Deadline nears to protect savings from banking busts

Miranda Wadham
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Deadline nears to protect savings from banking busts
Savers have just days to move money to different bank accounts, as from January 1st new rules come into force limiting compensation that can be received should a bank go bust. The new legislation which will reduce compensation to £75,000 per account, per institution, compared to the £85,000 available through the Financial Services Compensation Scheme (FSCS) now. Joint accounts will see protection cut from £170,000 to £150,000. The FSCS is advising those with more than £75,000 in one account to move money into another to gain full protection. However separate registered banks that operate under one brand, for example HSBC and First Direct, are only liable for £75,000 in total – even across two accounts with the different banks. Savers would then be advised to move excess money to a different bank entirely. Similarly, if you have money in an ISA, the situation is further complicated. You can only open one cash Isa a year, so be careful if that ISA account was opened this year. 
24/12/2015

Made in Chelsea’s Jamie Laing offers investment opportunity in sweet business

Miranda Wadham
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Made in Chelsea’s Jamie Laing offers investment opportunity in sweet business
Reality TV personality Jamie Laing is making the move into finance, hoping to crowdfund £300,000 for his modern confectionary business ‘Candy Kittens’. Laing, one of the most controversial stars of E4’s ‘Made in Chelsea’ series, launched his business on the show nearly two years ago and now stocks his range in Tesco, Waitrose and Sainsbury’s, as well as Selfridge’s and Topshop. Candy Kittens’ hope to be the ‘finest premium sweet in the world’, and are all gluten free and use real fruit juice. In its first year, the company 2014 reached sales of £254,000, and the addition of premium supermarket Waitrose to its list of stockists pull sales up by another 40%, to £350,000. With all stock being manufactured in the EU and stored in the UK, the company have developed a first class supply chain which can, if necessary, deliver full production runs within 4 weeks. The company exports to over 15 countries and is forecast to turn over between £1 and £2 million next year. However, in order to expand, Candy Kittens are crowdfunding to launch a major marketing programme in 2016. Whilst Laing’s ‘Made in Chelsea’ fans provided a ready customer base and enabled the launch of the business, he has since brought in Ed Williams as Managing Director, who has driven the company forward to where it is now. Laing said in an interview with The Telegraph: “I love TV and I love sweets, and I’m fortunate to be doing both things. But I couldn’t grow the company without help. Ed is the driving force.” Candy Kittens is crowdfunding for £300,000 on Seedrs, in return for 7.51 percent equity. The minimum investment is £12, but for £24 and upwards investors will be offered various perks including a signed photo of Jamie and 50 percent off Candy Kitten sweets for life. For more information, visit their campaign page on Seedrs. 
Miranda Wadham on 24/12/2015

GAME Digital shares drop over 30 percent in Christmas run-up

Miranda Wadham
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GAME Digital shares drop over 30 percent in Christmas run-up
Shares in gaming chain GAME Digital (LON:GMD) have plummeted over 30 percent this morning, after a trading update detailed disappointing performance in the pre-Christmas period. Total transaction value came in at £466.8 million, down 6.7 percent due to a 20 percent reduction in low margin console sales. However, performance was boosted by growth in GAMEtronics, their pre-owned mobile and tablet range, which was up 91.8 percent on the year. Overall, the group’s UK gross trading margin was down 4.8 percent at £73.9 million, with the company admitting that trading conditions in the market had been challenging. Martyn Gibbs, GAME Digital’s Chief Executive Officer, said in a statement: “The switch over from the older gaming formats to PlayStation 4 and Xbox One software has impacted profitability across the UK market. “Despite the market challenges, GAME has continued to deliver significant growth from new format content and newer categories such as licensed merchandise and preowned mobile phones and tablets, and we continue to prioritise these areas as well as growing our Multiplay business. “The pre-Christmas period and the winter sale are very important to our customers and with market leading offers we remain well prepared in our stores and online for the remaining peak trading period.” GAME Digital is currently trading down 38.18 percent at 127.20 pence per share. (1422GMT)

GDP growth slows in third quarter – ONS

Miranda Wadham
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GDP growth slows in third quarter – ONS

Growth in the UK economy slowed in the third quarter of the year, revised down from 0.5 percent to 0.4 percent due to a slowdown in the services sector.

The ONS also cut its estimate of second quarter GDP growth from 0.7 percent to 0.5 percent, lowering the chances of the government hitting its growth forecast for 2015

These are latest in a string of figures from the Office for National Statistics that suggest the UK economy is growing slower than expected; on Tuesday the ONS revealed that both public borrowing and household debt had risen in the last quarter, casting doubt on Chancellor George Osborne’s plan to have a budget surplus by 2017. The Treasury commented on the figures: “Today’s figures highlight that risks remain – that’s why we should continue working through our plan to build an economy that delivers security for working people.”  

Public borrowing rises in November, along with household debt

Miranda Wadham
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Public borrowing rises in November, along with household debt
Headline public borrowing rose to £14.2 billion in November, well above analysts’ forecasts and casting doubt on Chancellor George Osborne’s plan for cutting the budget deficit. The figure was 10 percent higher than in the same month last year, a sudden increase on the first eight months of the year where public borrowing was 8.9 percent lower. Figures for household debt are also looking worrying and are expected to rise to £40 billion this year, with unsustainable borrowing currently on a par with the levels reached before the 2008 global financial crisis. The former business secretary Sir Vince Cable told the Independent that Britain may be returning to “old and unhappily discredited” methods of economic growth: “We’re back on the treadmill of growth being sustained by personal borrowing. Much of it is against an inflating housing stock.” Osborne’s is aiming to turn the UK’s budget deficit into a surplus by the end of this decade, through continued austerity measures and budget cuts.

Camden Town Brewery becomes second crowdfunding exit, after deal with global ABInBev

Miranda Wadham
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Camden Town Brewery becomes second crowdfunding exit, after deal with global ABInBev
AB InBev, the world’s largest drinks company, are in the process of acquiring ‘craft’ brewery Camden Town Brewery, making it the second successful exit for a crowdfunded business. The deal is rumoured to be worth about £85 million, and will add Camden’s Hells, Pils and Pale Ale brands to AB’s roster, which already includes Stella Artois and Budweiser. According to Camden, it will represent a ‘very successful exit’ for backers who invested in the company through equity crowdfunding. The acquisition is a strategic move for AB InBev, who have faced growing competition from ‘craft’ breweries, which have risen exponentially over the last couple of years. However, many fans and investors in Camden Brewery are disappointed with the deal, suggesting the company has ‘sold out’ and will lose its ‘independent brewery’ image. Camden Town’s founder and CEO Jasper Cuppaidge told Business Insider that the deal was founded on the need for security: “We wanted to make sure that the brand was around for a long time and this capital investment gives us that security for our employees, for the brand, and also security to continue to make our beer as well as we have for the past 5 years.” Since Cuppaidge, his family and three best friends own 95% of the company’s equity, he stood to do rather well from the deal, with estimated figures suggesting that they have shared a combined payout of more than £80 million. There are also fears that, when ABInBev completes its acquisition of the world’s second biggest drinks maker SABMiller, niche ‘craft’ brands will be sold off. The company has already announced that it will sell the Greenwich-based craft brand Meantime, bought just seven months ago by SABMiller. In terms of the future of equity crowdfunding however, news of the deal bodes well. The industry is still relatively young and this deal will mark only the second successful exit in the UK. E-Car Club became the first in July, when the business was sold to global car hire company Europcar and investors received a return of three times their original investment. 
22/12/2015

Premier Veterinary Group gains 10 percent on part sale of business

Miranda Wadham
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Premier Veterinary Group gains 10 percent on part sale of business
Shares in Premier Veterinary Group (LON:PVG) have risen over 10 percent this morning after completing the sale of its Veterinary Business to Independent Vetcare. The deal was worth £6.5 million in cash payment and will allow the company to focus on the growth of its subsidiary, Premier Vet Alliance. CEO Dominic Tonner said in a statement: “We are very excited that we now have additional resources to expand the PVA business. The Board believes that the Disposal, coupled with the resultant focus on the PVA business, will lead to the enhancement of shareholder value. The Disposal re-enforces our independence in terms of the provision of services to third party veterinary clinics.” The sale was announced after a strategic review of the company’s assets and aims to reinforce their independence in the provision of services to third party veterinary clinics. Premier Veterinary Group is one of the largest movers on the London market this morning, currently trading up 11.35 percent at 109.68 pence per share (0929GMT). The company has a 52-week range of between 27.15 and 121 pence. 
21/12/2015

Spanish markets react badly to surprise election outcome

Miranda Wadham
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Spanish markets react badly to surprise election outcome
The Spanish national elections have caused turbulence in their financial markets, after surprising results left no clear winner. The conservative People’s Party and the Socialists, who have dominated politics for the last couple of decades, were challenged by anti-austerity newcomers Podemos. Whilst it is likely that the People’s Party leader Mariano Rajoy will be asked to form a government after winning 29 percent, his weaker majority will make for a more difficult task than previous years. Spanish markets reacted uncertainly to the news, with Madrid’s Ibex 35 down 2.8 percent. in early trading, with Spanish banks falling around 4 percent. The yield on ten-year Spanish government bonds rose 0.135 of a percentage point to 1.825%, meaning Spain would have to pay more to borrow internationally. It seems the Spanish people have chosen to abandon the traditional two-party system in favour of alternative emerging parties, after an economic crisis that lifted unemployment rates and triggered harsh austerity measures. “Spain is not going to be the same anymore and we are very happy,” said Podemos leader Pablo Iglesias after the results were released. 
21/12/2015

Oil falls to new lows, coming in under $35 a barrel for the first time since 2004

Miranda Wadham
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Oil falls to new lows, coming in under $35 a barrel for the first time since 2004
Oil prices fell to new lows over the weekend, with Brent futures down another 2 percent this morning at $36.06 per barrel; the weakest figure since July 2004. Crude has fallen 34.8 percent this year to date, and 76 percent since 2008, with analysts worried that the rout shows no sign of slowing. Markets have reacted badly to the news, with the Dow falling 367 points to 17,129 Friday; equalling its worst two-day slide since August. The rout has been caused by demand continuing to outstrip supply, something that is likely to continue after OPEC’s announcement this month that it will not curb production. Russian production has continued to expand and is now at 10 million bpd, the highest since the collapse of the Soviet Union. Similarly, OPEC leader Saudi Arabia has upped production from 10.226 to 10.276 million bpd between September and October. The U.S. oil rig count has risen by another 17 to 541, with a strong dollar following last week’s interest rate hike also having an adverse effect on prices. WTI Crude is currently below the $35 mark, trading at $34.73 per barrel, with Brent also down at $36.88 per barrel. 
21/12/2015

Supermarket Survey: Key Findings and Implications

UK Investor Magazine
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Supermarket Survey: Key Findings and Implications

Introduction

We have found clear winners and losers in this survey, this article will outline our findings and implications for the share prices of the concerned in 2016.

We will firstly outline the findings then conclude the implications central to the purpose of our study.

Sainsbury’s has attracted more Christmas shoppers this year (2014: 16.67%, 2015: 19.84%) whereas Tesco’s share has fallen (2014: 30.95%, 2015: 27.78%).

We feel this could play out in 2016 with Tesco underperforming Sainsbury’s shares as Sainsbury’s attract those shoppers who are turning away from Tesco.

There was little difference in the number of customers Morrison’s had through their doors but Asda suffered with a small decline.

The big winners of this year’s Christmas shopping activities have been, as many of you may have guessed, Lidl and Aldi. Both of their market share as markedly improved and appear to have benefited from savvy Christmas shoppers seeking bargains.

The Discount Store Take Over

The popularity of discount supermarkets has been a thorn in the side of the major supermarkets through 2014/2015, our findings suggest the pain discounters are causing the top four is only going to get worse.

36.51% of our respondents said last year they bought some of their Christmas dinner ingredients from discount stores where as a whopping 54.76% said that at least one of their Christmas dinner ingredients would be from stores such as Aldi or Lidl in 2015.

We must reiterate that 54.76% said they bought at least one item from discount stores, not the majority of their shopping, our respondents are still opting to do the bulk of their shopping in larger supermarkets.

What this shows is consumers are slowly fragmenting their shopping habits and going after value where possible by spreading out where they buy certain items.

These particular trend could well be the most significant of our entire survey as it highlights the extent shoppers are ‘shopping around’ at a higher rate to find cheaper goods of a reasonable quality.

This shift in customer behaviour began in ernest in 2014 and is snowballing.

Our projection is a continued rise in market share of discount stores forcing major supermarkets to change thier strategies, leading to price war that will damage the margins of the likes of Tesco and Sainsbury’s.

We feel the ‘discount store take over’ has the possibility to be largest factor in the disappointment we now feel will come from FTSE 100 supermarket Christmas sales reports and cause further underperformance in thier share prices.

Supermarket Loyalty

Our analysis has uncovered which supermarkets have the highest levels of consumer loyalty when it comes to opting to do their Christmas shopping at the same supermarket to where they would ordinarily do their grocery shopping.

Loyalty Levels:

Marks & Spencer: 97.9%

Morrison: 85.7%

Sainsbury: 78.6%

Tesco: 74%

Asda: 65.6%

We found those supermarkets which enjoy a higher proportion of weekly grocery market share are likely to have the most disloyal customers who have an inclination to chase lower prices and value.

This could impact on Christmas sales figures but the most important deduction is, these ‘disloyal’ savvy consumers are likely to be those that drive a supermarket price war and the erosion of profit margins in 2016.

Special Offers Beat Christmas Adverts

In the battle for market share, price matters. The habits of our survey respondents have cemented this view as 62.7% indicating special offers influenced where they did their Christmas shopping compared to only 12.7% who said Christmas adverts influenced their decisions. This highlights once again grocery shopper’s inclination to opt for value as opposed to exercising any brand value.

It’s interesting to note only a small amount of respondents said adverts impacted on their decisions which may mark the decline in the need to increase brand awareness and the beginning of a trend where supermarkets focus almost solely on conveying the low price of goods.

The ‘Mog the Cat’ advert maybe one of Sainsbury’s last efforts to tug the heart strings of potential customers in an effort to boost sales.

Validity and statistical significance of findings

To gauge the validity of our findings we compared the results of the survey to supermarket market-share data released to Kantar World Panel, one of the world’s largest market insight organisations.

To measure the degree of significance of our results we needed to find strong similarities with Kantar’s research so that our finding can be relied upon as having a strong correlation with real world activities.

We have been satisfied that are findings our consistent with broader studies in as far as the majority of our readings of market share are within 2% of Kantar Worldpanel’s data.

For example, in December Tesco were measured to have a 28% market share by Kantar which compares to our measure of 27.78% of respondents who said they would being their Christmas shopping at Tesco.

We have seen a slight bias towards higher end stores such as Waitrose and Marks & Spencer which we can only attribute to the nature of our publication.

Conclusions

  • Listed supermarkets (Tesco, Sainsbury’s and Morrisons) are set to report lower christmas sales than last year, with the exception of Marks & Spencer
  • Aldi and Lidl will post record sales
  • Price savvy consumers will drive a price war throughout 2016
  • Sainsbury’s is likely to outperform Tesco
  • Marks & Spencer’s food division will continue to carry their flagging clothing business
  • FTSE 100 supermarket shares will underperform the benchmark in 2016

The overall picture is pretty grim for FTSE 100 supermarkets but there is some hope for Sainsbury’s at least, who have reasonably loyal customers and seen an increase in it’s market share bucking the trend for the overall FTSE 100.

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