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.
NWF shares rally as it delivers 40% profit growth
Food, fuel and feed distributor NFW (AIM:NWF) saw its shares rally on Tuesday, following the publication of its uplifting results, for the full-year ended 31 May 2020.
Booking year-on-year revenue growth of 2.4% – up to £687.5 million – the company’s operating profit and profit before tax jumped 40.6% and 37.9%, to £13.5 million and £12.0 million respectively.
The situation was equally peachy for NWF shareholders, with fully diluted EPS bouncing 30.2%, to 18.1p, while dividends per share rose 4.5%, to 6.9p.
The company boasted strong performance in it fuels sector, with three acquisitions through the year boosting the scale of its business by 20%. It added that ‘unprecedented’ oil price drops and one-off domestic demand during lockdown, led its full-year operating profit to almost double, from £5.6 million, to £11 million, on-year.
NWF stated that its food segment successfully navigated the increased demand from supermarkets, and its new 240,000 sqaure foot warehouse would increase its storage capacity by 35%, to 135,000 pallets. However, the £0.5 million cost of this acquisition in-part led to the decline in year-on-year profits, down from £1.8 million to £1.4 million.
The feeds division was hardest hit during the financial year, with a mixture of higher energy costs and NWF Academy training future staff, seeing full-year profits drop from £2.8 million, to £1.9 million.
NWF Response
Commenting on the results, company Chief Executive, Richard Whiting, stated:
“NWF has delivered a very strong set of results, ahead of previous expectations, demonstrating both resilience and growth. Three acquisitions have been completed in Fuels and we have added significant additional warehouse capacity to support long-term customer contracts in Food. Feeds gained share with volume growth in a contracting market. The fundamental resilience of the Group has been highlighted with the response to the Covid-19 crisis. Huge thanks must go to all our employees for their outstanding efforts in very challenging times. All our employees were designated as key workers, demand increased, deliveries to customers were completed and safe working and home working where possible were implemented in early March and remain effective today.”
Investor Insights
Following the news, NWF shares rallied 5.78% or 11.84p, to 216.84p per share 04/08/20 12:06 BST. This price represents a year-to-date high for the company, with its p/e ratio at 12.97, and its dividend yield standing at 3.10%.BP reports $6.7bn loss amid “volatile” trading environment
BP (LON: BP) has reported a record loss in its latest quarterly results.
The oil giant reported a record $6.7bn (£5.1bn) loss as the Coronavirus pandemic led to a slump in global oil demand.
The $6.7bn loss is compared to a $2.8bn profit for the same period a year earlier. As a result, the group said that it plans to halve its quarterly dividend.
“These headline results have been driven by another very challenging quarter, but also by the deliberate steps we have taken as we continue to reimagine energy and reinvent BP,” said Bernard Looney, the chief executive.
“In particular, our reset of long-term price assumptions and the related impairment and exploration write-off charges had a major impact. Beneath these, however, our performance remained resilient, with good cash flow and – most importantly – safe and reliable operations,” he added.
Oil has been hit hard over the global pandemic. Shell and Total have also slashed the value of their assets. In response to the losses, the oil giant said earlier this year that it will cut 10,000 jobs. Looking forward, the group said that the ongoing impacts of the pandemic are continuing to “create a volatile and challenging trading environment.” Shares in BP (LON: BP) are trading up 6.07% (0915GMT).Direct Line shares up despite fall in profit
Profits at Direct Line (LON:DLG) fell 9.5% for the first six months of the year down to £236.4m.
Blaming a one-off restructuring cost and bad weather, the insurer said that the affects from Coronavirus were “broadly neutral” and that a fall in travel claims was offset by a rise in Motor and Commercial.
The group is making a series of cost-saving initiatives, totalling £60m over two years. Direct Line has spent £15m on cost-saving initiatives in 2020 so far.
Penny James, the group’s chief executive, said:
“I am very proud of what we have achieved so far this year. We have launched initiatives with an estimated investment of £80m to £90m to support our customers, people and local communities through the uncertainty caused by Covid-19.
“When the Covid-19 pandemic hit, we prioritised phone lines for existing customers, created new online journeys and offered additional value through various initiatives including mileage refunds and payment deferrals. We did not access government support and chose to protect all roles and salaries at the Group through to the autumn and our Community Fund is providing £3.5m to help people in communities across the UK.
“Despite the significant disruption caused by Covid-19 we have continued the trading momentum we saw at the end of 2019, growing direct own brands by two per cent and improving the quality of our earnings with an improved current-year loss ratio. We have also demonstrated financial resilience in the face of Covid-19 disruption, which has enabled us to declare our 2020 interim dividend as well as a catch-up of our cancelled 2019 final dividend.”
Following the results, Direct Line (LON: DLG) shares opened at 327.9. Shares in Direct Line are trading up 6.79% at 328.50 (0848GMT).
Hong Kong – what does the future hold?
Since 1997, Hong Kong has been the global economy’s bridge between China and the rest of the world. The former British colony is home to the highest income per capita and the largest concentration of ultra high net worth individuals in the world, marked by its characteristically low tax rates and free trade arrangement.
Its resilient financial market, independent legal system and commitment to free speech has long made it an oasis for investors seeking easy access to China – the second largest economy in the world – but the erosion of the emerging superpower’s pledge to honour a “one country, two systems” set-up until 2048 has already begun to unravel Hong Kong’s unique reputation as one of the world’s most free economies.
An investors’ oasis no more?
Over a year of social unrest has rocked the region’s usually stable balance of power, and the kingpins in Beijing have not responded kindly to protests over China’s short-lived extradition bill – which would have seen criminals from Hong Kong potentially extradited to mainland China under certain circumstances, in what pro-democracy activists argued was an infringement on the freedoms of Hong Kong citizens. Opponents speculated that the bill could have been used to persecute anti-Chinese journalists and activists as part of a wider move to strengthen China’s political influence over the region. Hong Kong chief executive Carrie Lam withdrew the extradition bill in September 2019 after months of violent clashes with protestors, but pro-democracy rallies have continued well into 2020, with Hong Kong citizens demanding further freedoms from China and an inquiry into alleged police brutality during the protests. All of this comes amid claims that press freedom is increasingly on the decline, with 5 Hong Kong-based booksellers reported missing only to eventually be found in Chinese custody, and the expulsion of several US journalists now banned from working in Hong Kong. Along with the apparent restriction on press and political freedoms, the relationship between China and the West has become increasingly antagonistic in recent months. The delicate situation has rightfully caused concern among traders and economists, with some predicting that companies previously happily-settled in Hong Kong will look to move their operations elsewhere in the near future if tensions do not subside. According to The Guardian, capital has quietly been shifting from Hong Kong to Singapore – touted to become the next major international trade hub – over the past year anyway, but rising anxiety surrounding China’s conduct in the region has accelerated the process as investors look to avoid any financial fallout from the conflict. Last month, Hong Kong authorities once again announced the introduction of a new law – this time a sweeping new national security bill which seeks to outlaw protests and anti-Chinese sentiment. The US retaliated by warning that it would consider revoking its special trade status with Hong Kong, while China’s central bank responded with the launch of the Wealth Management Connect initiative, designed to facilitate ‘cross-boundary investment’ and cashflow into the region. A senior regulator somewhat eased critics’ concerns, stating that China is ‘confident of Hong Kong’s future as an international financial center’ and will ‘continue to support its growth’ in a June report by Reuters. China’s assurances haven’t managed to iron out all of the anxieties, however. Businesses are still reeling from the impact of the coronavirus pandemic, and with a stark warning from Hong Kong leader Lam that the city is once again on the brink of a ‘large-scale’ outbreak, companies and investors alike are looking to shift their focus elsewhere amid fears that the region may have to shut down to prevent any further spread of the virus. Protests have continued despite calls to stay inside. Meanwhile, elections for Hong Kong’s Legislative Council due to take place in September look set to be postponed until next year.Commenting on the tense situation in Hong Kong, chief Asia economist at Capital Economics, Mark Williams, told Raconteur: “China is settling into a more antagonistic relationship with the rest of the world. Hong Kong’s position won’t be eroded overnight, but without assurances that companies and staff there will enjoy strong legal protection and aren’t subject to the arbitrary treatment found on the mainland, overseas firms will over time shift their operations elsewhere”. Despite being historically pretty stable in the face of market fluctuations – Hong Kong emerged relatively unscathed from the 1997 handover to China by Britain and Asian financial crisis, as well as the global financial crash of 2008 – rocketing geopolitical tensions could well throw a spanner in the works for the first time. Market volatility has already reached record levels in the region thanks to the hazardous concoction of coronavirus-induced pessimism and the ongoing pro-democracy protests jeopardising relations with the mainland. Dan Kemp, chief investment officer for Europe, the Middle East and Africa at Morningstar, said: “Equity prices in the broader China market and Hong Kong specifically are more attractive than the average. However, it’s worth noting that these markets are both volatile and this volatility may increase during the current political situation”. With concerns over the future of trade in Hong Kong, business could start to move elsewhere permanently. Nick Easen commented for Raconteur that if the region were to lose its autonomy from mainland China, then investors “might as well invest in Shanghai”. And, with capital reportedly orbiting around Singapore instead, it’s beginning to look like an increasingly likely outcome.“A more antagonistic relationship with the rest of the world”
Nevertheless, nothing is set in stone just yet, and US President Donald Trump‘s characteristically bullish attitude towards the issue is crucial to the forging the financial future for the former British colony. With the US elections on the horizon, Trump’s administration is no doubt looking to project the image that Washington has comfortable control of the conflict, whether or not that’s actually the truth of the matter. That being said, even though the US can’t afford to implement widespread sanctions on China over its actions in Hong Kong, the US could still find other ‘non-tariff measures’ to penalise China for its actions in the region and indicate its arms-length support for the protests. Dr Damian Tobin, a researcher at Cork University Business School, explained: “The US cannot act unilaterally to revoke Hong Kong’s special status, but it can create significant difficulties for how mainland Chinese companies using the territory’s markets are perceived by investors. The US’s pursuit of Huawei is an example of the type of non-tariff measures America could pursue. “Hong Kong has long offered mainland Chinese companies a route to external capital and this market would be jeopardised by any perception that its markets are no longer independent. For example, were Chinese companies delisted or refused listing in New York, they may think twice about Hong Kong”.“Were Chinese companies delisted or refused listing in New York, they may think twice about Hong Kong”
However, viewing the situation in Hong Kong with tunnel vision risks overlooking the human cost of the conflict. China’s encroaching influence is seen as a threat to the rights and freedoms of Hong Kong citizens, and people are significantly less likely to listen to their authorities when they believe those authorities are against them. The very fact that China has introduced its new national security law indicates either a real or perceived rise in anti-establishment sentiment, as well as a gradual erosion of the power of Hong Kong officials’ governance. Tobin outlines how the China-Hong Kong protests are in fact a manifestation of wider concerns over democracy, authority and self-determination: “The issue at stake is a persistent decline in governance. There is little attention given to this issue. From Beijing’s side the security law reflects a failure by Hong Kong’s politicians to read the public mood and manage the tensions associated with managing and regulating two systems. It’s not just to do with financial markets. There is a failure to find an effective way of ensuring benefits flow to the wider society”. The situation in Hong Kong probably isn’t going to go away any time soon. China is showing no signs of backing down on the matter just yet, and protests have continued even throughout the peak of the coronavirus pandemic. A number of activists have already been arrested under the region’s new national security law. Meanwhile, the UK government announced last month that it would be making the unprecedented move of offering citizenship to up to 3 million Hong Kong residents whose freedoms are being ‘violated’ by the new legislation. Overall, it appears that Hong Kong will continue to wobble on its socio-economic tightrope for some time, and businesses desperate for stability in the post-coronavirus world are understandably looking for steadier ground to stand on.“There is a failure to find an effective way of ensuring benefits flow to the wider society”
Egdon Resources shares rally 8% as Wressle Oil Field works commence
UK-based hydrocarbon extraction company Egdon Resources plc (AIM:EDR) saw its shares rally on Monday as it announced the commencement of site works at the Wressle Oil Field Development.
The works are the first of a number of stages, which the company anticipates will see it on track for ‘first oil’ during the second half of full-year 2020 – as it had previously advised. Speaking on the works, Egdon Resources said in its statement that the site civils contractor had mobilised to commence necessary works.
This phase of the site development includes the installation of; a new High Density Polyethelene impermeable membrane, a French drain system, and an approved surface water interception, as well as the construction of; a purpose-built bund area for storage tanks, a tanker loading plinth, and an internal roadway system.
The company said that the necessary stages of development, and its current progress, are as follows:
First, it has discharged key planning conditions, and progress with its detailed design tendering and procurement, and all HSE documentation and procedures, are on track.Second, it has installed four groundwater monitoring boreholes and two rounds of sampling and analysis have been carried out thus far.
Third, it is currently commencing the reconfiguration of the work site.
Fourth and fifth, it will install and commission surface facilities, and commence sub-surface operations.
Finally – it will commence production. So, it seems, the wheels are certainly in motion for Egdon Resources, with production firmly on the agenda in the latter stages of the year.The Wressle Oil Field is located in North Lincolnshire Licences PEDL180 and PEDL182, where the company has a 30% operated interest.
Egdon Resources response
Commenting on the news, company Managing Director, Mark Abbott, stated:“We continue to make good progress with the Wressle development, in line with the expected timeline, despite the challenges of the current operating environment. The commencement of the site reconfiguration works represents an important step in the progress to first oil which will increase Egdon’s production by 150 barrels of oil per day. Wressle is economically robust with an estimated project break-even oil price of $17.62 per barrel.”
“We maintain our guidance of first oil during H2 2020 and will continue to update stakeholders as works progress .”
Investor insights
Following the announcement, Egdon Resources shares rallied 8.20% or 0.16p, to 2.11p per share 03/08/20 10:00 BST. This current price represents a 59.81% decrease year-on-year on its rate on the same day last year. Analysts offering a one year forecast on its shares estimate a target price of 26.10p a share.HSBC shares slide as reported income freefalls by 96%
Shares at Europe’s largest bank HSBC (LON:HSBA) have slid nearly 4% on the back of the company’s grim 2020 interim results, outlining an alarming 96% drop in net income in the second quarter, down to just $192 million. The company’s pre-tax profits also plummeted over 80% to $1.1 billion over the same period.
Although based in London, HSBC makes the majority of its profits in China, making it especially vulnerable to the ongoing conflict between the UK government and Chinese officials over the implementation of China’s controversial national security law in the formerly British-owned territory of Hong Kong. The company reported a $3.8 billion surge in loan loss charges, significantly worse than the predicted figure of $2.7 billion by The Guardian, and almost seven times the $555 million that HSBC set aside in 2019.
The bank has also raised its forecasts for loan loss charges to between $8-13 billion for the entirety of 2020 in response to ‘the deterioration in consensus economic forecasts’ and the expectation that thousands more people and businesses will not be able to repay loans taken out during the peak of the coronavirus pandemic. According to the BBC, HSBC has reportedly given ‘more than 700,000 payment holidays on loans, credit cards and mortgages, providing more than $27bn in customer relief’.
The company’s disappointing results emerge after last month’s announcement that HSBC is to go ahead with plans to cut 35,000 jobs over the medium term, as part of the bank’s major restructuring plan first reported back in February – which largely preceded the pandemic and was put on hold while staff were indefinitely furloughed. HSBC’s chairman, Noel Quinn, has since stated that the bank intends to ‘accelerate’ this process in light of its poor 2020 performance.
Outlook for the rest of 2020 and beyond is marked by a heavy dose of caution, as HSBC prepares to face ‘a wide range of potential economic outcomes’ dependent on the potential for additional waves of coronavirus, the development of an effective vaccine, and the recovery of market and consumer confidence as lockdowns are increasingly eased worldwide. The bank also warns that ‘heightened geopolitical risk’ – no doubt a euphemistic reference to tensions over Hong Kong, one of its key markets – could have an impact on its performance in the months ahead.
HSBC’s chief financial officer, Ewen Stevenson, told the Financial Times that the bank is heading for a ‘much sharper’ V-shaped recession than initially forecast, with meaningful recovery likely to be delayed until 2021, subject to “the path of Covid, whether we can see the path to an effective vaccine, the outlook for Brexit… big events that we expect to have clarity on in the next six months, which will have a meaningful impact”.
Stevenson also confirmed that HSBC has already cut 3,800 jobs and ‘substantially’ cut back on hiring since the start of the year, as the company aims to save up to $4.5 billion in costs by 2022.
Chief executive Noel Quinn told the BBC on Monday:
“We will face any political challenges that arise with a focus on the long-term needs of our customers and the best interests of our investors. Current tensions between China and the US inevitably create challenging situations for an organisation with HSBC’s footprint. However, the need for a bank capable of bridging the economies of east and west is acute, and we are well placed to fulfil this role”.
Quinn was hesitant to speculate how tensions between the UK and China may impact business for HSBC in the medium to long-term amid rumours of impending sanctions by the US, simply stating that China’s national security is “a law we have to comply with, as we comply with all of the laws and activities in the geographies we operate”.
HSBC’s share price slid by 3.73% to 329.45p at BST 12:52 03/08/20, down an eye-watering 47.89% over the course of 2020. The bank’s P/E ratio sits at 24.55 and its dividend yield at 0.12%.
DW Sports collapses – 1,700 jobs at risk
DW Sports, the sports retailer and gym group, has collapsed and will enter administration.
The company, which was founded by Dave Whelan, has 73 gyms and 75 shops in the UK. The closures will risk 1,700 jobs.
After stores and gyms were closed during the lockdown, the group’s income plummeted and plans to appoint insolvency specialists.
“As a consequence of Covid-19, we found ourselves in a position where we were mandated by Government to close down both our retail store portfolio and our gym chain in its entirety for a protracted period, leaving us with a high fixed-cost base and zero income,” said Martin Long, DW Sport’s chief executive.
“Like many other retail businesses, the consequences of this extremely challenging operating market have created inevitable profitability issues for DW Sports.
“The decision to appoint administrators has not been taken lightly but will give us the best chance to protect viable parts of the business, return them to profitability, and secure as many jobs as possible.
“It is a difficult model for any business to manage through without long-term damage, and with the limited support which we have been able to gain.
“Having exhausted all other available options for the business, we firmly believe that this process can be a platform to restructure the business and preserve many of our gyms for our members, and also protect the maximum number of jobs possible for our team members,” he added.
The group was hit hard during the lockdown. Whilst DW Sports previously had a £15m income every month, it plummeted to zero overnight whilst still having £3m wage bills. Fitness First is the group’s sister company and will remain unaffected by the closures.Seeing Machines shares rally 7% with results consistently ahead of guidance
AI-powered operator monitoring systems producer for the transport sector, Seeing Machines Limited (AIM:SEE), saw its shares rally on Monday as it had booked full-year fundamentals well ahead of consensus guidance – despite what it described as the ‘difficult COVID-19 backdrop‘.
Touting itself as a rare 2020 success story, the company boasted a 30% year-on-year bounce in total income, up to an anticipated A$42.6 million.
This headline figure was accompanied by strong progress in revenues, which were expected to be $39.7 million – some 8.5% ahead of its A$36.6 million consensus guidance. Further, Seeing Machines stated that its cash position at period end stood at A$38.7 million, which represented a 22% step ahead of the consensus guidance figure of A$31.8 million.The company added that by the end of the year finishing 30 June 2020, the number of connected Guardian units – its commercial transport monitoring system – stood at 23,415.
Seeing Machines response
Company CEO, Paul McGlone, restated his approval of the company’s performance, especially during what he described as an acutely difficult period for the transport sector. He added:“Guardian connections have increased in FY2020 by more than 46% despite the limitations posed by grounded transport companies and pressure on commercial fleets to work around the clock to deliver supplies across vast geographies. As global economies return to some semblance of normality, we expect connections to accelerate through our growing distribution network.”
“In the Auto sector, Seeing Machines has much to look forward to in the coming months as we await the launch of two production vehicles featuring our DMS technology. The continued and reinforced regulatory momentum in Europe and North America is already having additional, positive impact across our Automotive and Fleet opportunities, and while the Aviation industry remains under more economic pressure than most, our ongoing negotiations remain intact.”
Investor insights
Following the news, Seeing Machines shares rallied 7.02% or 0.22p, to 3.32p per share 03/08/20 12:00 GMT. This is down from its lockdown-recovery-high of 3.50p on the 26 June 2020, but up from its recent dip to 2.70p on July 21 2020.Fortune 500 data scientist backs tech rally but gold and bitcoin could see volatility
Trying to manage money during a global pandemic is challenge enough, but trying to position yourself as an investor in an uncertain climate is an even greater cause for sleepless nights. The predominant issue here is uncertainty. Not necessarily over what the virus will do next, but the week-by-week adjustments in political policy that are made in response to the spread of the illness, and how this affects different parts of the economy. Acting as a voice of reason, Dr Richard Smith gives us his two cents on the outlook for politics and investment, including the tech surge which he says is here to stay.
Dr Smith is a Berkeley Mathematician and PhD in System Science. Dubbed ‘The Doctor of Uncertainty’ by his academic colleagues, Dr Smith is the CEO of The Foundation of the Study of Cycles, a Fintech entrepreneur and advisor to the US government and Fortune 500 companies (including Pfizer and Johnson & Johnson). His software, which focuses on course-correcting irrational tendencies and cognitive biases during investment, has served in excess of 25,000 investors, and helps steward more than $20 billion in assets.