Rishi Sunak to announce £3bn green package
The chancellor is set to announce a £3bn green package, as part of the plans to rebuild the economy following Covid-19.
Rishi Sunak will use Wednesday’s summer statement to unveil the package that will cut emissions, create thousands of green jobs, and decarbonise public buildings.
Environmental groups have said the package is not far enough and should be considered a “down payment”.
“Surely this is just a down payment? The German government’s pumping a whopping £36bn into climate change-cutting, economy-boosting measures and France is throwing £13.5bn at tackling the climate emergency. £3bn isn’t playing in the same league,” said Greenpeace UK’s head of green recovery, Rosie Rodgers.
Of the total amount, £1bn will improve the insulation of public buildings and homes. Homeowners could receive vouchers of up to £5,000 for home-improvement insulation projects, which could as a result lower household bills.
Business Secretary, Alok Sharma, explained: “What [the scheme] ultimately means is lower bills for households, hundreds of pounds off energy bills every year, it’s supporting jobs and is very good news for the environment.”
However, according to Ed Miliband, the shadow business secretary, the plans will leave out one-third of the population who are in the social-renting or private-renting sector.
“This is not a comprehensive plan,” he said. “It also needs to be part of a much broader and bigger scale strategy for getting back on track for net-zero which includes a zero-carbon army of young people getting back to work, investment in nature conservation, driving forward renewable energy, helping our manufacturers be part of the green transition and a plan for our transport network.”
The remaining £2bn will be spent on creating “green” jobs in construction.
A spokesperson for the treasury said: “The government remains committed to decarbonising buildings to keep us on track to reach net zero emissions by 2050.”
“The funding expected to be announced this week represents a significant and accelerated down payment on decarbonising buildings, to help stimulate the economic recovery and create green jobs. Allocations for future funding will be determined in due course.”
Boohoo shares plunge on exploitation claims
Boohoo has pledged to investigate claims that workers in a Leicester-based factory are being paid only £3.50 an hour.
The Sunday Times reported on Monday that employees are being paid less than half of the minimum wage and working in unsafe working conditions when the city is in lockdown.
Boohoo, which owns brands including Pretty Little Thing and Nasty Gal, has seen a surge in sales during the lockdown.
The retail group saw shares plunge 23% on Monday when the news was first reported.
The group released a statement and said they plan to immediately investigate the claims.
“Our early investigations have revealed that Jaswal Fashions is not a declared supplier and is also no longer trading as a garment manufacturer.”
“It therefore appears that a different company is using Jaswal’s former premises and we are currently trying to establish the identity of this company”
“We are taking immediate action to thoroughly investigate how our garments were in their hands, will ensure that our suppliers immediately cease working with this company, and we will urgently review our relationship with any suppliers who have subcontracted work to the manufacturer in question,” it added.
Garment factories in Leicester have already been criticized by the National Crime Agency, where there is thought to be widespread exploitation.
“Within the last few days NCA officers, along with Leicestershire Police and other partner agencies, attended a number of business premises in the Leicester area to assess concerns of modern slavery and human trafficking,” said a spokesperson from the NCA.
Leicester is currently under lockdown, however, garment factories are still seen to have workers who are working in cramped conditions with no social distancing measures.
Health Secretary Matt Hancock said earlier this week that he was “very worried about the employment practices in some factories” found in Leicester.
Shares in Boohoo (LON: BOO) are currently trading -23.16% at 297.74 (1550GMT).
Big Four told to split audit and consultancy arms by 2024 in historic reform
The UK’s “Big Four” largest consultancy firms (KPMG, PwC, Deloitte and EY) have been told by industry regulators, the Financial Reporting Council (FRC), that they must submit plans to ring-fence their audit and consultancy units by this October in a historic shake-up of the sector.
A precarious market
Following the high-profile collapse of companies such as auditor-approved Carillion and BHS, the industry has come under mounting pressure to reform the oversight of corporate finances – specifically by weakening the “stranglehold” on the audit market, which has essentially been monopolised by the infamous Big Four. Last year, a number of MPs called for the companies to “break-up” their audit and consultancy arms after it emerged from a government report that the Big Four had conducted audits on all but one of the UK’s 100 largest companies in 2019. Together, they audit 97% of FTSE 350 companies and collect 99% of audit fees. Labour MP Rachel Reeves said at the time: “The big four’s dominance has fostered a precarious market which shuts out challengers and delivers audits which investors and the public cannot rely on”. The FRC has set a deadline of this October for the Big Four to submit their separation plans, and expects the historic move to be fully completed by 2024. It said that the shake-up was ultimately “in the public interest” and would protect auditors “from influences from the rest of the firm that could divert their focus away from audit quality”.Why did the FRC step in?
After construction giant Carillion collapsed in 2018, the Big Four faced heavy criticism for its handling of the company’s finances. Over 2,400 people lost their jobs and the taxpayer was forced to shoulder a £148 million bill – according to the National Audit Office (NAO) – after racking up debts totalling £1.5 billion. A number of Big Four-backed companies have since followed in Carillion’s footsteps, including holidaymakers’ favourite Thomas Cook (audited by KPMG) and high street jeweller’s Links of London (overseen by Deloitte). In a shocking scandal just last month, German financial services firm Wirecard filed for insolvency after a £1.7 billion hole emerged in its coffers, paralysing the accounts of thousands of UK customers after it was subsequently banned by the Financial Conduct Authority (FCA). It was audited by EY. The FCR’s intervention comes as part of a wider scheme to overhaul the UK’s “dysfunctional auditing industry”, following three government-led reviews and years of lobbying and unfulfilled promises. Previous reports in 2006 and 2013 failed to incite tangible change, but a December 2019 review calling for “urgent reform” appears to have finally wet the appetite for ameliorations.New rules for the Big Four
The Big Four have agreed to a set of 22 operational principles outlined by the FRC, among them a new rule that audit practices should produce a separate profit and loss account from any overarching consultancy firm – designed to prevent consultancy work from unfairly subsidising audits. FRC Chief Executive Sir Jon Thompson welcomed the news, stating: “Operational separation of audit practices is one element of the FRC’s strategy to improve the quality and effectiveness of corporate reporting and audit in the UK. “Today the FRC has delivered a major step in the reform of the audit sector by setting principles for operational separation of audit practices from the rest of the firm. The FRC remains fully committed to the broad suite of reform measures on corporate reporting and audit reform and will introduce further aspects of the reform package over time”.Barratt Developments shares rally as company announces it will repay £25m in furlough fees
Residential property developers Barratt Developments plc (LON:BDEV) have announced that they are set to begin the new financial year with “cautious optimism” on the back of surprisingly resilient trading figures, and intend to pay back a total of around £25 million in furlough fees as it welcomes back its staff.
The company’s share price has rallied an impressive 6.67% on the news.
Incredible resilience, flexibility and commitment
Barratt – which is the UK’s largest housebuilding firm – released a trading update for the year ending 30 June 2020, outlining its “resilient” balance sheet with “year-end net cash of around £305 million (30 June 2019: £765.7m)” and “land creditors at around £800 million (30 June 2019: £960.7m)”. The firm’s forward order book is looking decidedly rosy, with total future sales as of 30 June 2020 standing at 14,326 homes (30 June 2019: 11,419 homes), at a combined value of £3,249.7 million (30 June 2019: £2,604.1m). Since reopening all of its operational sites, the company has recorded “high customer interest levels”, with net private reservations per outlet almost on par with the previous year at 0.63 (2019: 0.69) per week for the last six weeks running. Barratt “acted quickly” at the start of the coronavirus pandemic, closing all of its offices, construction sites and sales centres on 27 March 2020. The firm cancelled its interim dividend – which was due in May – and implemented a voluntary 20% reduction in base salary for “Executive Directors, the wider Executive and Regional Managing Director team, the Chairman and the Non-Executive Directors”. Although home completion rates were significantly impacted by the lockdown – only 12,604 total homes built including joint ventures during the year, compared to 17,856 in 2019 – the company’s strong forward order book and encouraging balance sheet offset the otherwise disappointing figures. During the government’s mandatory lockdown scheme during the peak of the pandemic, some 85% of Barratt’s 6,700 UK employees were placed on furlough. The company’s surprisingly strong results at the end of the quarter have afforded Chief Executive David Thomas the opportunity to pay the government back in full. In a message included in Barratt’s trading update, Thomas commented: “Prior to the Covid-19 pandemic, the group was delivering a strong year of progress on both volume and margin. The pandemic has caused significant disruption, but our highly skilled and experienced team have shown incredible resilience, flexibility and commitment, both through the peak of the crisis and in the careful reopening of our sites”.Optimism “not founded on thin air”
AJ Bell investment director Russ Mould weighed in on Barratt’s news, and was keen to congratulate the firm on its better than expected performance: “Any kind of optimism is welcome in the current climate, cautious or otherwise, so the tenor of today’s trading update from Barratt Developments struck a chord with the market. This optimism is not founded on thin air. The company has a growing order book, has seen high customer interest levels since the reopening of its sales centres, and it now has all its sites up and running”. Of course, there was not a complete crop of good news; Barratt’s home completions were badly impacted by the lockdown, and no doubt played a part in the near-paralysis of the UK housing market at the peak of the pandemic. “There was some bad news to balance out the good in Barratt’s statement – inevitably completions were down in the 12 months to the end of June and the average asking price also fell. Dividends remain off the table, but it doesn’t appear as if the market was expecting anything different on that score”. To stir the market back into action, Chancellor Rishi Sunak is set to announce a stamp duty holiday on properties under £500k as part of a “mini budget” on Wednesday. The news is sure to be welcomed with open arms, but while the market is in desperate need of liquidity, first-time buyers are still set to struggle to get onto the ladder in the first place.Investor insight
Meanwhile, Barratt’s share price has climbed 6.67% or 32.70p to 523.00p BST 13:41 06/07/20 on the back of the firm’s optimistic figures. The company’s dividend yield sits at 0.056% and its P/E ratio at 7.15.Cora Gold shares in disarray as it seeks out Sanankoro equivalent
Mali and Senegal focused mining company Cora Gold (AIM:CORA) announced on Monday that it had been collecting samples from other parts of the licences it owned as part of its Mali operations, and with this news, investors were entirely unsure how to act.
From its projects in West Mali and East Senegal, the company stated that it had identified a new target at its Madina Foulbé Permit, with assay values that included 57.2 g/t, 11.8 g/t, 5.99 g/t and 3.97 g/t of gold. Similarly, it announced two targets at the Diangounte Project Area, with values of 14.1 g/t and 12.1 g/t of gold.
It added that the partially completed reverse circulation drilling programme at Madina Foulbe had identified mineralisation zones of 47m at 0.63 g/t and 36 at 0.53 g/t.
In its Southern Mali Yanfolila Project Area, Cora Gold stated that initial results from rotary air blast drilling at its Tagan Permit had suggested a presence of 1.7 g/t of gold, while a similar drilling programme at its Winza site had a potential strike of over 1,000m with multiple gold zones.Speaking on its tests and efforts to find the company’s next big project, Cora CEO Bert Monro:
“Given the results generated during H1 2020, we are hopeful that we can discover, in time, another Project like Sanankoro from within our existing highly prospective licence package. Cora has an experienced exploration team that have worked together for well over a decade, based in West Africa, which enables us to operate in an efficient and cost-effective way constantly building up a future pipeline of new drill ready targets.”
“Cora’s main focus remains the Sanankoro Gold project with a very positive Scoping Study, with an 84% Internal rate of return (‘IRR’) at a US$1,400/oz gold price, completed on it and a recent US$21m mandate and term sheet signed for funding to support its future development.”
Following the fairly uneventful update, Cora Gold shares dipped by over 4.50%, before switching back and rallying 2.66%, to 9.08p per share 06/07/20 12:41 BST. This is about equal from the company’s previous year-to-date high in the last week of June, and well above its 4.25p nadir in mid-March.Sunak to announce stamp duty holiday for properties under £500k
Chancellor Rishi Sunak is expected to announce a ‘mini budget’ on Wednesday, in which he will propose a stamp duty holiday, similar to the proposal made by former Chancellor Phillip Hammond in 2017.
The move is expected to see the raising of the initial stamp duty threshold from £125,000 to as much as £500,000, in a ‘holiday’ designed to kick-start the UK economic recovery.
The Treasury’s current plans will affect England and Northern Ireland, who currently pay an average of 2% stamp duty on homes between £125,000 and £250,000, and an average of 5% on properties worth £250,000 to £925,000.
On properties worth £500,000, Peter Gettins of mortgage broker L&C Mortgages said first time buyers could expect to save up to £10,000 under the new scheme. Home movers buying property at the ONS’s average UK price of £248,000 can expect to save £2,460, while those buying a second property for the same price could expect to save £9,900.
The scheme is expected to be implemented in the Autumn, following the Coronavirus disruption which saw property prices fall for the first time in eight years. One issue that should be raised is that the stamp duty is normally most lenient towards those buying their first home, and thus the holiday will benefit them least. Today’s move, perhaps, should be seen as more of an effort to increase property market liquidity, than home ownership.
It serves the understandable purpose of encouraging economic activity, but by making it disproportionately easier for speculators to add to their portfolio, could actually make it more difficult for first time buyers to get on the ladder.
Speaking on the announcement, Managing Director of Ringley, Mary-Anne Bowring, said:
“A stamp duty holiday would no doubt cause a rush of transactions and help breathe life into a housing market that has been put into deep freeze in an effort to battle coronavirus.
“The government should be looking at long-term solutions as well as short-term sticking plasters when it comes to fixing the UK housing market.
“Millions of Brits were already renting, and that number was predicted to grow anyway with or without coronavirus. The disruption caused by coronavirus will likely see rental demand grow, as banks squeeze potential buyers with tighter lending restrictions and people put off buying or selling a home as it becomes clearer COVID-19 has caused continued uncertainty and disruption in the medium term.
“Eliminating additional stamp duty for buy-to-let investors would help stimulate the supply of rental homes while also driving wider activity in the housing market. Landlords are a crucial source of development finance through off-plan sales and will help support getting Britain building again.”
Pret A Manger to close 30 stores due to “significant operating losses”
Coffee and sandwich chain Pret A Manger is set to close 30 of its 410 UK stores – jeopardising at least 1,000 jobs – as the company prepares to navigate the post-coronavirus high street. The company has warned that the impact of the pandemic has forced it to make a “difficult decision”.
The eye of the storm
Although Pret has already reopened 399 of its sites across the UK, footfall has not yet recovered to the rates seen at the beginning of the year, and sales are still down 74% on this time in 2019. Along with 30 store closures, the chain is also planning to “reduce headcount across remaining UK shops to reflect lower footfall, rental costs and new safety measures”. The chain employs around 8,000 staff in the UK, and while the company did not give an estimate for how many employees will be affected by the closures, a source has confirmed that as many as 1,000 could be laid off. Just two weeks ago, a private letter to landlords by Pret CEO Pano Christou was leaked to the press, revealing that the company could only afford to pay 30% of its quarterly rent dues as it found itself stuck in “the eye of the storm”. Sales were down to a mere 20% of pre-pandemic levels.“We cannot defy gravity”
Commenting on the company’s sombre Monday morning announcement, Pret’s CEO Christou explained: “When the coronavirus crisis hit, we said that our priority was to protect our people, our customers, and of course Pret. We confirmed it was our intention to do everything we could to save jobs. Although we were able to do that through the lockdown, thanks in particular to the government’s vital support, we cannot defy gravity and continue with the business model we had before the pandemic”. While the company remains in talks with landlords to reduce its rent, CEO Christou lamented, “it’s a sad day for the whole Pret family”. He assured, however, that the chain “must make these changes to adapt to the new retail environment”. “Our goal now is to bring Pret to more people, through different channels and in new ways, enabling us to grow once more in the medium term. While Pret may look and feel different in the short term, one thing I know is that we will come through this crisis and have a bright future if we take the right steps today”.The future for Pret?
During the pandemic, Pret branched out to by launching a retail coffee initiative with Amazon as well as a delivery partnership with Deliveroo, Just Eat and Uber Eats, with sales through these online channels up 480% year-on-year. They now represent more than 8% of the company’s annual profits. The chain will likely benefit from levelling up its digital commitments and partnerships with popular food delivery companies, especially as the UK office scene – Pret’s core target audience – shifts permanently towards the work-from-home scheme that proved so successful during lockdown. With less footfall on the streets around London (home to 237 Pret sites), the chain is destined to have to reconsider its current business model. With that in mind, hopefully Pret can continue its ongoing ethical commitments of offering jobs and housing to the homeless as part of its characteristically compassionate Pret House scheme, and keep up with its daily end of the day deliveries of unsold items to shelters and food banks. It would be a cruel casualty of the pandemic to see one of the UK high street’s most charitable faces forced to change its ways.Elsewhere on the high street
Privately owned by German conglomerate JAB Holding Company which purchased the chain for £1.5 billion in 2018, Pret is among a slew of popular food chains that have faced financial difficulties due to the UK government’s strict lockdown measures, joining the likes of Frankie & Benny’s, Wagamama, and Bella Italia. After restaurants and pubs in England reopened their doors to customers last Saturday, only time will tell if the service industry can manage a full recovery after a historically challenging quarter.Lloyds boss to step down after almost 10 years
The chief executive of the Lloyds Banking Group has announced plans to step down next year after almost ten years.
António Horta-Osório will leave the banking group in June 2021 and will have earned £60m during his time at the helm.
“It is of course with mixed emotions that I announce my intention to step down as Chief Executive of Lloyds Banking Group by June next year. I am lucky to have had the support of a superb Board and executive team on whom I will continue to rely as we complete our current strategic plan, transforming the Group into the bank of the future,” said Horta-Osório in a statement.
“Everyone at Lloyds has unified around our purpose of Helping Britain Prosper and our customers and communities are seeing our commitment to that now, more than ever.”
“I have been honoured to play my part in the transformation of large parts of our business. I know that when I leave the group next year, it has the strategic, operational and management strength to build further on its leading market position”.
Horta-Osório has been the leader of the group since March 2011 and has seen Lloyds through the transition back into private hands after the banking crash saw the government payout a £21bn bailout during the banking crash.
He also took the bank through the PPI scandal, which cost the lender around £22bn and was cut £234,000 from his bonus in 2015.
In a shakeup, Lloyds has also appointed a new chairman, Robin Budenberg, who will replace Lord Blackwell.
“I am delighted to welcome Robin Budenberg to the Board as my successor. His knowledge of the Group combined with his broad experience in both financial services and other strategic advisory roles give him an outstanding background to provide the Board leadership required to support the continued transformation of the Group,” said Blackwell.
Shares in Lloyds Banking Group (LON: LLOY) are trading 1.90% higher at 31.62 (0909GMT).
UK injects £400m stake into failed satellite firm OneWeb as part of UK-EU space race
The UK government has announced that it is set to spend £400 million on a stake in bankrupt satellite firm OneWeb, as part of its post-Brexit plan to replace the loss of access to the EU’s Galileo sat-nav system.
OneWeb declared itself bankrupt back in May after the company racked up $2 billion in debt, but the government’s pledge will see the UK able to access the firm’s 74 space-based satellites, building on its pledge from last month to make “high-risk, high-reward” investments in promising new technology.
The UK government joins India’s telecommunications tycoon Bharti Global – which is also due to make an equal £400 million contribution – in OneWeb’s project, designed to provide broadband from space. Together, the UK and India have boosted OneWeb with a total of $1 billion in new funding.
OneWeb currently operates 74 satellites in low Earth orbit, but the company’s press release fails to clarify if the Anglo-Indian investment is to be used to complete its original plans to install an extensive 650-satellite constellation before it filed for bankruptcy. Nevertheless, the response from the UK side of the deal has been overwhelmingly positive. Business Secretary Alok Sharma hailed the investment as the first step towards the “first UK sovereign space capability” and puts the UK in slightly better stead ahead of its long-awaited exit from the EU this October. In a statement on the news, Sharma brightly said: “This deal underlines the scale of Britain’s ambitions on the global stage. Our access to a global fleet of satellites has the potential to connect millions of people worldwide to broadband, many for the first time, and the deal presents the opportunity to further develop our strong advanced manufacturing base right here in the UK”. OneWeb stated on its press journal that the coronavirus pandemic has highlighted the “tremendous potential” and “demand for a new mix of connectivity services”. The UK’s nationwide work from home trend during lockdown has no doubt emphasised the importance of staying connected, and the bid for OneWeb’s satellite system shows that the UK government is well aware that it cannot afford to lose out on the broadband front once Brexit goes through. Adrian Steckel, OneWeb’s CEO, commented on the firm’s announcement: “We are delighted to have concluded the sale process with such a positive outcome that will benefit not only OneWeb’s existing creditors, but also our employees, vendors, commercial partners, and supporters worldwide who believe in the mission and in the promise of global connectivity. The combination of HMG [Her Majesty’s Government] and Bharti will bring immediate value as we develop as a global leader in low latency connectivity. This successful outcome for OneWeb underscores the confidence in our business, technology, and the work of our entire team. With differentiated and flexible technology, unique spectrum assets and a compelling market opportunity ahead of us, we are eager to conclude the process and get back to launching our satellites as soon as possible”. The deal is still subject to approval from the U.S. Bankruptcy Court, but is expected to be sealed by 2020’s fourth quarter. In the meantime, the UK government and Bharti are to work alongside OneWeb’s management team to “further develop the strategy and business plan” as the satellite firm prepares to relaunch its regular schedule in the coming weeks.We are excited to announce that a consortium of @beisgovuk & Bharti Global have committed to provide more than USD$1 billion to acquire OneWeb and fund the full restart of our business operations. (1/7)
— OneWeb (@OneWeb) July 3, 2020
Opportunities in the Future of Health Tech
The health sector is experiencing an ongoing uptrend in health optimisation and self care. This is supported by a global shift toward patient controlled records, allowing consumers to take control of their own health data. So which starts ups are leverage these opportunities in health tech?
While consumers collect more data about themselves every day, health results are arguably more confusing now than they were 10 years ago. The average consumer still gets lost in medical acronyms like HbA1c, LDL and CRP, measures like millimoles and micromoles and fitness scores like Vo2 Max, lactic threshold, and zone 3 heart rate.
Consumers are often overwhelmed with health data from wearables, other devices, work out apps, online nutritional programs and various medical and fitness tests. While new technology and start ups make health and fitness data more accessible, arguably they also make it more confusing for the average person.
Start ups like Bioscore are working from the other side of this problem, planning to make health and fitness data both easier to understand and more visual.
Bioscore is a health and fitness platform that is centred around infographics that can be easily understood by end users and engaging digital reporting that can be easily used by health and fitness professionals to explain results to their clients and customers. The system contextualises health data with reference ranges, colour codes, targets, benchmarks, linked test histories and more. Results are delivered to users digitally with simple explanations and links for more reading.
The CEO of Bioscore, Matthew Reede said, “we see self care as an important growth area in health tech, so we are building a health and wellness platform that has user controlled records at its foundation with great visualisations for end users and easy to use reporting tools for health professionals”
Bioscore has built its proof of concept and is raising seed level finance to fund development through to the release of its minimum viable product.
If you are a UK based investor. SEIS and EIS are currently open for your tax considerations.
Crowdcube raise: https://www.crowdcube.com/companies/bioscore/pitches/Zpvy0q
Info website: www.bioscore.health
Short video: https://vimeo.com/373948133
IM, Pitch Deck and Questions: matt@bioscore.health
Start ups like Bioscore are working from the other side of this problem, planning to make health and fitness data both easier to understand and more visual.
Bioscore is a health and fitness platform that is centred around infographics that can be easily understood by end users and engaging digital reporting that can be easily used by health and fitness professionals to explain results to their clients and customers. The system contextualises health data with reference ranges, colour codes, targets, benchmarks, linked test histories and more. Results are delivered to users digitally with simple explanations and links for more reading.
The CEO of Bioscore, Matthew Reede said, “we see self care as an important growth area in health tech, so we are building a health and wellness platform that has user controlled records at its foundation with great visualisations for end users and easy to use reporting tools for health professionals”
Bioscore has built its proof of concept and is raising seed level finance to fund development through to the release of its minimum viable product.
If you are a UK based investor. SEIS and EIS are currently open for your tax considerations.
Crowdcube raise: https://www.crowdcube.com/companies/bioscore/pitches/Zpvy0q
Info website: www.bioscore.health
Short video: https://vimeo.com/373948133
IM, Pitch Deck and Questions: matt@bioscore.health