Wednesday 10/07/24

1. In MACRO, ENERGY & COMMODITIES NEWS, the US makes progress, efforts to oust Biden lose momentum (although Europeans are hedging their bets), renewables firms plan new onshore windfarms, BP warns of lower profits and it’s not looking good for coffee prices
2. In BUSINESS & EMPLOYMENT TRENDS NEWS, Begbies Traynor expects higher insolvency levels, Dyson announces deep cuts, Page Group issues another profit warning and Linklaters partners rake it in
3. In CONSUMER GOODS & LEISURE NEWS, a US non-alcoholic beer brand doubles its valuation, Nike’s turnaround efforts stumble, Samsung Electronics workers vote for an indefinite strike and Loungers knocks it out of the park
4. In MISCELLANEOUS NEWS, Ariane 6 launches, Vistry expects a Labour boost and Shein launches a €200m fund
5. AND FINALLY, I bring you gourmet food on a budget…

So the US moves forward, the Biden ousting loses momentum, renewables firms plan windfarms, BP warns of lower profits and there’s no respite for coffee prices…

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

US economy has made ‘modest further progress’, says Fed chairman (The Times, Mehreen Khan and Louisa Clarence-Smith) cites Fed chief Jerome Powell’s assessment of the US economy in front of the US Senate’s banking committee, where he said that it was not “overheating” and that it was making “modest further progress” in bringing inflation back towards its target of 2%. The Fed has been hinting at just one interest rate cut this year while the market is expecting two.

Meanwhile, Donors and Democrats despair as push to sideline Joe Biden fizzles (Financial Times, James Fontanella-Khan, Joshua Chaffin, Alex Rogers and Demetri Sevastopulo) shows that Biden and his team launched a campaign to win back support from Democrat waverers in Congress. It seems to have, at least briefly, taken some of the sting out of efforts to remove him but concerned donors and party members alike continue to despair of the situation, particularly as a $50m ad campaign from Biden’s team is just about to be launched. The old duffer faces another test tomorrow at NATO’s summit in Washington where he’ll have to perform at a high-profile press conference without the safety net of a teleprompter. I guess he just has to avoid making a complete hash of that if he is to have any chance of survival…

That being said, Europeans use Nato summit to build contacts with affiliates of Donald Trump (Financial Times, Henry Foy, Felicia Schwartz and James Politi) shows that European delegates to the summit are hedging their bets by holding meetings with Trump’s foreign policy team on the sidelines.  I guess that, when you get close to an election, this sort of thing is

always bound to happen – but the recent stumbles of the Biden campaign and the contrasting rise in Trump’s fortunes gives things an extra frisson.

Following the change in government, Renewables firms already planning new onshore windfarms in England (The Guardian, Jillin Ambrose and Helena Horton) shows that at least six renewable energy companies have started to identify suitable sites for new onshore windfarms for the first time in almost ten years. * SO WHAT? * This is in reaction to Labour’s reversal of the restrictions that the Conservatives put in place on turbines as part of broader plans to make Britain a “clean energy superpower”. Energy secretary Ed Miliband, wasted no time in pointing out that “the onshore wind ban was in place for nine years, and this government has removed it in 72 hours”.

Then in BP warns profits likely to be lower than expected (Financial Times, Shotaro Tani and Tom Wilson) we see that the oil major warned that profits will probably undershoot expectations due to lower refining margins and a fall in the performance of its oil trading division. It’s due to announce its Q2 earnings at the end of this month. * SO WHAT? * Is this BP just trying to make things look bad ahead of Labour attacking it with another windfall tax? Not necessarily. Rival ExxonMobil is also talking about weaker refining margins. We might have a better picture at the end of this week as OPEC and the IEA are going to be publishing their respective oil market reports today and tomorrow.

In other commodity news, Coffee prices will rise even higher, says Giuseppe Lavazza (The Guardian, Jonathan Yeboah) cites the chairman of coffee company Lavazza who says that prices will remain “very high” until at least the middle of next year (he had previously, incorrectly, predicted that prices would begin to fall this year) due to pressures on the supply chain and worsening harvest conditions in Brazil, Vietnam and Colombia. * SO WHAT? * Prices haven’t been this high for 15 years! In the UK, the price of a 1kg bag of beans has risen by 15% over the last year and it’s possible this could go up by 20% to 25% a year from now. Whether it’s hot chocolate, tea or coffee – there’s no getting away from the rising price of hot beverages! OK so it’s only relatively minor in the scheme of things but an accumulation of these sorts of things can contribute to higher inflation…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Begbies Traynor expects insolvencies to continue, Dyson announces big cuts, Page Group issues another profit warning and Linklaters partners get fat bonuses…

In business trends news, Begbies Traynor expects ‘elevated’ insolvency levels to last into next year (The Times, Helen Cahill) shows that the restructuring firm not only benefited from high levels of corporate distress over the last year (where insolvencies increased by 12%!), but that it also expects this to continue for the coming year as stubbornly high interest rates continue to put strain on companies. The UK government’s monthly insolvency statistics show that company insolvencies are still at decade-long highs, backing up Begbies Traynor’s stance. Can Labour do anything to slow this down I wonder?

There’s misery in Dyson to cut almost a third of its UK workforce (Daily Telegraph, Matt Oliver) as the company announced yesterday that it was going to lay off approximately 1,000 of its 3,500 UK-based employees following a review of worldwide operations. It’s not clear whether job losses will hit the company’s 2,000 employees in Singapore. * SO WHAT? * This is huge. Just imagine working in a place where a THIRD of the workforce just disappears! I’ve worked in companies when 10-15% of the workforce has been axed in one go – and that is shocking enough. It seems to me that the company needs to find a new hit product asap otherwise things could continue to slide. Its Zone Absolute+ Headphones just ain’t it as far as I’m concerned!

In Page Group issues second profit warning of year (The Times, Tom Howard) we see that one of the UK’s biggest recruiters has been having a rough time of it and reckons that things could get worse from here. Page Group had a disappointing June thanks to political uncertainty in France and low confidence generally among employers and candidates. The company had expected the labour market to improve before the summer – but now they think that any uptick could be pushed into next year. * SO WHAT? * This is Page’s second profit warning this year and it has, like its rivals, suffered since the pandemic hiring spree lost momentum over the last 18 months or so. The company has cut the number of its recruiters by about 20% over the last two years in response. Although companies are more reticent about hiring due to macro uncertainties, candidates are also more reluctant to move now because in the boom times they could jump ship for a 15% bump in pay whereas the average salary uptick is just 5-6%, which makes moving far less attractive.

Meanwhile, Partners at magic circle law firm take home nearly £2m (Daily Telegraph, Adam Mawardi) shows that average payouts for equity partners at Linklaters increased by 8% to £1.9m in the year to April thanks to revenues breaching the £2bn threshold for the first time. * SO WHAT? * The interesting thing here is that the company said that the driver of this performance was the return of deal-making in recent months. Such high-profile deals included Barratt’s takeover of Redrow, BHP’s bid for Anglo American and Mondi’s acquisition attempt of rival DS Smith. In total, Linklaters advised on $133bn worth of deals last year. It also benefited from the expansion of its US business, which had a 24% rise in revenues. This is yet another sign of the improvement in the M&A landscape – which is great for everyone in the deal food chain!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

A US non-alcoholic beer brand sees its valuation double, Nike’s turnaround efforts stumble, Samsung workers vote to strike and Loungers looks strong…

America’s Biggest Nonalcoholic Beer Brand Doubles Its Valuation (Wall Street Journal, Lauren Thomas) highlights the fortunes of Athletic Brewing, which has just closed a new financing round that now gives it an implied valuation of about $800m! The company is surfing the trend of Americans drinking less alcohol. Athletic was only founded in 2017 but it has since become the king of nonalcoholic beers. * SO WHAT? * The company has plans to continue its expansion as Americans continue to cut down on their alcohol intake, particularly among the younger demographic. Nonalcoholic beer is now the fastest growing segment of the beer market. Over the last ten years we’ve seen a craft-beer boom, a hard-seltzer boom and now the alcohol-free beer boom, which is also being accompanied by rising demand for canned cocktails. This is a trend that we are seeing over in the UK as well (hence things like Carlsberg’s recent move to buy Britvic).

Then in Nike’s new chief runs into trouble as turnaround efforts falter (Financial Times, Sara Germano) we see that Nike’s slide continues as calls increase for it to take a new direction. It’s been relying heavily on its past glories but investors are getting increasingly frustrated with the company’s apparent lack of

direction and spark. * SO WHAT? * Nike’s sluggishness has opened the door to the likes of Hoka, On and New Balance in terms of market share. This company is clearly in need of a refresh, but there is nothing forthcoming so far…

Samsung Electronics Union Launches Indefinite Strike (Wall Street Journal, Kwanwoo Jun) is an interesting article which shows that Samsung’s unionised workers have voted for an indefinite strike to get better wages and working conditions. The National Samsung Electronics Union has 30,000 members, making up almost 25% of the company’s workforce, and around 6,500 of its workers have been on strike since Monday. * SO WHAT? * So far, there’s not been any immediate impact but, given Samsung’s high profile, you do wonder whether other workers in other companies will take heart and do what they are doing – particularly if the company caves to union demands.

Back home, Loungers hits record revenues after opening 36 new bars (The Times, Emma Taggart) shows that the cafe-bar chain, which trades under the Lounge and Cosy Club brands, posted a 22% rise in annual revenues whilst opening 36 more all-day bars! It also reported a strong start to the current year. Isn’t it nice to hear a hospitality business doing well for a change! It seems to me that Loungers is one of those rare chains to have done well throughout the nightmare of lockdown and beyond…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Ariane 6 launches, Vistry expects to benefit under Labour and Shein launches a fund…

In a quick scoot around some of today’s other interesting stories, Europe’s newest rocket launches into space (Financial Times, Peggy Hollinger) highlights the launch of Europe’s first new heavy-lift rocket for almost 30 years yesterday – and it was a success! * SO WHAT? * Ariane 6 is Europe’s main hope at trying to break SpaceX’s stranglehold on satellites and the launch was already four years late. There are doubts as to Ariane 6’s effectiveness versus Musk’s reuseable Falcon 9 rocket, or his much bigger Starship, but at least this gives Europe options for now. However, Ariane is due to make its first operational flight by the end of this year.

Then in Vistry sees benefit in Labour housing drive (The Times, Tom Howard) we see that Vistry may well benefit from the new Labour government’s focus on housing as it made the switch last year to building homes for housing associations and local authorities  in anticipation of a change in regime. For now, though, it reckons that it will experience a 7% increase in half-year adjusted pre-tax profit thanks to strong demand for its affordable housing. Given Labour’s housing plans, you would have thought that Vistry is very much in a sweet spot and could benefit from

what could potentially be the biggest growth in affordable housing for a generation!

Meanwhile, Shein to launch €200mn fund to tackle fashion waste as it awaits IPO approval (Financial Times, Laura Onita and Eleanor Olcott) shows that the fast-fashion group is launching a “circularity fund” which will address fashion waste to tackle criticisms of the brand’s sustainability. Shein wants to use the cash to invest in a mixture of UK businesses that use new tech and/or help to make them more sustainable. * SO WHAT? * Let’s be honest here, €200m is a tiny pimple on the backside of Shein’s $2bn in profits for 2023 and you do wonder whether this is just some token gesture intended to make Shein appear more cuddly than it really is. According to the Ellen MacArthur Foundation, a non-profit that campaigns against waste and pollution, over 50% of all fast fashion is thrown away in less than a year. Shein argues that its on-demand business model means that it has lower inventories than traditional retailers – but let’s get real, here, Shein has a reputation for fast fashion and low quality, making it more disposable. Also, when you consider that they send individual items via air freight to avoid paying duties they just don’t have a leg to stand on here…I think this fund is just a way for them to “prove” their commitment to the environment and give investors slightly more reason to buy their shares when they do an IPO, wherever that may end up being!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

When I saw this, I thought it was quite clever! Talk about dining on a budget! Very creative 👏👏👏