Thursday 30/09/21

1. In ENERGY, FUEL & FURLOUGH NEWS, the UK plans to kick China out of nukes, China itself suffers with coal shortages, 3 more UK energy suppliers go bust, fuel deliveries are prioritised and furlough comes to an end
2. In RETAIL NEWS, Next warns about Christmas, SSP recovers and Morrisons heads for auction
3. In CARS NEWS, chip shortages continue to bite UK production and Rolls-Royce teases its first battery car
4. In MISCELLANEOUS NEWS, Evergrande sells a bank stake, Amazon releases a robot and Peel Hunt has a solid debut
5. AND FINALLY, I bring you a job opening as a pizza crust taster and some sinister dog claw clipping…

So the UK wants to push China out of nukes, China has coal shortages, more UK energy suppliers go under, fuel deliveries are prioritised and furlough ends…

📢 It’s Thursday – and here at Watson’s Daily, we are going to be doing something NEW on Instagram called Watson’s Whackdown where two people will choose a “commercial awareness” topic each and try to persuade YOU that their argument is the most compelling. They get three minutes each to present their argument, one minute of questions from me (and/or YOU if possible!) and then we decide the winner – all on Instagram Live! We should be done and dusted within about 15 minutes. The aim is for Watson’s Whackdown to be to commercial awareness what Strictly Come Dancing is to ballroom dancing 😁.I shall then be doing the one hour weekly ZOOM call for paying subscribers where I will pick out the main business and financial markets developments of the week and open it up to questions and debate so that you can contribute! The ZOOM call will start at 5.30pm and run until 6.30pm. See you there!

In UK plans to force sale of Chinese-owned nuclear stake to investors (Financial Times, Jim Pickard and Nathalie Thomas) we see that a 20% stake in the proposed Sizewell C nuclear plant in Suffolk will be sold to institutional investors or floated on the stock market as the UK government attempts to push China’s CGN out of the project. The original agreement signed in 2015 states that CGN would pay 20% of the plant’s development costs with an option to participate in construction once everything had been finalised. CGN/Sizewell C: enforced sale could leave Chinese group with a warm glow (Financial Times, Lex) reminds us that funding such projects is fraught with difficulty given the nature of the asset, but as the current climate between the UK (and much of the West) and China is not exactly great this move is unsurprising. * SO WHAT? * I wonder whether CGN will try to push back on this in public but be secretly quite pleased to be shot of what could become a money pit and let the British taxpayers burn cash instead. I also wonder whether/how China will retaliate. 

Meanwhile, China runs out of steam as shortages of coal bite (The Times, Philip Aldrick) shows that the world’s second biggest economy is having difficulties with energy shortages (just like many other countries!) – and Goldman Sachs has cut its full-year GDP growth forecasts for the country as a result from 8.2% to 7.8%. The coal shortage has caused a number of power outages and the government’s commitment to reducing emissions is

resulting in a choking off of supply just at a time when demand is increasing, hence the potential negative impact on GDP growth. Many other investment banks have also made downward revisions to their full-year GDP growth estimates for China. * SO WHAT? * This is not great for the global economy because, as we’ve seen under lockdown, China manufactures rather a lot of the stuff we all buy and if they aren’t churning it out as quickly as we’re used to then we’ll have a shortage of supply to add on top of all the supply-chain related delays that are going on right now.

Back home, Energy suppliers under scrutiny as three more collapse (Daily Telegraph, Rachel Millard and James Warrington) highlights more strife among British energy providers – this time it’s the turn of Enstroga, Igloo Energy and Symbio Energy to go bust. This follows on from last week’s failures which happened because of ongoing high gas prices making their business model unviable. There will be a lot more to come…

Fears for online deliveries as fuel is diverted from business fleets to forecourts (Daily Telegraph, Oliver Gill, Bill Gardner and Harry Yorke) shows the latest development in Britain’s current fuel crisis as fuel distribution is being prioritised, meaning that delivery companies are starting to be affected. This happened as the government announced that the Army is going to start driving tankers within “the next couple of days” to help ease the shortage and industry sources saying that the number of forecourts running out of fuel is continuing to fall. If you have the time and the access, you should definitely give Where did all our petrol stations go? (Daily Telegraph, Rachel Millard) a read because it takes an interesting look at how filling stations have changed over the years with non-petrol sales rising and the impending transition from petrol to electric being the next major evolution on the horizon that will challenge the existing way they do business. They will clearly need to make as much money as they can now in order to survive long term…

Then in Widespread concern over impact on economy as furlough scheme ends (The Guardian, Larry Elliott and Richard Partington) we see that nerves are frayed as today is the last day of furlough and no-one really knows whether this is going to result in a sudden spike in unemployment but Older workers and Londoners face highest risk as furlough scheme ends (Financial Times, Delphine Strauss) shows that the effects may hit particular groups of people harder than others, according to research from the Institute for Fiscal Studies. * SO WHAT? * The fact is that no-one really knows what the effect is going to be. I personally think that the real effects won’t be known until after Christmas because I imagine that many companies will want to try to see whether the festive season will save them. 

Next warns of potential Christmas disappointment, SSP recovers and Morrisons’ fate will be decided by auction…

Prepare for Christmas shortages and price rises, warns Next boss (Daily Telegraph, Laura Onita) highlights concerns from long-time Next chief Lord Wolfson that the lack of warehouse workers and lorry drivers could negatively impact Christmas shopping deliveries. He also warned customers that prices would edge higher as input costs are passed on. He has added his weight to others pushing for relaxation in immigration rules (despite being a prominent Brexiteer himself). * SO WHAT? * Next is often seen as a bellwether for the high street and so if it is having problems (or at least predicting them) then it doesn’t bode well for everyone else. Wolfson is softening up consumers before raising prices – and this is going to put even more upward pressure on inflation! When will the Bank of England crack and put up interest rates to calm all of this down??

Then in Earning a crust is getting easier as travel restarts (The Times, Dominic Walsh) we see that SSP, which owns

Ritazza and Upper Crust, reported better revenues in the latest quarter as airports and railway stations gradually return to normal. The company itself sounds cautiously optimistic about the future as it, like others, is facing higher input costs and staff shortage issues. * SO WHAT? * I guess that SSP is quite a good proxy for commuting and business travel given where it plies its trade – and things are going reasonably well at the moment. This could, of course, all change suddenly – so it will be hoping that there will be no more lockdown shocks. It would be interesting to know how well SSP is doing versus, say, WH Smith, which also has a lot of sites in airports and railway stations. SSP is probably a purer play because WH Smith has the high street business, but it would be good to do a comparison!

And just as a reminder, Morrisons takeover battle set to be decided via one-day auction (The Times, Louisa Clarence-Smith) marks your card for this weekend for when the British supermarket’s fate will be decided. It’ll be Clayton, Dubilier & Rice on the one corner and Fortress Investment Group in the other slugging it out to win Morrisons’ hand. The final offer may be made no later than 7am on Monday. Shares in Morrisons have risen by around 60% since the takeover talks first came to light and I would have thought that an auction has a decent chance of really pumping up the price.

Chip shortages hit UK car production and Rolls-Royce goes electric…

I guess that Computer chip shortage stalls UK car industry production (The Guardian, Jasper Jolly) is not exactly surprising news given that we seem to get this sort of headline every five minutes or so 🤣 but the latest figures from the Society for Motor Manufacturers and Traders show that the number of cars built in UK factories fell by 27% year-on-year in August. The car industry’s hunger for

chips remains unsated (not unsalted, badum tish) – which means that it will not be able to take full advantage of the underlying demand for new vehicles. Not great for an industry that is doing its best to recover.

Meanwhile, Rolls-Royce teases first battery car ‘Spectre’ in all-electric plans (Daily Telegraph, Alan Tovey) highlights a historic development for the BMW-owned car maker as it unveiled its first battery-powered vehicle as part of its plans to fully electrify within ten years. For those of you who are tempted, the price is expected to come in at a very reasonable £250,000 – £500,000 range 😱. But hey – just think of all that money you’ll save on petrol 🤣!

Evergrande sells a bank stake, Amazon launches a home robot and Peel Hunt has a decent market debut…

Evergrande sells $1.5bn bank stake to state-owned enterprise (Financial Times, Thomas Hale and Edward White) shows that the embattled Chinese real estate developer Evergrande has managed to raise a chunk of change by selling part of its 20% stake in Shengjing Bank to Shenyang Shengjing Finance Investment Group, the state-owned investment group. Shengjing Bank is “demanding” that money from the sale is used to settle liabilities it is owed. * SO WHAT? * This is a very small drop in a very large ocean given that Evergrande is thought to have liabilities of over $300bn! You do wonder whether selling off assets could help the company’s path to redemption or whether authorities are pulling the strings behind the scenes to ensure as painless a demise as possible for Evergrande…

Meanwhile, Meet Amazon’s Astro, the £1,000 robot that patrols your house and detects intruders (Daily Telegraph, James Titcomb) highlights the release of a new gizmo for

the home in the form of a wheeled robot – yours for the princely sum of $1,449. For that price you get a glorified and annoying tripping hazard that will supposedly tell you if you’ve left the oven on and patrol your house when you are out. Thanks Amazon. This is just what I needed. In my small house. That has stairs. Amazon: home robot Astro will be no stellar seller (Financial Times, Lex) reckons that this is not going to be wildly popular, but then again Amazon is so big it won’t matter. It’s all part of Amazon’s increasing encroachment into our daily lives!

Then in Peel Hunt brokers good City debut (The Times, Tom Howard) we see that the flotation of City stockbrokers Peel Hunt went smoothly yesterday and its price went up by a very modest 2%, suggesting that it had been priced to perfection (although this is only one day’s trading of course!). It allowed some of the company’s big cheeses to get a nice cash sum, but it also proved to be a nice boost for over half of the company’s 285 employees, who owned shares in the company. Some of the money raised in the IPO will help to fund European expansion, initially in the form of a Copenhagen office. I think that this flotation was a solid move by a solid company. Not sure about European expansion, though, unless it is to sell its existing UK product to Europeans, in which case it might be a good thing.

…in other news…

I just thought I’d leave you today with the interesting job opportunity in Pizza hut is offering £5,000 for someone to critique their stuffed crust pizzas (The Mirror, Paige Holland) and the highly amusing ‘James Bond villain’ owner threatens dog with bath or nail clippers in hilarious clip (The Mirror, Edward Kay). The dog’s facial expression is priceless!