Wednesday 15/09/21

1. In MACRO & OIL NEWS, Norway goes left and Chevron commits to clean energy
2. In CONSUMER & RETAIL NEWS, US consumers continue to spend, UK job vacancies rise, Amazon and Deliveroo offer free delivery and JD Sports has a corker
3. In M&A AND IPO NEWS, Bain Capital buys Gail’s while Peel Hunt aims for an IPO
4. In MISCELLANEOUS NEWS, Evergrande hires restructuring advisers and Apple does its reveal
5. AND FINALLY, I bring you a taste test of curry-in-a-can

Norway goes left and Chevron commits…

Norway vote puts Scandinavia’s social democrats back in driving seat (Financial Times, Richard Milne) highlights an interesting development for Europe as Norway has been the latest country in Europe move to the left politically. The result of Monday’s election means that it will be the first time since 2001 that all three countries in the region – including Denmark, Finland and Sweden – will have social democrat PMs. * SO WHAT? * It seems that Europe is swinging to the left after leaning to the right for a number of years and there could be a further boost coming up as Olaf Scholz is the front-runner to win the German chancellorship as the Social Democrat candidate on September 26th. Having said that, although Sweden and now Norway have social democrats as leaders, they lead – or will lead – very fragmented coalitions. Very crudely speaking, if you’re a fan of coalitions, then you’ll probably say that they’re great and reflect the increasingly diverse society we live in. If you’re a cynic, you’ll say that everyone has their own agenda which means that it gets very difficult to get anything meaningful done because no-one can agree on anything.

Then in Chevron to spend $10bn on clean energy push (Financial Times, Derek Brower and Justin Jacobs) we see that the oil major has committed to spend a large amount of cash on renewable energy production and cut its carbon emissions over the next seven years. * SO WHAT? * This sum is actually triple the amount it had previously earmarked for this initiative, but let’s keep things in perspective here – it’s still equivalent to less than 10% of its planned annual capital spending until 2025. It is interesting to note that Chevron and ExxonMobil have dragged their feet in solar and wind power versus the likes of BP and TotalEnergies, but I guess this forms part of their effort to get back on it. I’m always a bit sceptical about oil companies committing to going green given what they have been built on, but initiatives like this show that there is at least some willing. The irony is that they need to continue their core work to finance their transformation!

Consumers spend, job vacancy numbers rise, Amazon and Deliveroo offer a freebie and JD Sports wins gold…

Across The Pond, US consumers still spending despite Delta risk, banks say (Financial Times, Imani Moise and Joshua Franklin) shows that US consumers are still spending more than they were pre-pandemic despite rising case numbers of the Delta variant, according to a number of banks. Execs at JP Morgan Chase (America’s biggest bank) and Wells Fargo say that consumer spending rebounded this year after the lows of late 2020 and that the summer season has seen the momentum continue. Some particularly Covid-sensitive categories, such as travel, have seen spending wane in the last few weeks, but the overall trend is one of rising consumption. Loan demand is not stellar, though – something that could be seen as reflecting caution on the part of consumers as they don’t want to over-reach themselves. Still, What’s your raise really worth? Inflation has something to say about it (Wall Street Journal, Sarah Chaney Cambon and Gwynn Guilford) suggests that rising prices are starting to eat into salaries although Pace of consumer price rises cools slightly in August (Financial Times, Colby Smith), which cites the latest data from the Bureau of Labor Statistics, suggests that there is light at the end of the tunnel.

Back in the UK, Record 1m job vacancies as UK payroll levels rebound (The Guardian, Richard Partington) cites the latest data from the Office for National Statistics which shows that employment across all pretty much all regions rose in August. The number of job vacancies has increased

to levels not seen since records began in 2001 but there are particular shortages in accommodation and food services. Having said that, unemployment still has a way to go in order to return to pre-pandemic levels (but it’s only 0.6% higher, so not that far to go!). The real test is going to come following the imminent end of furlough, but we’ll just have to wait and see how that goes.

Meanwhile, consumers have got something to look forward to in Amazon and Deliveroo offer free delivery to Prime subscribers (Financial Times, Tim Bradshaw) as the two giants announced their first customer-facing partnership since the former invested a ton of money in the latter. They will offer free deliveries on grocery and food orders worth over £25 for a year, the equivalent of the “silver” tier of Deliveroo Plus which normally costs £3.49 per month. Sounds nice 👍.

Then Profits jump as JD Sports ‘smashes it’ in pandemic (The Times, Ashley Armstrong) shows that the British public’s penchant for the “athleisure” trend has powered half-year sales at JD Sports to new highs, leading the company to be confident enough to raise its full-year forecasts. First half sales were up by a whopping 52% at pre-tax profits went from £41.4m to £364.6m! Both its UK and US businesses put in solid performances. * SO WHAT? * This sounds great, but I do wonder how long it will be before we see the end of this trend because surely we can’t all lounge around in sweatpants and hoodies for ever!?! I wonder whether the next trend will be for clothes that look smart but are as comfortable as sweatpants etc. Companies like Public Rec, for example, make very comfortable clothes that you can wear in a variety of scenarios so I wonder whether they will come to the fore in the not-too-distant future.

Bain buys Gail’s and Peel Hunt plans a flotation…

M&A momentum marches on in Bain Capital snaps up suburban bakery-and-café group Gail’s (Financial Times, Alice Hancock and Kaye Wiggins) as the US private equity group has decided to buy the posh bakery chain which has 73 outlets in predominantly suburban areas in the south of England (we’ve got one in Guildford – it’s great, although somewhat pricey). * SO WHAT? * Gail’s has been performing well since lockdowns lifted, but I guess that Bain is just using its massive cash pile to invest in Gail’s and expand its footprint for a nice fat return in a few years’ time.

Then in City broker Peel Hunt to float after pandemic trading boom (The Times, Ben Martin) we see that the broker has announced plans to float which could see an implied valuation for the company of up to £300m and will give a lot of bosses and staff a major windfall in the process! It wants to join junior market AIM this month in order to raise money to power its growth and set up an outpost in Europe. Over 68% of the company is owned by management and staff with the rest owned by high net worth individuals. * SO WHAT? * I think that it makes perfect sense for the company to take advantage of the growth it has seen in trading and advisory but Peel Hunt: UK broker’s IPO rests on retail investor trades (Financial Times, Lex) observes that a premium valuation depends on the broker continuing in its supremacy at facilitating retail trades on its systems. Fun Facts: Peel Hunt’s systems were involved in 50% of shares traded by retail investors last year in the UK and the trading services arm makes over half of the company’s total revenues! That is amazing for a company this size IMO.

Evergrande seeks outside help and Apple does a reveal…

Evergrande hires restructuring advisers as Chinese property fears mount (Daily Telegraph, Louise Moon) shows that Chinese property giant Evergrande has brought in US restructuring advisers Houlihan Lokey, prompting its Hong Kong-listed shares to fall by 12% yesterday to their lowest point since 2014. The share prices of other property giants like China Vanke, Sunac and Country Garden also fell as investors worried about what might happen next for the massively debt-laden sector. * SO WHAT? * China’s property sector is another area of focus for President Xi Jinping’s administration as it is notorious for heady debt levels – something the administration is keen to crack down on. Although Houlihan Lokey has a lot of experience in advising on the bankruptcies of Enron, Lehman Brothers, China’s Luckin Coffee and Hong Kong’s Admiralty Harbour Capital you do wonder how China’s government is going to view this outsider coming in. It is thought that the Chinese are putting together their own team of accounting and legal experts to take a closer look at Evergrande’s finances. I suspect that the drama is only just starting and that Evergrande’s rivals will be battening down the hatches as a result…

I thought I’d mention New Apple Watch, iPad Mini, iPhone 13 Pro and more products unveiled at 2021 event (Daily Telegraph, Matthew Field) because it’d be remiss of me not to (but TBH, it’s the usual better phone, nicer camera and slightly longer battery life story that we’ve become accustomed to over the years) and Apple must end its iPhone obsession to avoid an existential crisis (Daily Telegraph, Ben Marlow) is the usual moan about how reliant Apple is on the sale of its iPhone despite all its happy talk about things like wearables and services although Apple rushes to fix iPhone hack blamed on Israeli spyware makers (Daily Telegraph) acknowledges the security scare that it faced. Apple trundles on regardless!

…in other news…

This is more of a follow-up of a story I highlighted last month but I just felt compelled to share We try Japan’s new drinkable curry in a can (SoraNews24, Oona McGee). 😋or 🤢??? Do you know what, I think it just might be genius…