Friday 08/02/19

  1. In MACROECONOMIC NEWS, the Bank of England hunkers down on interest rates
  2. In MEDIA-RELATED NEWS, Twitter turns its first ever full-year profit, Publicis suffers slowing sales and the BBC nears a transformational deal
  3. In CAR-RELATED NEWS, Amazon invests in Aurora and JLR has a shocker
  4. In HIGH STREET NEWS, Tui and Thomas Cook react to turbulence and Superdry feels the heat
  5. In OTHER NEWS, I bring you some breakfast trolling. For more details, read on…



So the Bank of England gets cautious on the outlook…

Bank warns of weakest UK economic growth in a decade (Daily Telegraph, Tim Wallace) heralds an altogether cautious tone as the Bank of England forecasts UK GDP growth of just 1.2% this year – the lowest growth rate since 2009 – versus the previously-predicted level of 1.7%. Funnily enough, it’s down to the overall global slowdown and Brexit uncertainties as well as stubbornly sluggish

inflation and so the Monetary Policy Committee kept interest rates on hold at 0.75%, indicating that the rate is only likely to rise once over the next three years versus previous expectations of two or three times. * SO WHAT? * TBH, the Bank’s predictions have been pretty cr@p – they predicted GBP growth of 1.7% in NOVEMBER (!!!) and average earnings growth of 2.75% in 2018 when it actually turned out to be 3.5% – so I think a lot of what Carney says these days is just noise. Having said that, we are living in very unpredictable times at the moment, so I don’t think anyone is capable of making consistently good predictions – especially as far as Brexit is concerned.



Twitter turns a profit because of ads, Publicis suffers on poor ad sales and the BBC continues to be on the verge of something big…

Twitter’s push for healthier discourse lifts revenue, hurts user growth (Wall Street Journal, Georgia Wells) highlights the company’s first ever full year of profitability as it posted record quarterly revenues on the back of a decent performance from ad sales – but there was also investor disappointment with a 1.5% drop in the number of monthly users, which was probably the main reason behind the company’s 10% share price drop in morning trading. Interestingly, the company is planning on foregoing the disclosure of monthly users but has just started to disclose the number of daily users. Chief exec Jack Dorsey talked about continued efforts to crack down on trolling, which is a move that marketers like because they don’t want to be associated with negative content. * SO WHAT? * It seems that Twitter is yet another beneficiary of the increase in digital advertising spend that has benefited Facebook and Snap and it’s good to hear that it is at least doing SOMETHING about trolling. However, the fact that it is planning on abandoning a data point that it has used for years (the disclosure of monthly user figures) would suggest that it is not particularly confident about further expansion in this area. This is a classic move – if your stats aren’t painting the picture you want, kill or change them to something else – just ask Apple! Ads are definitely the way forward for Twitter – and 126 million daily users is not something to be sniffed at by advertisers (although that compares with 1.52 billion for Facebook and 186 million for Snap). The more Twitter can do to snuff out the trolls the better it will be for all concerned.

Ad shop Publicis knocked by slowing sales (Financial Times, Matthew Garrahan and Myles McCormick) signals

tricky times for the world’s third biggest advertising group by revenues as it revealed organic revenue growth of 0.3% versus market expectations of 2.5%, blaming a slowdown in spend from big consumer packaged goods companies. The share price of Publicis, which also owns agencies including Starcom and Zenith, fell by almost 15% and sparked a wider sell-off in the sector with WPP falling by over 8% in London, Dentsu by 4.4% in Tokyo and Omnicom by 5.5% in the US on fears of a structural slowdown in ad spend. * SO WHAT? * Actually, Publicis reported profits ABOVE expectations for 2018 but there’s no denying the continued shift of ad spend to digital, with the likes of Facebook, Google, Snap and Twitter increasingly muscling in on their turf. Traditional advertisers will have to continue to streamline their complicated structures in order to cut costs and change their respective focus in order to survive.

UKTV CEO quits as BBC prepares to take full control of broadcaster (The Guardian, Mark Sweney) takes the story on a bit from what I highlighted in Wednesday’s edition of Watson’s Daily as the chief exec of UKTV is leaving the company ahead of a £1bn break-up of the broadcaster. UKTV is currently owned by BBC Studios (the BBC’s commercial division) and Discovery and the deal I mentioned on Wednesday is expected to leave the BBC in control of up to seven UKTV channels, whilst Discovery will get UKTV’s lifestyle channels and all of the BBC’s natural history content. Some are saying that this could be a precursor to the launch of a streaming venture with ITV as a “Best of British” rival to the likes of Netflix and Amazon. ITV’s chief exec Carolyn McCall is expected to reveal more details on the service at ITV’s annual results on February 27th. * SO WHAT? * This sounds like it could be a really compelling proposition, but a break-up of UKTV (which includes channels like Dave and Gold) is likely to be bad news for Channel 4 which handles its £250m-a-year ad sales contract and it’s not yet clear how they would fare in the aftermath as Discovery uses Sky to sell TV advertising on its channels. Exciting times for the ITV and BBC, though!



Amazon makes a driverless investment and JLR announces a record loss…

Amazon backs self-driving car start-up Aurora in $530m round (Financial Times, Shannon Bond) shows Amazon throwing its hat in the ring for making self-driving cars a reality by joining the likes of T Rowe Price, Lightspeed Venture Partners, Geodesic Capital, Shell Ventures and Reinvent Capital in the latest funding round that values Silicon valley start-up Aurora at over $2.5bn. Aurora will use the money to increase headcount from the current 200 and for further development of the software and hardware it puts into cars made by Volkswagen, Hyundai and Byton, a Chinese EV start-up. Amazon is exploring ways of using autonomous vehicles for deliveries and logistics – it is about to test small autonomous delivery robots in Seattle suburbs, has bought a stake in a French company developing tech for self-driving forklifts in warehouses and

has been using self-driving systems made by Embark to haul Amazon freight trailers – so it should be a good strategic fit. * SO WHAT? * This all sounds great and there is a ton of money flying around in this area into the likes of GM’s Cruise, Ford’s investment in Airgo AI, Waymo, Uber’s Advanced Technologies Group and Zoox – but ultimately I think that development will be so costly that there is bound to be more consolidation further down the line. Everyone is talking a good game now, but I just think that we are way off having self-driving cars in the mainstream. I do, however, think that they will come much sooner to warehousing and logistics because there will be fewer moral and legal issues to worry about. It’s an interesting one to follow, though…

We are brought down to earth, however, with Jaguar Land Rover to record £3.4bn quarterly loss (Daily Telegraph, Jack Torrance) as the troubled car manufacturer that has been suffering from over-exposure to diesel and China continues the misery by announcing a record quarterly loss as it its forced to write-down the value of its assets by over £3bn. * SO WHAT? * It never rains but it pours for JLR – and the outlook isn’t good. Unfortunately for employees, I suspect there are going to be a lot of job losses to come.



Travel turbulence affects Tui and Thomas Cook while pressure mounts on Superdry…

Thomas Cook off to flyer while Tui struggles (The Times, Dominic Walsh) highlights a contrast between the two travel companies as Thomas Cook’s share price shot up by 10% yesterday after it announced plans to sell off its airline while Tui, its much larger rival, announced a profit warning that sent its shares down by a whopping 19%. Tui’s warning was particularly shocking given that it only announced its fourth consecutive year of double-digit growth as recently as December when Thomas Cook was struggling with its second profit warning in two months. * SO WHAT? * These are turbulent times for holiday operators, with Brexit impact being the big unknown. A spokeswoman for Thomas Cook said that “We don’t think it’s necessarily putting people off travel, but it is clear to us that the protracted uncertainty is causing some to delay the decision of when and where to book their holidays, no matter how much reassurance we give them that flights will continue as normal”.

Chain tries to weather the storm of criticism (The Times, Deirdre Hipwell) shows pressure mounting on Superdry as it reported another quarter of “subdued trading” in the midst of a turnaround programme that is trying to diversify its offering. Shop sales were down sharply while online sales were slightly weaker – and the only bright spot was in its wholesale division where revenues were up by 12.7%. The company blamed mild weather in November and December hitting outerwear sales and “ongoing legacy product issues”. * SO WHAT? * Co-founder Julian Dunkerton, who resigned in March, disagrees with the current chief exec’s strategy of streamlining the number of products available online (he thinks they should be going the other way) and decreasing its traditional reliance on sales of cold weather clothing. The board is currently backing current chief exec Euan Sutherland but he has been having a tricky time of it what with having to announce profit warnings twice in the last 12 months, so at least the company didn’t have to announce a profit warning this time around. This will no doubt give Sutherland a bit of breathing space but I expect that this won’t put Dunkerton off breathing down his neck as he wants his old job back to become the Steve Jobs-like saviour of the company he founded all those years ago.



And finally, in other news…

I thought I’d finish the week with this gem that made me laugh: Home cook ridiculed for breakfast that looks like it was made ‘under her armpit’ (The Mirror, Courtney Pochin The photo is certainly worth of comment!

Have a great weekend!

Some of today’s market, commodity & currency moves (as at 0829hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq *DAX *CAC-40 *Nikkei **Shanghai **
7,094 (-1.11%)25,170 (-0.87%)2,706 (-0.94%)7,28811,022 (-2.67%)4,986 (-1.84%)20,326 (-2.01%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

(markets with an * are at yesterday’s close, ** are at today’s close)