Gender pay gap at 8.6% record low
The Office for National Statistics (ONS) has reported that the gender pay gap has fallen to a record-breaking low. In the year to April 2018, the gap was at 8.6%. This is down from 9.1% the previous year. These statistics are based on the median difference in full-time hourly pay.
Despite the record low, campaigners have deemed the rate of improvement too slow.
Halfords pulls out of Evans Cycles rescue talks
Sky News has reported that Halfords (LON: HFD) has pulled out of rescue talks with Evans Cycles.
The UK’s biggest bikes retailer was previously in talks with Evans Cycles and made bids for the struggling retailers but has ended discussions.
A source told Sky News that Halfords plans to invest on its current brands, Cycle Republic and Tredz, rather than invest in Evans.
Halfords declined to comment on the report.
Sports Direct (LON: SPD) is rumoured to be the new saviour of Evans Cycles. Mike Ashley recently purchased House of Fraser in a £90 million deal after it fell into administration.
It is now yet known if a deal will be agreed between Sports Direct and Evans but a likely deal will be valued at between £10-20 million.
The cycle chain was founded almost a century ago and has been one of the many retailers struggling amid the difficult retail environment.
Group’s including House of Fraser, Mothercare (LON: MTC), New Look and Toys R Us UK have either been forced into administration or secured creditor approval for radical restructurings.
Evans is being advised by PricewaterhouseCoopers (PwC). It has over 60 stores across the UK and required an urgent capital injection following a slump in profits back in September.
Millennials shunning wealth management firms for alternative advice
Millennials are seeking investment advice in considerably different ways when compared to other generations. A survey conducted by Crealogix has revealed the different perceptions of traditional wealth management services across generations.
Provider of digital banking solutions, Crealogix conducted an independent survey of 1,200 UK consumers. Interestingly, the survey identified that over 41% of millennials seek investment advice from their family above any other option. Moreover, only 30% of respondents said they would seek investment advice from a bank. Additionally, only 19% identified wealth management services. This is striking given the range of apps and digital services that banks and wealth management firms offer, encouraging investment. Despite digital services rendering investment management more accessible than ever, a family is still the first port of call.
Furthermore, the survey identified that younger investors seek advice from a more varied group of sources.
Of the millennials surveyed, 50% turn to family for investment advice, whereas 25% seek advice from their bank.
It has become apparent that this trend inverts as investors get older. In fact, 22% of baby boomers ask family members for investment advice and 35% opt for their bank. Interestingly, the survey has revealed why there may be a general reluctance to turn to wealth management firms. Of the consumers surveyed, 19% branded wealth managers as “elitist”. Likewise, 18% have said the industry is “old-fashioned”. Commercial Director at Crealogix UK, Jo Howes, has commented: “There appears to be a misconception that bank savings accounts are the best safe choice for big investments, which is untrue. Wealth management services are falling behind in educating their clients about other low risk investment options which have a better chance of protecting savers from the effects of inflation.” “Risk-averse, long term savers are just one of several market segments where wealth managers have the opportunity to compete more proactively with banks to attract new consumers and their investments. By educating people about how to make smarter use of their money, the wealth management sector can regain trust and reputation.” “Digital wealth management technology offers wealth management firms a great new set of opportunities for engaging consumers and helping them manage their money better.”Millennials are twice as likely to invest via an app, according to the survey. In fact, today there is a wealth of apps designed to educate and encourage new investors.
Moreover, Anton Zdziebczok, Head of Product Strategy, added: “Providing digital wealth management services allows established firms to appeal to younger generations and gain much better scalability as they onboard new clients. Financial institutions don’t need to build everything in house.” “There’s plenty of expertise on hand in the UK, once wealth managers commit to a digital strategy. With the ecosystem of specialist software providers and fintechs expanding rapidly thanks to the open banking movement, there’s never been a better time for wealth management firms and financial advisors to reinvent themselves.” With the growing technological advancements, perhaps wealth managers should commit to offering more digital alternatives to attract younger investors. However, they would still be competing with family members as the top investment advisors for young people.WPP shares tumble 22% on fall in sales
Shares in WPP (LON: WPP) plummeted over 22% on Thursday after reporting a fall in sales.
The advertising group reported a 1.5% fall in net sales for the third quarter when it was expected to reach a 0.3% growth.
Almost £3 billion was wiped off the group’s market value.
Mark Read, WPP’s new chief executive, said: “Clearly we have underperformed our competition in the third quarter.”
“We are not going to sugarcoat the reality,” he added.
WPP is struggling to perform following the departure of founder and former chief executive Sir Martin Sorrell in April.
Sorrell said when stepping down: “As I look ahead, I see that the current disruption we are experiencing is simply putting too much unnecessary pressure on the business.“
“That is why I have decided that in your interest, in the interest of our clients, in the interest of all shareowners, both big and small, and in the interest of all our other stakeholders, it is best for me to step aside.”
“As a founder, I can say that WPP is not just a matter of life or death, it was, is and will be more important than that. Good fortune and Godspeed to all of you … now Back to the Future.”
WPP has been struggling amid the growing competition from Facebook (NASDAQ: FB) and Google (NASDAQ: GOOG), whilst other big clients including Unilever (LON: ULVR) are spending less on advertising.
George Salmon, who is an equity analyst at Hargreaves Lansdown, said: “We’re yet to get the full details, but it looks like the over-riding theme of [Mark Read’s] restructure will be a simplification of the business. It’s easy to see why.”
“Taking over at a group where success depends so much on having an in-depth knowledge of all the various agencies and divisions was always going to be a serious challenge.”
“This journey has already started, and the decision to sell a stake in Kantar is the next step,” he added.
Shares in WPP are currently trading -16.88% (1112GMT).
Tesla reports $312m profits in Q3
Tesla beat analyst expectations and made a profit of $312 million in the last three months.
Despite the turbulent few months for the electric company, the group announced surprisingly high profits sending shares up 10% in after-hours trading.
Musk told analysts that it was an “incredibly historic quarter”.
“Customers actually cared about the future of the company so much that they volunteered their time to help the company succeed. It chokes me up, actually,” he said.
Over the past three months, when the group saw an increase in profits, Musk found himself in the headlines many times.
Musk is currently being sued by a British diver, who he called a “pedo”. He fined and sanctioned by the US Securities and Exchange Commission (SEC) and also smoked cannabis live on a radio show.
Jeremy Acevedo, who is the manager of industry analysis at Edmunds, said: “The third quarter in many ways serves as Elon Musk’s redemption – you may not agree with his approach, but you can’t argue with the numbers.”
“Between the SEC battle, controversial interviews and Twitter feuds, Elon’s antics hit a zenith in the third quarter, yet Tesla managed to exceed production goals and the Model 3 outsold many of the most popular cars in America. Achieving profitability is a huge milestone, and one that even the most staunch Tesla skeptics would have to give them a little bit of kudos for,” he added.
The company has said that it expects to generate a profit during the fourth quarter. Tesla has had just two profitable quarters before Wednesday’s results.
Tesla said: “We will focus even further on cost improvements while continuing to increase our production rate” in the fourth quarter.
Shares in Tesla (NASDAQ: TSLA) are currently trading -1.92% (1037GMT).
Debenhams to close 50 stores, risking 5,000 jobs
Debenhams has posted record losses and said that it plans to close 50 retail stores, risking up to 5,000 jobs.
The struggling department store revealed a £491.5 million loss compared to profits of £59 million the year before.
Sergio Bucher, the group’s chief executive, said: “It has been a tough year for retail in 2018 and our performance reflects that. We are taking decisive steps to strengthen Debenhams in a market that remains volatile and challenging.”
“Working with our new chief financial officer Rachel Osborne, and the board, I am determined to maintain rigorous cost and capital discipline and to prioritise investment to achieve profitable growth. At the same time, we are taking tough decisions on stores where financial performance is likely to deteriorate over time.”
“With a strengthened balance sheet, we will focus investment behind our strategic priorities and ensure that Debenhams has a sustainable and profitable future.”
The group currently has 165 stores and employs 27,000 people. It said that the closures will take place over three to five years.
The retailer is struggling to adapt to consumer changes, where shoppers are moving away from the traditional high street and buying more online.
Debenhams has issued three profit warnings this year and the group’s share price has dived by 75% in the past year.
Richard Lim, chief executive of Retail Economics, said: “Put simply, department stores are incredibly expensive to run.”
“The combination of too much space, inflexible leases and spiralling operating costs are set against a backdrop an accelerating behavioural shift towards online and experiences. This is eroding their profitability and changes in the business need to occur at a pace if they are to survive.”
Earlier this year House of Fraser was bought out of administration by Mike Ashley’s Sports Direct in a £90 million deal.
David Birne, business recovery and insolvency partner at H W Fisher & Company, commented:
“That Debenhams has announced the closure of as many as 50 stores and losses of £500m suggests it has done a pretty good job of keeping the reality of its dire financial situation from markets.”
“Still the circumstances Debenhams found itself in, having issued three profit warnings this year already, made restructuring inevitable. The only question was which route the chain would go down.”
“That it has taken the decision to close nearly a third of its current stores rather than take the option of putting in place a Company Voluntary Arrangement (CVA) suggests Debenhams was unable to put forward a CVA that its creditors felt able to agree to. That said rent reductions appear to have been agreed and the strategy announced today could see the chain survive.”
Shares in the group are trading +9.15% (0935GMT).
Patisserie Valerie £40m black hole but wins court case
Patisserie Holdings Plc (LON:CAKE) has today won its court case, with the firm surviving a winding-up petition served by HMRC.
The petition came amid claims that the company’s subsidiary, Stonebeach, had an unpaid tax bill of £1.14 million. To the relief of the company’s board and investors, the petition was dismissed by the High Court of Justice, Business and Property Courts.
In a less fortunate turn of events, the company are still in the midst of a fraud scandal and audit failure, which has left a £40 million hole in the firm’s accounts. While Patisserie should be £28 million to the good, the firm’s owner Luke Johnson has had to invest as much as £20 million of his own money just to keep the company afloat.
On the brink of insolvency, the company brought in forensic accountants from PricewaterhouseCoopers to trawl through its accounts and uncover the fraudulent activity that left it close to collapse. As part of the financial black hole is the mishandling and distribution of shares to company board members, which represents a serious failure by the auditing services of Grant Thornton.
Similarly, the ongoing investigation remains in its “preliminary” stages, but has uncovered severe and repeated malpractice by company board members amongst others, as the Serious Fraud Office have opened a case against an indiviudal – and finance director Chris Marsh was arrested and then released without bail.
In an official statement, Directors of Patisserie Valerie launched an investigation into “significant, potentially fraudulent accounting irregularities” on October 10.
However, a source close to major shareholder, Invesco, said, “Shareholders are concerned the board has given itself supervision of the investigation into [its] own conduct and potential incompetence.”
Luke Johnson has said “determined to understand the full details of what has happened” and the board would conduct a “full investigation with its legal and professional advisers into its true financial position”.
Gourmet Burger Kitchen to close 17 stores
Gourmet Burger Kitchen has announced plans to close 17 of its 85 restaurants.
The casual dining chain is the latest to file for a Company Voluntary Arrangement (CVA), risking 250 jobs.
“We are having to take tough but necessary actions to reduce our fixed-cost base and restore long-term profitability,” said Derrian Nadauld, the firm’s managing director.
Gourmet Burger Kitchen is owned by South Africa’s Famous Brands (JSE: FBR), which also owns Wimpy and the bakery Paul.
The difficult trading conditions have led to several dining chains close outlets. Byron has closed 20 of its 67 sites through a CVA.
Jamie’s Italian, Carluccio’s and Prezzo have all used a CVA to shut outlets and cut hundreds of jobs during this year.
Earlier this year Prezzo announced plans to close 94 restaurants, including all 33 outlets in its TexMex chain Chimichanga.
The process for Gourmet Burger Kitchen is being run by Grant Thornton.
Under the terms of the deal, the restaurant chain will close 17 outlets and every effort will be made to redeploy staff.
Matthew Richards, a director at Grant Thornton, said: “The casual dining trading environment in the UK remains extremely challenging, driven by a change in dining behaviour, long-term consumer trends and increased competition.”
“It is important to stress that no restaurants will close immediately and employees and suppliers will continue to be paid on time and in full.”
The chain has said it has worked on restructuring the business operations through reducing head office costs and refurbishing offices.
May rules out two-tier backstop amid Brexit debacle
With Brexit ‘divorce talks’ well under way, prime minister Theresa May reaffirmed her position that no deal would be made that sets Northern Ireland apart from the rest of the UK, regarding trade relations.
In the forever-hindering and sensitive saga that are customs negotiations, May has categorically ruled out a customs deal that puts regions of the UK on different tiers.
Much to the comfort of her DUP counterparts, the prime minister has said a deal to keep the Northern Irish ‘backstop upon a backstop’ in place would be a deal that no UK prime minister could ever accept.
Despite the apparent elephant in the room, May has said in a speech to MPs that an EU Withdrawal Agreement is 95% complete.
‘the shape of the deal across the vast majority of the Withdrawal Agreement is now clear.’The prime minister now calls for a substantive attitudinal shift from her colleagues in the EU27, while turning back to her DUP peers to tell them that she will not cross the ‘blood red line’ that could topple her government, nor would any backstop or transition deal be never-ending. This latest deal offering – which would have to be a separate legal agreement to the Withdrawal Agreement – was tabled by the EU to reignite stalled talks, but in spite of the EU27’s best efforts to play down the divisive nature of the legal article, UK politicians look set to stand firm against a deal which practically amounts to extra electronic controls on goods passing between mainland Britain and Northern Ireland. Yesterday in Commons, the prime minister laid out four conditions that must be met for an agreement to be reached. Among which, May demanded there be a “commitment to a temporary UK-EU joint customs territory legally binding, so the Northern Ireland only proposal is no longer needed”. In the next draft of the Withdrawal Agreement, it is understood that references to Northern Ireland being part of the EU’s “customs territory” will be dropped, however the possibility of a Northern Ireland-only backstop has been noted for the future, the parameters of which would be set out in a separate annexe abiding by the EU’s Union Customs Code. In regards to ruling out a Northern Irish backstop within the Withdrawal Agreement itself, EU sources told RTE News this would not be possible on grounds of temporal constraints. “That’s complicated,” one EU source said, “It’s much more complicated than it sounds.” “The first point is the legal basis. You can’t do it under Article 50. That’s always been our stance. The second point is the practical aspects. It’s very complicated to work out all the details in a short period of time. These things need to be negotiated properly.” Setting aside the boorish mindset of the UK’s inflated worth, what the EU is asking is for the UK to clarify which parts of the UCC it is willing to compromise on – for instance, whether the UK plans to sign its own trade agreements or profit off of the EU’s FTA’s, and whether the UK will be part of new trade negotiations during its limbo period. Similarly, time pressure makes the task of resolving regulatory issues nigh-on impossible. For a comprehensive single tier backstop to be put in place, there would have to be an alignment of the EU’s single market rules, and the time-frame of current negotiations do not allow for such adjustments to an entrenched legal framework. The only solution would be for the UK to take an ad hoc approach and adopt an off-the-shelf model such as the trade arrangement the EU has with Turkey – the terms of which the UK would never accept. Going into the next round of talks in Brussels, the head of the UK negotiating team, Olly Robbins, will surely hope Mrs May will quit her trigger finger on the bravado gun. While she faces stern opposition at home, arrogant and empty promises in Commons will only serve to antagonise any progress with the EU negotiating team. With the gift of hindsight, one can bleat in futility that the UK should have had some plan going into the Brexit referendum. However, the reality today is that a happy medium needs to be found between a practical compromise behind closed doors and quasi-nationalist fodder to drown out the baying of Commons critics of all persuasions.
Daily Round-Up: FTSE 100 recovers from Tuesday’s losses
The FTSE 100 has recovered 57 points to 7,012 on Wednesday morning, boosted by the weak pound, which is down to below $1.30.
Wednesday saw the third-quarter results for various lenders, sending shares both up and down for different banks.