Thursday 28/11/24

Keir Starmer to be invited to meet EU leaders in February (Financial Times, Andy Bounds and George Parker) highlights a positive post-Brexit development as the British PM is going to be invited to meet the 27 EU leaders on February 3rd to discuss European security. The UK minister in charge of negotiations for a post-Brexit “reset” in EU relations will also be meeting the incoming president of the European council this week. * SO WHAT? * It will be the first time a British PM will have attended an EU meeting like this since we left the bloc in 2020. It certainly looks like a step forward and I think that there will be willing on both sides to make something work. Some EU officials downplayed expectations for the meeting, which is being billed as an informal gathers but clearly some serious stuff needs to be discussed.

In markets news, Just Eat to leave London Stock Exchange (The Times, Jessica Newman) shows that Europe’s biggest food delivery group has decided to quit the London stock market but keep its primary listing in Amsterdam. It blamed the “administrative burden, complexity and costs” for the decision and its final day of trading on the LSE will be Christmas Eve. Concerns have risen over the last few years about an exodus of companies that have decided to ditch a London listing. Building materials company CRH shifted its primary listing to New York last year, betting group Flutter Entertainment also went stateside and Tui left London to be solely listed in

Germany. Superdry and Nightcap have quit London to go private. The gloom about the London market is overdone (Financial Times, Lex) is an interesting article that suggests there is no need to panic, though, as it observes that the IPO pipeline is improving. French media giant Vivendi’s planned €6-8bn IPO of its TV business, Canal+, will be London’s biggest listing since 2022 – and then there’s the proposed Shein listing to consider. Recent rule changes have relaxed things a bit (like allowing dual share structures, for instance) for those thinking of listing and although many point to the massive valuation gap between the UK and US markets, if you take out Big Tech in the US then the valuation gap isn’t so big. * SO WHAT? * FWIW, I think that many of the delistings/listing migrations/going private are for company-specific reasons rather than London being particularly “bad”. CRH and Flutter, for instance, have seen their respective business mixes change dramatically over recent years where their earnings/growth prospects have shifted significantly to the US, making a listing shift a logical move. Tui also had this (albeit it shifted its primary listing to Frankfurt) but Superdry has just been a disaster for the last few years anyway, so no wonder it went private, meaning that it didn’t have to air its dirty laundry all the time. That being said, the exodus is not a good look and I think these upcoming listings will be good for morale – and perhaps even encourage others to come forward!

Budget hits confidence of consumers and business (The Times, Mehreen Khan) cites a BRC survey which shows that consumers and businesses are more pessimistic about the state of the economy post-Budget, which meant that spending levels were flat in November versus October, despite the run-up to Christmas, when you’d expect spending to start ramping up. A separate survey of service sector businesses by the CBI cites the sharpest drop in optimism in two years in the latest quarter, the first drop in nine months. BRC chief Helen Dickinson said that the government should help mitigate rising costs from NIC changes and the minimum wage rises by overhauling the business rates system. * SO WHAT? * These survey results make for sober reading but then again they are surveys by industry bodies that have vested interests and paying members to answer to. I would argue that this makes them inherently biased and more likely to make the situation look a lot worse than it actually is (although I’m sure that the situation isn’t great). It is worth mentioning that the most recent GfK survey showed that consumer confidence is actually rebounding after a pre-Budget wobble. GfK is a market research company, so I’d suggest that its findings will be less inherently biased – but the disparity behind the findings of all these surveys could also be due to timing because the depth of feeling could have been at its height immediately post-Budget as retailers reacted. Still, businesses exposed to low-earners (like retail, hospitality etc.) will be the most affected and the most vocal about their predicament. It will be very interesting to see how holiday season trading goes because higher volumes could go a long way towards mitigating Budget impact…

In retail news, Trump tariffs could force us to raise prices, warns Ikea (Daily Telegraph, Hannah Boland) shows that Ingka Group, the biggest franchisee of Ikea and runs most of its

outlets worldwide (about 90% of them), said that new trade tariffs could make selling its wares at low prices “more difficult”. It’s particularly tricky given that the US is Ikea’s second biggest market after Germany. Meanwhile, Ingka announced weaker profits in the latest financial year.

Then in Pets at Home falls after cutting its annual profit outlook (The Times, Emma Taggart) we see that the UK’s biggest retailer of pet products saw its share price drop by over 13% after it warned of potential price increases as it adjusts to the recent Budget. It decided to cut its annual profit outlook due to weakening demand for accessories and treats. It is currently making efforts to become a “unified petcare platform” by integrating its retail, grooming and veterinary services via a new app. * SO WHAT? * This announcement is unsurprising as most retailers have highlighted the Budget as being a real headache. It’s bad now but I guess after a period of adjustment, more consumer confidence, the end to the Middle East conflicts, the Ukraine war and improved relations with Europe MAYBE things will turn around. So much could still go wrong, but then again there are some positive developments coming up…

In leisure news, Harvester and Toby Carvery owner says it will take £100m hit from tax changes (The Guardian, Joanna Partridge) highlights difficulties facing Mitchells and Butlers – the owner of Harvester, Toby Carvery, All Bar One, O’Neill’s, Stonehouse and Sizzling Pubs – which has become the latest hospitality business to warn of a Budget-powered hit. That being said, it said that it is seeing sales growth and expects to outperform market expectations for the coming year. It has also managed to cut debt and bolster its balance sheet. Again, it will be interesting to see how this does over the Christmas and New Year period…

British car production slows for eighth consecutive month (The Times, Alex Ralph) cites the latest figures from the SMMT which show that car production has dropped for the eighth month in a row as the industry continues to struggle with the switch to EVs. * SO WHAT? * The global market has slowed down but the SMMT argues that the UK will find things particularly difficult because “we have arguably the toughest targets and most accelerated timeline but without the consumer incentives necessary to drive demand”. The government doesn’t seem to be relenting at the moment…

Meanwhile, Aston Martin looks to raise £210m after second profit warning in two months (The Guardian, Jack Simpson) highlights yet another profit warning in short succession from the luxury car maker whilst it also said that it was trying to raise £210m to help its ongoing

electrification efforts. The company blamed delays for its new Valiant supercars. The nightmare continues…

Then in German car supplier axes hundreds of UK jobs amid switch to Evs (Daily Telegraph, Matthew Field) we see that German clutch supplier Schaeffler announced plans to cut 4,700 jobs across Europe and close the UK plant in Sheffield. The shifts towards EVs and automatic transmission have led to weakening demand. * SO WHAT? * This is just the latest in a long line of automotive players suffering in the transition to electrification. Car registrations are pretty flat and electric sales are down 5% this year, according to the European Automobile Manufacturers’ Association.

In a quick scoot around some of today’s other interesting stories, EasyJet targets £1bn profit as Lundgren signs off (The Times, Robert Lea) highlights a solid performance from the budget carrier powered by a strong summer while its CEO, Johan Lundgren, stepped down after seven years in charge. What a bounceback from the nightmare of Covid! It’s not often a CEO of a major company gets to leave with their head held high.

In Direct Line rejects Aviva takeover offer of £3.3bn (The Guardian, Julia Kollewe) we see that Direct Line rebuffed a takeover approach from Aviva in a second instance where it’s fended off a potential buyer this year! Given that Direct Line hasn’t been doing particularly well, you can understand why it’s attracted interest. Will there me more approaches I wonder??

Then in Reddit overtakes X in popularity of social media platforms in UK (The Guardian, Dan Milmo) we see that the discussion platform has overtaken X (and LinkedIn!) to become the UK’s fifth most popular social media platform in the UK, according to Ofcom. Reddit is also now the fastest-growing large social media platform in the UK! YouTube is now #1 after it overtook Facebook. * SO WHAT? * It seems to me that there is a real shift taking place in social media at

the moment. I wonder whether Reddit is becoming more popular because it is sort of self-moderating as it is community-based whereas platforms that are associated with Big Tech leaders like X (Musk) and Instagram (Zuck) are losing traction because of the perception that they have some kind of agenda. If that is the case, it will be fascinating to see whether this trend accelerates – because if it does, advertising trends could change considerably as the money gravitates towards platforms that are operated more “responsibly”.

Handbags at dawn: is there life for Capri after Tapestry? (Financial Times, Lex) considers the situation after Tapestry – owner of brands including Coach, Kate Spade and Stuart Weitzman – decided to ditch its plans to buy Capri Holdings – which owns the likes of Versace, Jimmy Choo and Michael Kors. * SO WHAT? * Investors in Tapestry clearly felt relieved – the share price boomed by 30% on the news – but Capri is now vulnerable once more and its ongoing problems with Michael Kors are now, once again, at the top of the agenda. It had been hoped that Tapestry could use its experience of turning Coach around to turning Michael Kors around, but that’s obviously not going to happen now. Maybe its time for private equity to have a go!

If you’ve ever wondered how I behave on a long car journey when I’m on my own, I think that this video gives you an accurate representation. The only major differences are that I don’t mime – I sing quite loudly (love a bit of in-car karaoke) – and if I feel the need to communicate to fellow road users I’m generally not quite as polite as this 🤣