Post Office in talks to sell telecoms and insurance arms
The Post Office is in talks over selling its telecoms arm and its insurance business.
The new chief executive, Nick Read, hopes to shake things up as he was appointed just last year at the government-owned business.
The Post Office is reportedly selling the telecoms arms, which has 500,000 customers and an annual revenue of £150m, for £100m. Meanwhile, the insurance arm of the business has 300,000 customers.
A source told Sky News that selling both of the divisions will allow the group to focus on mail, parcels, cash and banking services.
Read joined the Post Office almost a year ago from the Nisa convenience store group. He continues to deal with the effects of the major scandal that saw Post Office branch managers wrongly sent to prison.
Last year the group agreed to pay £58m to settle a legal claim brought by a group of 550 branch managers.
The group has declined to comment.
US budget deficit hits record highs
The US budget deficit has hit a record high of over $3tn (£2.3tn), as the government continues to spend billions on coronavirus relief.
Within the first 11 months of the financial year, the US government spent a total of $6tn – $2tn of which was on Coronavirus relief.
The country only took in $3tn worth of taxes during this same period of time, leaving a difference that is over double what it was during the 2009 financial crisis when the full fiscal 2009 deficit totaled $1.4 trillion.
Nancy Vanden Houten of Oxford Economics said in a research note: “While we expect policymakers to enact another fiscal relief package, it won’t come soon enough to have an impact on this year’s deficit.”
There is one month left in the US’ financial year, which could see the budget deficit grow even higher.
Alan Blinder, a professor of economics and public affairs at Princeton University, told the BBC earlier this year: “So far, the answer has been everything is fine, as to how much borrowing the United States government can do before investors start to feel satiated with US debt. But there is a legitimate question.”
The non-partisan Congressional Budget Office has estimated the full-year deficit in the US to reach $3.3tn.
Job losses could exceed one million in 2020, new study finds
A new study has shown that UK job losses in Autumn are expected to exceed 700,000.
According to the Institute for Employment Studies (IES), between 500,000 and 700,000 redundancies could be announced during autumn.
This is on top of 240,000 redundancies that have been announced already this year, taking the total number of job losses of 2020 to over a million.
The figures come amid the UK’s deepest recession.
“It would also be comfortably the highest level since this data series began in 1995,” said the report ”Sadly, much of this restructuring appears now to be inevitable and reflects both significant structural changes (either a result of, or accelerated by, the pandemic) and the damage already done to those firms most affected by the crisis.”
The government’s furlough scheme is coming to an end in October, which will see a new wave of job losses.
As the Autumn budget approaches, there is pressure from the government to support those affected.
Tony Wilson, the IES director, said: “We can do a lot more to minimise the job losses and support those who are most at risk.”
“Although most of those who were furloughed by their employers are now back at work, there are still many parts of the economy where perfectly viable businesses cannot bring people back because of the ongoing disruption caused by the pandemic. So we need tightly targeted support to help these firms ride out the next few months, where they can commit to not laying staff off.”
Global equities finish an erratic week on a subdued note
In a week of sharp ups and downs, global equities were perhaps ready for a quiet day as Friday swung around, and a quiet day is what they got.
The Dow Jones led the pack, up 0.81% to 27,756 points – or put another way, just shy of the 28k mark it has seen as something of a second home since breaking its all-time record last December.
Following close behind were Asian equities, with Shanghai’s SSE Composite up 0.79% to 3,260, the Hong Kong Hang Seng Index up 0.78% to 24,503 and Tokyo’s TOPIX up 0.72%, at 1,636 points.
Failing to really be inspired by the US entry this afternoon, Eurozone indexes lagged behind, with Germany’s DAX down by 0.17% to 13,187 and France’s CAC up by a modest 0.16%, to 5,032 points. Just ahead was the FTSE, up by exactly 0.50%, to 6,033, as the last bell of the week sounded in London.
This last spurt of energy was in UK equities was likely led by a mixture of the Sterling’s slow recovery after a rough start to the week, and slight giddiness at July’s better-than-expected GDP reading.
Talking on the Pound Sterling and the outlook for the coming week – between Chinese data and continued big tech volatility – Spreadex Financial Analyst, Connor Campbell, commented:
“[…] the pound also effectively sat on its hands, up 0.1% against the dollar but down the same amount against the euro. News of 6.6% growth in July meant little to the currency given the deafening no deal Brexit alarm bells that have been ringing all week.”
“Turning to next week and it’s a bit of a gauntlet for investors, with a Chinese data dump in the early hours of Tuesday morning – including the all-important retail sales reading – followed by the latest UK jobs report; a Fed meeting on Wednesday night; and September’s Bank of England get-together at Thursday lunchtime.”
“And that’s not to mention the volatile state of the US tech sector, which is still twisting and turning in the wind.”
Peloton revenue surges 172% thanks to lockdown demand
Peloton (NASDAQ: PTON) sales and shares surged after the group became a popular purchase during the lockdown.
As gyms closed across the world, sales at Peloton grew to 3.1m – over double than the membership base a year previously.
Shares jumped 10% on the news as the group revealed fourth-quarter revenue surged 172% at $607.1m. Analysts on average expected a revenue of $583 million.
Chief executive John Foley said: “Demand… remains strong and member engagement remains elevated, despite improving weather and the gradual reopening.”
Peloton has said revenue forecast for the next financial year is expected to reach at least $3.5bn – higher than Wall Street’s expectations.
“FY 2020 was a transformative year for Peloton. We made great progress in scaling our business, from manufacturing and logistics, to member support and field operations,” said the group in a statement.
“We launched operations in Germany, our first foreign language market, and continued to grow our footprint in the United States, Canada, and the United Kingdom. By the end of FY 2020 our Peloton membership base grew to approximately 3.1 million, compared to 1.4 million Members in the prior year. Fueled in part by the challenges associated with COVID-19, Member engagement reached new highs with 164 million Connected Fitness Subscription workouts completed in FY 2020.”
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.