Travis Perkins to cut 2,500 jobs & 165 stores
Travis Perkins will be closing 165 stores and cutting 2,500 jobs amid the Coronavirus pandemic.
The building materials group announced the decision, putting the closures and job cuts down to an expected weaker demand over the next two years.
“While we have experienced improving trends more recently, we do not expect a return to pre-Covid trading conditions for some time and consequently we have had to take the very difficult decision to begin consultations on the closure of selected branches and to reduce our workforce to ensure we can protect the group as a whole,” said Nick Roberts, the group’s chief executive.
“This is in no way a reflection on those employees impacted and we will do everything we can to support them during this process.”
“The group has a robust balance sheet, strong liquidity position and I am confident that these proposed changes will enable us to trade successfully through this period of uncertainty with a cost base that better reflects the environment we are operating in,” he added.
Travis Perkins said in a statement: “It is evident that the UK is facing a recession and this will have a corresponding impact on the demand for building materials during 2020 and 2021.”
The group has 2,154 branches around the country and owns brands including Wickes and Toolstation. Most of the stores that will be affected will be smaller shops – where profit margins are thin and social distancing measures are hard to ensure.
From Monday, non-essential shops are opening across the UK following the three-month shutdown.
During the course of lockdown, the group kept a third of its branches open. More branches have opened over the last month, with sales about 60% down across the month of May. However, sales have picked up since the end of lockdown.
Shares in Travis Perkins (LON: TPK) are trading down almost 3% at 1,049.00 (1355GMT).
H&M sales halved, shares fall
Sales at Hennes & Mauritz (H&M) have halved in the second quarter of 2020.
The latest figures from the clothing retailer reveal that net sales for the three months to 31 May were £2.45bn – 50% lower than the same period last year.
As H&M was forced to close four-fifths of its global stores during the Coronavirus pandemic, sales plummeted. However, as stores are reopening across the UK on Monday, sales are set to recover.
RBC analyst Richard Chamberlain said: “In many markets we expect to see customers preferring to shop locally and more pressure on urban locations more reliant on tourism and people using public transport.”
Shares in H&M closed 24% down this year on Friday.
Sales across the sector have suffered in the last quarter. Owner of Zara, Inditex (BME: ITX) reported a 44% drop in sales between February and April.
Shares in H&M (STO: HM-B) are trading at 141.75 (1203GMT).
FTSE 100 tumbles as investors fear a second wave
As fears of a second wave of Coronavirus outbreak grow, the FTSE 100 tumbled in Monday’s early trading.
As shops across the UK open for the first time in three months, the index of UK blue-chips fell below 6,000 points whilst the pound also dipped 0.2%.
Investors’ optimism has been dampened amid the news of a spike in Coronavirus cases in Beijing, where authorities closed a food market over the weekend.
“Reports of a new COVID-19 lockdown in Beijing speak directly to market fears that the measures taken to contain the virus so far are not enough,” said Michael McCarthy, the chief market strategist at CMC Markets.
Among the biggest fallers of Monday’s FTSE trading was oil giant BP, which tumbled 5% on opening to 306p.
The oil company said this morning that the pandemic is set to have “an enduring economic impact.”
Bernard Looney, BP’s chief executive, said: “In February we set out to become a net-zero company by 2050 or sooner. Since then we have been in action, developing our strategy to become a more diversified, resilient and lower-carbon company. As part of that process, we have been reviewing our price assumptions over a longer horizon. That work has been informed by the Covid-19 pandemic, which increasingly looks as if it will have an enduring economic impact.”
Global stocks also took a hit on Monday. Japan’s Nikkei was 3% down whilst in Europe, the CAC in Paris, German DAX and Spanish IBEX all fell around 3%.
In the UK, non-essential retailers are opening to re-start the economy. Retailers have introduced strict safety measures and social distancing rules for customers whilst shopping. Prime minister Boris Johnson has told shoppers to “shop with confidence”.
Rishi Sunak – Boris Johnson’s crown jewel or dagger in the back?
Rishi Sunak, a young and charismatic Chancellor, and one of the few members of the government to see their stock rise during the Coronavirus crisis. But why should we be interested in Mr Sunak, and more importantly, should we get used to seeing him on our TV screens?
After six years in politics, he moved into 11 Downing Street and within a few high-profile appearances, cemented himself as a formidable figure on the political mainstage.
Johnson’s jewel or dagger?
I first noticed Sunak as a member of Boris Johnson’s leadership campaign entourage, and again during subsequent appearances, when the Yorkshire MP seemed to shock those in attendance with a level of composure you wouldn’t expect from a young politician. Since then – and since taking the second top job in political office – our early interest in Rishi Sunak has been vindicated. After only weeks in office, Sunak delivered one of the most well-received budgets in recent memory, before completely outclassing the prime minister with a convincing performance in his opening Coronavirus address. So, a talented orator he may be, but does this mean he is necessarily a threat to Boris Johnson? Initially, no. Prior to the challenges posed by Coronavirus, Mr Johnson commanded healthy support, by marrying a clear pro-Brexit message with a fair deal of Jeremy Corbyn’s pro-spending ethos – the careful combination of which made for an intoxicating (and ultimately convincing) aura of hope and nationalist optimism. During these early days of Johnson’s premiership, and even after succeeding Sajid Javid, Sunak resembled a welcome but non-threatening voice of reason to compliment Boris’s light-hearted but empty ‘ramp-up’ and ‘turbo-charge’ rhetoric. The far-reaching impact of Coronavirus, though, has seen the brakes slam on Johnson’s gusto train. An awkward combination of economic shutdown; a slow trickle of advice from his scientific advisors; cross-examining form Kier Starmer; and a sorry defence of the blatantly careless actions of Dominic Cummings; have all seen the PM’s bravado shrivel down to little more than angry grumbles about BLM protests and tweeting about statues. In the meantime, Sunak has grown in stature. Having avoided the (fairly tame but persistent) scrutiny suffered by the likes of Mr Johnson, Matt Hancock et al., Sunak’s attempts to provide financial support to workers – and perhaps even more impressive, the additional support he implemented in response to public criticism – have been on the whole well-received. This week, as Ipsos Mori told the story of Kier Starmer gaining ground on Boris Johnson in the opinion polls, it shouldn’t go unnoticed that Sunak seemed to be acting increasingly like a leader in wait. Not only has he made up the majority of plausible leader-like soundbites from the last few months, but his appearance at John Lewis (helping with the preparations for socially distanced shopping), his letter asking local councils to ban bailiffs being used to punish council tax arrears, and his impressive Zoom call with Conservative MPs, have all seen the Chancellor galvanise both public favour and support within the ranks of his party.What should Sunak do next?
Whether or not you agree with the points I’ve made so far, what most of us should realise is that even if Sunak is not yet a viable leadership candidate, he certainly has the makings of one. Besides, he has just turned forty. If his time hasn’t yet come, he’s a young Chancellor gaining experience in the upper tiers of public office, and will someday, surely, have not only the presence but the acumen necessary to be a successful leader. With this in mind – and plain to many of the pundits looking at Boris’s front bench – Sunak’s mounting reputation for competence will earn him an increasing share of the spotlight. The dilemma he will now be mulling over is whether to stay the course, or distance himself from the challenges that lay ahead. On the one hand, despite what opinion polls and his PMQ performances might suggest, Boris Johnson still commands not just a heathy majority, but an impassioned and hopeful working-class core of voters. By effectively harnessing a narrative of national potential, as well as occupying the hard Brexit ground, Johnson has spoken to and galvanised a large chunk of the electorate who felt their concerns had been ignored by both of the main parties for decades. What this could mean, save for Boris maintaining his recent form, is that the Conservative Party is well-positioned for dominance for some time. Rather than derail or undermine the powerful Boris-Cummings-Geist, Sunak may well choose to overlook recent failing and weather the storm. Should the government opt for an energetic and stimulus-heavy exit to the Coronavirus shut-down, Sunak may still get to enact some of the generous spending promises which piqued the interest of listeners across the political spectrum. In this scenario, his time as Chancellor would be defined by high spending (which is ultimately why he was given the job to begin with), and with all things being well, would stand him in good stead for leadership in the future. The more likely direction of fiscal policy post-lockdown, however, will be a return to retrenchment – spending cuts. This path, the depressing alternative that it is, would see Sunak become the face of the inevitably unglamorous Brexit-Coronavirus economic life support machine. Not only would this go against the brand that he has built for himself so far as Chancellor, but would mean serving under a zealous PM who likely isn’t as cut out for speeches about balancing the books, as he is for those about ambitious projects and big spending. More than anything, though, overseeing cuts would be costly to Sunak’s popularity. While austerity may be understood as necessary by many, I’d challenge anyone to recall the last time they heard someone say they missed seeing George Osbourne’s face in Commons. Now, in Sunak’s case: the switch from his first budget to austerity would be like promising a feast, and then stealing the food from diners’ mouths. I offer this scenario not as a criticism of the Chancellor, but rather as a deflating contrast to the mood after his budget in March. It’s difficult to imagine what we’d do in Sunak’s situation, without knowing what he (hopefully) does about the government’s economic direction coming out of lockdown and into Brexit proceedings. What I can say is that, so far, the majority of Sunak’s onlookers have been impressed; and compared to most of his cabinet peers, he certainly looks impressive. Whether he stays true to Johnson or not, we can hope he lives up to the hype, and that his potential isn’t tarnished either by the failures of others, or the difficult timing of his arrival in office.Why Asia has yet to embrace sustainable investment, and why it should
Sustainable Investment, defined by the Forum for Sustainable and Responsible Investment as “an investment discipline that considers environmental, social and corporate governance (ESG) criteria to generate long-term competitive financial returns and positive societal impact”, is a rapidly growing industry.
A Financial Times article published earlier this year revealed that “$17.5tn out of the $79tn of total assets under management globally are invested in funds applying environmental, social and governance criteria”. An encouraging figure, perhaps, but one which distorts a canyon of regional disparity in the commitment to environmentally and socially sustainable investment.
The same article reported that a mere 5% of East Asian management assets are currently invested in sustainable projects, compared with almost 30% in the USA and Canada.
While the breadth of the discrepancy may come as a shock, it is in keeping with a decades-long trend within the Asian economy: to put the quest towards economic development first, even at the expense of glaring environmental and social consequences. The result is the staggering rate of pollution and worsening inequality across the Asian continent.
A continent of extremes
A 2019 Greenpeace report concluded that, out of the 100 most polluted cities in the world, 99 were in Asia. In particular, India and China were found to be the worst perpetrators, with the air in the city of Gurgaon – Southwest of New Delhi – containing more than 13 times the World Health Organisation’s (WHO) air quality guideline. Beyond the immediate environmental concerns, Asia is facing a worsening income inequality crisis. A 2017 Oxfam report demonstrated how the continent has become a magnet for economic extremes, with 4 of the world’s 5 most expensive cities residing in Asia, despite a widening wealth gap – aggravated by wage disparity and inconsistent access to education. Yet, Southeast Asia remains a huge market for sustainable investing opportunities. According to the Global Impact Investing Network, nearly a third of all sustainable investment ventures are based in the region, with 44% of companies intending to expand their projects in Asia over the next few years. And that is chiefly because Asia represents a monumental opportunity for companies interested in sustainable investment enterprise; not only is there a growing demand for practical solutions to worsening socio-economic crises – not least including the dire need to tackle pollution and income inequality – but there is a shifting emphasis towards self-sufficiency, both from a political and environmental perspective. The impact of climate change means that many natural resources are already, or will soon, become increasingly scarce and exponentially more expensive. The incentive to prioritise investment in projects which produce a positive socio-environmental impact grows ever greater, not just from an ethical standpoint, but as a practical necessity in a world on the brink of a climate crisis.Appetite for sustainable projects
Politically speaking, the trend towards self-sustainability is one which has slowly come to the forefront of global affairs in recent years, most notably in China. In 2017, the economic superpower announced a $300 billion plan to become self-sufficient by 2025, citing a desire to reduce dependence on foreign imports in the wake of a dramatic rise in domestic demand and a typically volatile international market. Moving forwards, we can perhaps expect to see more Asian businesses following the example of large cap players such as Morgan Stanley and Citigroup, seeking out investment ventures not just on an ethical basis, but as an increasingly attractive move to capitalise on the growing demand for practical solutions to social and environmental issues. That being said, sustainable investment has taken some time to gain traction in Asia, and in its very nature appears to go against the characteristically short-term approach that Asian investors have historically taken. As Curtis Chin wrote in the Financial Times, “the perception of ESG as a gospel preached by well-meaning but interfering non-government organisations has a strong hold in a region where many countries have understandably been focused on rapid economic development”. This dizzying climb towards economic growth has benefitted from the more laissez-faire approach taken by a number of Asian countries – most notably in the region of Hong Kong, which was rated top of the list of the most economically free countries in the world in a 2019 Investopedia report – but the integration of ESG legislation from various non-governmental organisations has been relatively coldly received in some parts of Asia, being frankly low on the “list of priorities”.A new beginning?
However, the tide is beginning to turn. The model which Asian businesses are only really just beginning to consider is one which places sustainability at its core, investing in projects that revolve around a positive ESG impact. In 2019, Japan announced that one of its largest banks would be reversing its commitment to coal-fired power generating schemes, and the number of Chinese companies signed up to the United Nation’s Principles for Responsible Investment tripled between 2017 and 2018. So, evidently, Asia has already started to consider sustainable investment, but it has only just dipped its toes into a vast lake of fiscal opportunity. There is still much work to be done in shifting a long-held suspicion, as well as a considerable degree of apathy, towards sustainability projects. The GIIN cited, in particular, “regulators’ unfamiliarity with impact investing” as an obstacle to the growth of the market in Asia, resulting in “complex, inefficient, and restrictive policies or the absence of enabling policies”. Certainly, there is a lack of regulatory framework for sustainable investment projects on the continent, but this is largely because sustainability is a relatively novel concept in business terms, and the legislation simply hasn’t had a chance to catch up. There is some improvement being made in terms of regulations, however, with Hong Kong’s Securities and Futures Commission making it mandatory for all its listed companies to disclose their sustainability credentials – and, from the start of 2020, mainland China has also committed to implementing a similar strategy.A pivotal opportunity
At the turn of the decade, Asia is faced with a pivotal opportunity to change its approach to sustainability, and to put environmentally and socially beneficial projects at the core of its rapidly evolving economy. There is a visible appetite for it too, with a vast population struggling with stark income inequality and the reality of the ever-encroaching dangers posed by climate change. On a continent ravaged by “the worst health crisis of a generation”, the demand for investments that focus on people as well as on money has never been greater. All that remains is for the Asian economy to shift its focus from short-term, high-yield rewards, to a more durable model based on sustainable investment and putting the future before the present. By removing the hindrance of the widespread lack of familiarity and understanding of sustainable investment, and by challenging the deeply-embedded tendency towards short-term profit at the expense of long-term demand, Asia could well blossom into a leading example of how an economy can be recalibrated to give, and not just take.Global equities recovery ran out of steam before the final bell
If you ever wished to see an underwhelming arc, you need only look as far as the performance of global equities on Friday. After a horrific Thursday session, indices had an excited start on Friday, before running out of steam in the afternoon and settling fractionally above where they began.
Speaking on the optimistic opening, Spreadex Financial Analyst Connor Campbell commented,
“There was little reason behind Friday’s gains, beyond investors deciding that the severe losses of the last few days provide a handy entry point to a market that had gone on a hell of a run at the start of the month.”
The FTSE, for instance, rose 1.1% to over 6,150 points, despite the news that the UK economy had contracted by 20.4% in April. Similarly, the DAX added 75 points and the CAC bounced by 1.7%, both in spite of industrial production falling by 17.1% in April.As UK trading entered the final knocking of the week, however, the FTSE was down to a 0.048% rally, to under 6,080 points. Similarly in other equities, the CAC revised its gains down to 0.60%, while the DAX ended up dipping by 13 points. Finally, after recovering to over 25,900 points, the DOW Jones sits at 25,350 points (up from its 25,100 point nadir) as UK traders go home for the weekend.
This evening could offer some consolation, though, with some pundits predicting a 600 point bounce when the bell rings on Wall Street.Similarly, “In terms of data, US import prices are set to rise from -2.6% to 0.6% month-on-month, while the preliminary consumer sentiment reading from the University of Michigan is expected to jump from 72.3 to 75.0.” adds Connor Campbell. So there are some glimmers of positivity for global equities, as we wrap up for the week.
Government considers ending support for overseas fossil fuel projects
The UK government is reportedly assessing its ongoing commitment to financially support overseas fossil fuels after it emerged that £3.5 billion of public funds has been spent on polluting operations since the Paris climate agreement came into effect in 2016.
It is understood that senior civil servants are considering a new climate strategy with the aim of “phasing out” financial support for oil and gas infrastructure in developing nations. The news comes amid the announcement that the COP26 climate summit – originally scheduled to be held in Glasgow this November – is set to be postponed until 2021 due to the coronavirus pandemic.
Global Witness, a prominent NGO campaigning to end fossil fuel operations, has accused the UK government of “rank hypocrisy” in a complaint to the Organisation for Economic Cooperation and Development (OECD).
Despite the government’s commitment to the climate pact, credit agency UK Export Finance (UKEF) has allegedly offered loans, guarantees and insurance totalling £3 billion to British companies involved in fossil fuel projects, according to a report by Global Justice Now.
The report also outlines that the total value of fossil fuel shares on the London Stock Exchange stands at a whopping £900 billion – higher than the GDP of the whole of Sub-Saharan Africa.
Climate activist for Global Justice Now, Daniel Willis, called for the government to reassess its commitment to overseas fossil fuel operations:
“For the government to show real climate leadership ahead of COP26 and support a global green recovery from Covid-19, it needs to end these highly damaging investments”.
A spokesperson for the UKEF commented on the matter, stating the company is “proactively developing the breadth of [its] support for renewable sectors” and added that it has already allocated £2 billion towards clean growth and renewable energy projects.
In a piece for The Guardian earlier this year, Labour leader Keir Starmer urged “let’s fight for a green new deal now” and explained how the UK government should be shifting its priorities:
“Rather than funding fossil fuel projects abroad, we should use our development budget and technical expertise to help other countries skip our bad habits and grow their own low-carbon economies on renewables instead”.
A spokesperson for the Department of International Development said the UK government has agreed that “all future aid spend will be aligned with the Paris agreement” and will continue its commitment to helping developing nations tackle climate change.
Drax Group extends its £125 million ESG facility to 2025
British power company Drax Group (LON:DRX) today announced that it had successfully completed a three-year-long extension to its Environmental, Social and Governance facility, with the contractual final maturity now pushed back to 2025.
Drax is known for championing ethical alternatives, having become the first coal-run power station company to invest in flue gas desulphurization technology back in 1988. Today, the company – between its subsidiaries – runs the largest biomass-fuelled power station in Europe, the UK’s largest decarbonisation project, and supplies between 7-8% of the country’s electricity supply.
The ESG facility that was extended on Friday will extend the profile of Drax’s existing facilities, and includes maturities to 2029. The facility adjusts the rate of interest Drax pays on its carbon emissions against an annual benchmark, which the company says reflects its commitment to reducing its emissions and becoming carbon negative by 2030.
It finished by saying that its all-in interest rate during the first year of the extended facility would be less than 2%, and that its overall cost of debt would be lower than 4% p/a.
Following the update, Drax shares rallied modestly by 0.75% or 1.60p, to 215.40p per share 12/06/20 15:52 BST. The company has a p/e ratio of 7.15 and a very generous dividend yield of 7.24%. JP Morgan analysts reiterated their ‘Overweight’ stance in May, stating that the company’s shares were under-priced and oversold due to the adverse effects of Coronavirus on energy prices.