50p set by 16 analysts, and represents a 42.76% year-on-year drop.

Mondi shares rally on ‘resilient’ performance amid COVID challenges

Jamie Gordon
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1
Mondi shares rally on ‘resilient’ performance amid COVID challenges
FTSE 100 listed packaging and paper company Mondi plc (LON:MNDI) saw its shares tick higher on Thursday, even as its half-year fundamentals lagged behind the performance of the previous year. Likely already pricing in lower paper and pulp prices, as well as COVID challenges, today’s optimistic response to the company’s results is likely led by a feeling that things could have been worse. The group’s half-year revenues dipped by over €300 million year-on-year, down from €3.77 billion, to €3.45 billion for the half-year period. Similarly, its underlying EBITDA fell from €894 million to €738 million, while its underlying operating profit and profit before tax dropped by €155 million and €166 million, to €524 million and €466 million respectively. The overview was equally conservative for Mondi shareholders, with first half basic underlying EPS narrowing year-on-year from 96.2 to 73.0 EUR cents, while its interim dividend payments were cut from 27.28 cents, to 19.00 cents per share. Regarding its rates of return and cash from investments, Mondi stated that its cash from operations was down from €737 million at 30 June 2019 and €898 at December 31, to €602 at 30 June 2020. Similarly, its underlying EBITDA margin contracted from 23.7% to 21.3% on-year, while its Return on Capital Invested fell from 23.2% to 17.1%.

Mondi response

Commenting on the results, and taking note of both the group’s resilience during COVID trading, as well as its ability to reinstate its dividend, CEO Andrew King said: “Sustainable packaging continues to be a long-term priority for our customers and wider society. As a leading producer of both paper and flexible plastic-based packaging, we are in a unique position to support our customers’ environmental goals with packaging that is sustainable by design adhering to our principle of paper where possible, plastic when useful.” […] “Going into the second half of 2020, heightened macro-economic uncertainties remain. Pricing across our key pulp and paper grades is below or in line with the average of the first half. Demand for packaging daily essentials remains robust while we continue to see weakness in certain industrial end-uses. Uncoated fine paper order books have picked up from the lows seen in the second quarter, albeit we do not expect a near-term recovery to pre-pandemic levels. We have rescheduled planned mill maintenance shuts which will have an impact on the second half of the year.” “We are confident that the Group will continue to demonstrate its resilience in the event of a prolonged macro-economic downturn, while remaining well-positioned when the recovery takes place. This is underpinned by the Group’s integrated high-quality, cost-advantaged asset base, culture of continuous improvement, portfolio of sustainable packaging solutions and the strategic flexibility offered by our strong cash generation and financial position.”

Investor insights

Following the news, the Mondi shares rallied 1.65% or 23.50p, to 1,448.50p per share 06/08/20 12:28 BST. This is comfortably below its consensus 12-month target price of 1657.10, set by 13 analysts, with today’s price also representing a 6.66% year-on-year dip. The company’s p/e ratio is 9.21, its dividend yield currently stands at 1.71%.

Virgin Atlantic files for bankruptcy protection, warns it is running out of money

Bronte Carvalho
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0
Virgin Atlantic files for bankruptcy protection, warns it is running out of money
Virgin Atlantic – partly owned by British entrepreneur and billionaire Sir Richard Branson – has filed for bankruptcy protection in the US, just weeks after securing a £1.2 billion rescue deal to save the airline from impending collapse. According to Sky News, a US court has heard that Virgin Atlantic is seeking protection under Chapter 15 of the US Bankruptcy Code, which allows a foreign debtor to shield their assets in the country. The move comes amid similar court proceedings in the UK, where the firm is looking to secure approval from creditors before it goes ahead with a major restructuring plan. The company’s lawyers have assured that Virgin Atlantic is ‘financially sound’, but warned that a significant restructuring is necessary to guarantee the airline’s future as the travel industry faces a steep uphill battle before it returns to pre-pandemic normality. Virgin Atlantic has now become the second of Branson’s airlines to face an insolvency crisis this year, after Virgin Australia went into administration in April, with The Guardian reporting that the airline owed $6.8 billion to more than 12,000 creditors. Meanwhile, the BBC has divulged that a London court has been told by the company’s lawyers that Virgin Atlantic cash flow is already dropping to ‘critical levels’, and warned that it could run out of cash altogether by the week beginning 28th of September – not even a month since securing a rescue deal with Atlanta-based financial services firm First Data. The airline operates mainly long-haul flights, with its transatlantic fleet entirely grounded between April and July due to the historic lack of demand. As a result, Virgin Atlantic shut its operations at Gatwick Airport and announced it would be axing up to 3,000 jobs to offset losses. David Allison QC, a lawyer for Virgin Atlantic, stated that the company had maintained “a fundamentally sound business model which was not in any problems at all before the Covid-19 pandemic”. Nevertheless, he conceded that the airline was poorly prepared for the catastrophic impact of coronavirus on the travel industry, saying: “Passenger demand has plummeted to a level that would, until recently, have been unthinkable. As a result of the Covid-19 pandemic, the group is now undergoing a liquidity crisis”. He warned that without a ‘solvent recapitalisation’, Virgin Atlantic would have no choice but to slip into administration in September and sell its assets. The restructuring plan needs to get approval by early-September, Allison stated, with a creditors meeting set to go ahead on August 25. Until then, Virgin Atlantic is continuing its flight schedule as usual, saying: “With support already secured from the majority of stakeholders, it’s expected that the Restructuring Plan and recapitalisation will come into effect in September. We remain confident in the plan”. Earlier this year, Sir Richard Branson came under fire for his plea to the UK government to bail out his struggling airlines, with critics citing his extensive personal wealth. He later pledged to give up his luxury Necker island home in the Caribbean as collateral, but was rejected by UK ministers.

WH Smith prepares to cut 1,500 jobs as sales dive due to pandemic

Bronte Carvalho
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1
WH Smith prepares to cut 1,500 jobs as sales dive due to pandemic
High street newsagent WH Smith (LON:SMWH) has become the latest UK retailer to announce a restructuring plan after sales were slashed by the impact of the coronavirus pandemic in the first half of 2020. The firm has reportedly begun to consider axing as many as 1,500 jobs – 11% of its total workforce – primarily across its airport and train station sites, which have suffered from the near-paralysis of the travel industry during the peak of the lockdown. Revenue across WH Smith’s travel arm was down by 92% in April and May, and although some stores have reopened since global travel restrictions have been incrementally loosened, sales were still a sore 73% below average during July. The company has now reopened 53% of its UK travel branches, citing its focus on ‘increasing average transaction value in these locations’ in the coming months. WH Smith’s high street stores have started to recover as consumer appetite returns, after revenue slipped by 71% in April amid widespread store closures and an almost universal plunge in retail sales. In July, WH Smith reported its high street sites had benefitted from the relaxation of lockdown rules, but sales were still down 25% year-on-year. Last year WH Smith made £155 million in profit, but has warned that its proposed restructuring could cost the company between £15-19 million. It reassured investors that its liquidity position remains nonetheless ‘consistent’, citing as-yet-undrawn revolving credit facility of £200 million and bank facility of £120 million, as well as its eligibility for the UK government’s Covid Corporate Financing Facility scheme. However, the FTSE 250-listed company admitted that the impact of the pandemic looks set to see WH Smith make a £70-75 million pre-tax loss for the year ending August 2020. The firm’s trading update contained a comment on the impending restructuring plans: “As a result of the impact on passenger numbers and lower footfall on the UK high street, we have taken the difficult decision to review our store operations across both our Travel and High Street businesses. We are now starting a collective consultation on a proposed restructure which could lead to up to c.1,500 roles becoming redundant. This has been a very difficult decision and we are committed to supporting all our colleagues throughout this process and ensuring it is conducted fairly”. Chief executive Carl Cowling provided a statement as part of WH Smith’s trading update, saying: “In our Travel business, while we are beginning to see early signs of recovery in some of our markets, the speed of recovery continues to be slow. At the same time, while there has been some progress in our High Street business, it does continue to be adversely affected by low levels of footfall. As a result, we now need to take further action to reduce costs across our businesses. “I regret that this will have an impact on a significant number of colleagues whose roles will be affected by these necessary actions, and we will do everything we can to support them at this challenging time”. Despite the firm’s less than stellar news, WH Smith’s share price seems unfazed – in fact, it is actually up by 1.12% to 996.50p at BST 15:02 05/08/20, compared to a decidedly more dire picture when shares slipped by 12.41% back in March. Nevertheless, shares are still well below the year high of 2660.00p recorded in December 2019.

Gold price hits $2,000 but might still be worth investing in

Jamie Gordon
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2
Gold price hits $2,000 but might still be worth investing in
Gold renewed its all-time-high record on Wednesday, only a week or so after breaking its previous record. The price of gold now stands at $2,000 dollars, a real milestone that readies investors for the potential of prices in the $2-3k range in future, but is a continued rally something we can expect? As we stated previously, gold is on one of its longest price rallies in history, continuing from 2018 and expecting to consolidate somewhere in 2020, the COVID pandemic acted as a nitrous kick to revive the tail-end of the rally. Now, we see ourselves coming to the end of the first pandemic shock wave – having been through March, where most companies watched their shares haemorrhage in value, and a June where we saw something of an over-exuberant recovery. What we need to figure out next, is whether there will be a second, equally disruptive spike in cases, or whether other risk factors might contribute to a prolonged gold rally.

Gold price risk factors

A key pressure with either downward or upward pressure is the US NFP data release, which, if it confirms another reading, could strengthen the dollar and put downward pressure on gold. However, despite seemingly manageable initial unemployment data, US jobless claims indicate that the country are sauntering off of the recovery track, and without swift action by the Fed, this could strengthen gold-buying activity. Also, any Fed assistance would likely come in the form of lowering its interest rates or extending its asset-buying programme, both of which would likely stimulate gold prices. Further, and despite some initial signs of recovery, we can always rely on the political newsreel to rock the boat. As stated by Chief Currency Analyst at HYCM, Giles Coghlan: “Stock markets may be making modest daily gains but the chance of a second outbreak of cases, which seems to be increasingly likely, could result in these gains being lost. What’s more, we shouldn’t forget that there are some big-ticket events on the table for the rest of 2020, including the US Presidential election, Brexit and the ongoing US-China trade war. These will all have significant implications on the financial markets depending on how they play out. As a result, investors are taking a conservative approach by reducing their risk exposure.”

How should we approach gold?

Naturally, gold is a game of volatility. If sentiment indicates uneasiness and uncertainty, then gold tends to flourish. The key takeaway about how markets are affected by pandemics – more so than by orthodox economic downturns – is that they’re entirely shaken by the fact that they can’t control a virus. Not only are pandemic responses largely at the behest (or mercy) of political figureheads and the services they commission, but the potential -as we’ve seen – for illnesses to resurge and take a second pass at societies and markets, gives them both long-lasting potential, and the ability to truly spook investors. If you’re feeling unsure about the exact nature of market sentiment, or sentiment in the US market, it might be worth looking towards the Chicago Board Options Exchange’s CBOE Volatility Index, which offers real-time market expectations of volatility based on S&P 500 options.

Does the BP share price offer better value than Shell?

UK Investor Magazine
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Does the BP share price offer better value than Shell?
With both of the FTSE 100’s major oil companies recently reporting, the BP share price (LON:BP) and Shell (LON:RDSB) have become very different propositions to the companies investors are traditionally accustomed to. In the wake of the coronavirus crisis, the global oil market is yet to recover and has forced major changes at London’s largest oil companies. In this article we explore whether the BP share price now offers better value than the Shell share price given the historic conditions in the global energy market.

BP share price

By first looking at the the BP share price in absolute terms, it is evident that BP has outperformed Shell in 2020 with BP shares down 34% year-to-date and Shell losing 46% of it’s value. Having trading mostly inline with each other, a deviation in the two companies became pronounced as the two companies announced their second quarter earnings. This deviation was largely noticeable in the performance of the shares on the respective days of their announcements, providing a gauge of investor sentiment to the underlying performance of the businesses. BP shares rallied some 4%, whilst Shell sank around 6% on the day of their announcements. The rally in BP shares took place despite a cut in their dividend, suggesting the market had largely priced in a reduction in payouts and were more concerned with the underlying profitability and management of the companies.

Second Quarter Losses

Both companies reported historic drops in profitability. BP reported a $6.7 billion adjusted loss in the second quarter compared with a $2.8 billion profit in the same period a year prior. Shell, on the other hand, produced an adjusted profit of $600 million, down from $3.5 billion a year ago With BP swinging to huge loss but still able to stage a rally, the reaction in the share prices following the releases should be attributed to analyst estimates going into results. The reaction in BP’s share price reflects the significant beat of a loss of $8.45 billion, predicted by analysts polled by Bloomberg whilst Shell beat by a much smaller margin.

Dividends

As BP released the dramatic loss, they took the historic decision to slash their dividend in half by cutting it from 10.5 cents to 5.25 cents. With GBP/USD exchange rates currently at 1.309, this equates to 4.01p meaning if this level of dividend is maintained, investors can expect an annual yield of 5% from a BP share price of 314p. Shell took the decision to cut their dividend in the prior quarter, slashing the dividend by two thirds to 16 cent. This was maintained in the second quarter and with Shell trading at 1,158p, investors in Shell will be receiving a yield of 4.2%. Based purely the income from the two shares, BP would seem more attractive to income seekers with their higher yield, but this approach is too simplistic to fully evaluate the relative value of each company’s equity. It must be noted the earnings coverage of these dividend is non existent in the case of BP and negligible in the case of Shell so attention must be paid to the cash position of each company.

Cash

BP’s cash position has actually improved based from the end of 2019 as the company tapped the bond market for cash to the tune of $11 billion. The bond issue, coupled with $25 billion of impairments and writes offs, helped offset BP’s whopping $20 billion pretax loss meaning BP’s cash rose to $34.6 billion from $18 billion in the first quarter. With dividend payments reducing, this amount of cash would seem sufficient to support dividends and provide resources for their shift strategy towards a low carbon energy producer. However, the $20 billion pretax loss should be a concern for investors as a similar drain in the coming quarters would put the cash position under pressure. This is highlighted by BP’s lack of Free Cash Flow. Measured by deducting investing cash from operational cash flow, BP’s Free Cash Flow amounts to a $272 million deficit. Shell, conversely, produced Free Cash Flow of $12 billion, suggesting Shell has greater scope to invest in the next chapter of their shift towards greener fuels and the next big growth area for energy companies.

Shift To Renewables

With the destruction of oil demand and associated fall in oil prices, the focus on renewables has increased for both BP and Shell. Both companies have strategies to increase the proportion of clean power they produce, and when assessing the relative value of each over the long term, this must be central to any valuation thesis. However, with revenue from renewables limited in both companies, the judgement of their low carbon activities falls to natural gas. In this respect, Shell has a far larger exposure to natural gas and would be judged to be ahead of BP in becoming a greener energy producer.

Summary

With the absence of any meaningful multiples based on earnings in the first half of 2020, the assessment of value falls to cash and ability to shift towards the demands of government targets on emissions. In both of these respects we would feel Shell has the edge over BP, despite BP providing investors with a higher yield.        

Segro boosts its dividend by 10% despite profit plunge

Jamie Gordon
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2
Segro boosts its dividend by 10% despite profit plunge
FTSE 100 listed business and logistics property investor Segro (LON:SGRO) saw its shares rally, as it announced it would hike its dividend, despite a less than consistent set of results for the six months ended June 30. The company’s adjusted profit before tax was up 6.5% year-on-year, from £131.8 million to £140.4 million. However, its IFRS profit before tax illustrated a notable decline, dropping 46.2% on-year, from £419.8 million, to £220.9 million. The income picture was equally mixed for Segro shareholders, with adjusted EPS rising 2.5% to 12.5p per share, while IFRS EPS fell 47.4% year-on-year, down from 37.1p, to 19.5p. However, shareholders would have been buoyed by the news that despite a mixed bag of results, Segro decided to hike its interim dividend per share by 9.5%, from 6.3p to 6.9p. Looking ahead, the company remained positive, boasting that occupier demand remained strong. During the period, it secured £33.7 million of new headline rent – up from £33.3 million the year before – with new pre-lets increasing by £3.6 million on-year, to £18.8 million.

It added that it could see potential rent of £22 million from development completions, 64% of which have been leased by 30 June. It continued, saying that rents agreed in reviews and renewals were on average 10.4% higher than previous passing rents, while vacancy rates had increased but ‘remains low’ at 5.2%, and customer retention ‘remains high’ at 88%.

Segro response

After speaking on the company’s resilient performance during lockdown, company Chief Executive, David Sleath, discussed the consumer shift to e-commerce, and how this has fortified demand for efficient logistical spaces and supply chains:

“The impacts of the pandemic are accelerating the adoption of technology, particularly e-commerce, across society and have resulted in a renewed focus by many occupiers on the critical importance of efficient, resilient logistics supply chains. These factors play to the quality of our portfolio and should continue to support and enhance occupier and investor demand for our prime warehouses, both in the UK and, increasingly, on the Continent.”

“Our existing portfolio has performed well and our development programme has expanded, with a pipeline of additional near-term pre-let projects which is approximately twice the size of a year ago. This, combined with our well-located land bank, means we are in a strong position to make further progress in the second half of the year and beyond.”

Investor insights

Following the news and a relatively bright outlook, Segro shares rallied 3.22% or 31.00p during trading on Wednesday, up to 994.20p per share 12:50 GMT. This is above the company’s 12-month median target price provided by 19 analysts, which stands at 910.00p a share, and represents a 35.35% jump year-on-year for the same day. The company’s p/e ratio is 12.15, its dividend yield stands at 2.08%.

FTSE 100 held steady by BP and travel optimism

UK Investor Magazine
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0
FTSE 100 held steady by BP and travel optimism
The FTSE 100 traded largely sideways on Tuesday after a strong rebound on Monday that reversed some of the losses last week over coronavirus fears. The FTSE 100 was down 13 points to 6,019 on Tuesday afternoon having largely ranged between 5,990 and 6050 for most of the morning. BP was among the top risers after the oil major confirmed the were to half their dividend, but posted a better set of underlying results than expected by the market. BP shares were up in excess of 6% in mid afternoon trade on Tuesday. Diageo was the FTSE 100’s biggest faller as the drinks giant counted the costs of coronavirus and the impact on sales. Diageo’s full year sales were down 8.7% as coronavirus offset strength in the first half. “Fiscal 20 was a year of two halves: after good, consistent performance in the first half of fiscal 20, the outbreak of Covid-19 presented significant challenges for our business, impacting the full year performance,” said Ivan Menezes, Chief Executive of Diageo. Diageo shares were 5.5% weaker in the wake of the news. IAG was higher amid optimism surrounding demand for travel on the back of an upbeat update from easyJet. “European airlines are on the rise after easyJet saw better-than-expected summer demand,” said Joshua Mahony, Senior Market Analyst at IG. “Airlines are soaring in early trade today, with easyJet bringing a rare bit of good news after seeing stronger-than-expected demand despite the pandemic.” Shares in easyJet were up over 9% whilst IAG was 4% higher. easyJet are no longer in the FTSE 100 having slipped to the mid cap index in the last reshuffle. “With the airline expecting to run flights at 40% of capacity, we are seeing a clear sign that many people are confident enough to travel despite the Covid risks that have held some back,” Mahony continued. “With the airlines likely to see better-than-expected revenues after improved demand, the subsequent alleviation of pressure on their finances should lessen the need for further funding going forward.” IAG have recently announced plans for a €2.75 billion rights issue to help them through the COVID-19 crisis.

Pizza Express and Dixons Carphone to axe a combined 1,900 jobs

Jamie Gordon
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1
Pizza Express and Dixons Carphone to axe a combined 1,900 jobs
Restaurant chain Pizza Express (HKG:3396) and electrical goods store Dixons Carphone (LON:DC) are among the latest companies to announce large-scale redundancies during lockdown.

Dixons Carphone

The tech retailer said it would be cutting 800 jobs as it began restructuring its staff for a new way of running stores. The company, which owns Currys PC World, stated that retail managers, assistant managers and team leaders will be the ones cut at the company, while new positions in sales management, customer experience and operational excellence management will be made available. Another feature of the reshuffle will be a shift to a greater virtual focus, with some employees being moved onto its online ShopLive service, where customers are given advice and support via video link with staff. Commenting on the announcement, company CEO, Mark Allsop, said: “We remain committed to our stores as part of an omnichannel future, where we offer the best of online and stores to our customers.” “As part of this, we want to empower our store leadership teams, create a flatter management structure and make it easy for our customers to shop with us, however they choose.” “This proposal will ensure in-store roles are focused on giving a seamless customer experience and exceptional service across all our customer channels, whether online or in-store.” “Sadly, this proposal means we have now entered into consultation with some of our store colleagues. This was not an easy decision and we’ll do everything possible to look after those colleagues we can’t find new roles for, financially and otherwise.” The news comes just months after Dixon Carphone closed all 531 of its Carphone Warehouse stores, leaving more than 2,900 people unemployed.

Pizza Express

Also undergoing restructuring during lockdown is Pizza Express, who are set to close 67 of its 449 outlet. The company has so far failed to disclose which sites will shut down, claiming that it had “yet to be decided”. The company’s managing director, Zoe Bowley, stated that Pizza Express would do everything possible to support its staff during the difficult period, but that the move should be seen as a “positive step forward”. The company currently has 166 stores open as the ‘Eat Out to Help Out’ scheme comes into force, and stated that initial customer demand had been ‘encouraging’. Despite this, the company stated it hoped to announce a Company Voluntary Agreement in the near future – an insolvency procedure which would see it discuss repayment of its £1 billion debt with creditors, on more favourable terms. Speaking on the news, Pizza Express CFO, Andy Pellington, said: “While we have had to make some very difficult decisions, none of which has been taken lightly, we are confident in the actions being taken to reduce the level of debt, create a more focused business and improve the operational performance, all of which puts us in a much stronger position.”

High street employment as it stands

While the Eat Out to Help Out scheme may be well-meaning, it doesn’t change the stark reality that thousands more jobs will be lost across the high street – and elsewhere – in both the medium term and near future. Partner at law firm BLM, Julian Cox, stated: “Pizza Express is yet another household name that has been pushed to the brink by Covid-19.” “Whilst the government has attempted to encourage people through the doors with ‘Eat Out to Help Out’, the initiative is clearly not going to be enough to protect the sector in the long term.” Questions have continued being asked about the government’s contingency plan for jobs and unemployment support, as thousands of desperate and recently unemployed Brits look for help, in a market scant with new employment opportunities. Despite the seemingly sombre update, both the companies issuing job cuts today saw their shares rally during Tuesday trading, with Dixons Carphone up 3.76% and Pizza Express owner Legend Holdings Corp up 8.73%.    
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