Wednesday 15/11/23

1. In MACRO, ENERGY & COMMODITIES NEWS, US inflation falls, Ørsted has issues, Cornwall gets another lithium boost and Glencore moves forward
2. In CONSUMER & RETAIL NEWS, UK wage growth eases, UK bills look set to rise, Selfridges sees control shift, the Body Shop is sold and Home Depot benefits from the pros
3. In BUSINESS TRENDS NEWS, company collapses rise, Babcock benefits from war and Landsec notices a shift
4. In INDIVIDUAL COMPANY NEWS, Wise sees booming balances and Pfizer cuts headcount
5. AND FINALLY, I bring you a messy variation of beer pong…

So US inflation falls, Ørsted has issues, Cornwall gets more lithium interest and Glencore moves on…

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:

I’ll be conducting a commercial awareness bootcamp THIS Saturday 18th November with Jake Schogger of the Commercial Law Academy! If you’re looking for something to turbo-boost your commercial awareness, why not give it a go?? Just register HERE.

US stocks and bonds jump after inflation falls to 3.2% (Financial Times, Nicholas Megaw and Colby Smith) shows that US inflation weakened by more than expected to 3.2% in October, its first fall for four months. This all led to Treasury yields to fall suddenly and Wall Street stocks to rise as the implication here is that there is less pressure on the Fed to increase rates any further to tame inflation.

In energy-related news, Wind developer Ørsted bosses exit after £3bn-plus failure (The Guardian, Jillian Ambrose) shows that the world’s biggest wind power firm reported major losses after its recent cancellation of two US projects and that its CFO and COO have had to fall on their swords as a result. The CEO will stay in situ but the board of directors believe that the company needs “new and different capabilities” to move forward. Meanwhile, Wind farm giant pushes for more subsidies (Daily Telegraph, Jonathan Leake) shows that the company is now in talks with Energy Secretary Claire Coutinho about what’s going to happen with the Hornsea 3 project off the coast of Norfolk – because if the company is willing to ditch two US projects at the cost of over

£3bn, then it’s not looking to good for Hornsea, now is it!?! * SO WHAT? * Ørsted has been banging on about how it needs more state input for projects because of a massive rise in costs and I’m sure that the recent cancellation will have made everyone else sit up and take notice, particularly as Sweden’s Vattenfall was announced only a few months back that it would postpone plans to build a major windfarm off the coast of Norfolk. The government’s renewables plans seem to be somewhat shaky at the moment…

Elsewhere, UK geothermal developer seeks £600m to expand into lithium in Cornwall (Financial Times, Harry Dempsey) shows that Geothermal Engineering Ltd (GEL), the developer that is due to launch the first ever geothermal electricity plant in the UK in Cornwall, is also looking to diversify into lithium by raising £600m to build multiple sites by 2030. As a starter, it’s looking to raise £100m-£200m to produce at least 1,000 tonnes of lithium at its United Downs site which already has the financing in place to produce geothermal power (which is basically where electricity is generated by drilling deep underground to access hot water that creates steam which drives a turbine, creating clean power). * SO WHAT? * This is another pretty amazing development, with GEL joining the likes of Cornish Lithium and Imerys British Lithium in tapping the region for resources to power the future of transport and power generation. There is a lot at stake here and there’s no guarantee of success for any of these companies. However, the potential rewards could be enormous – which is why investors seem to be willing to take the risk.

Then in Big Teck coal deal sets up the demerger of Glencore (The Times, Emily Gosden) we see that the FTSE100 commodities group is now making plans to break itself up after negotiating a deal to buy most of Canada’s Teck Resources’ coal business for $7bn. Its bid for the whole of Teck Resources was rejected earlier this year, so clearly this was the next best thing. The coal business will be spun off and listed in New York with secondary listings in Toronto and Johannesburg with the remaining Glencore business keeping its London listing. Glencore/Teck: passing the buck to make a buck (Financial Times, Lex) observes that this is quite a neat move as it pools all the “dirty” coal business together so that it can be surgically removed, giving Glencore investors the option of not buying into coal, whereas until now they’ve not really had the option as it has all been lumped in together.

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!

UK wage growth slows, UK bills look set to rise, Selfridges’ owners have a tussle, Body Shop is sold and Home Depot relies on the professionals…

In consumer news, UK wage growth eases to 7.7% in third quarter (Financial Times, Delphine Strauss) cites the latest ONS data which shows that UK wage growth slowed down in Q3 as hiring got less frenzied. This all coincides with other data which points to a softer labour market and potentially suggests that there’s less of a need for the Bank of England to raise interest rates. Meanwhile, Household bills set to soar under Southern Water turnaround plan (The Times, Robert Lea) shows that the CEO of Southern Water has admitted that although his company has an “appalling” environmental record, it is going to have to hike household bills by 55% to fund proposed improvements. Nasty.

In Thai retailer seizes control of Selfridges from co-owner (Daily Telegraph, Hannah Boland) we see that Thai retailer Central Group has taken control of Selfridges after Signa investment group, which had a 50% stake in the department store, got into financial difficulties earlier this month, putting Selfridges in limbo. Central is now in the driving seat while Signa will retain a minority stake. * SO WHAT? * OK, so things have stabilised as a result – but the key question is what’s next?? In a world where department stores are dying it’s crucial that Selfridges adapts. I think that one of the major things in its favour is that it has cachet in its own right and is a destination retailer so it may have a bit more time to sharpen up its offering than others.

Then in Body Shop sold in cut-price deal losing £660m in value (Daily Telegraph, Hannah Boland) we see that the famous cosmetics retailer, which has 250 stores in the UK and 3,000 globally, has been sold by Natura & Co to private equity firm Aurelius for £207m – way less than the £870m it bought it for in 2017! The Body Shop was a real pioneer in ethical products when it started up in 1976, but the emergence of other brands such as Lush and Rituals since then has blunted its edge. * SO WHAT? * Will Aurelius bring the brand up-to-date by cutting the number of physical stores and put more effort into digital?? At the moment its specialty store model looks somewhat out of touch. There’s a lot to do here, but it seems to me that there’s still real substance to the company and lots to work with.

Over in the US, Home Depot Looks to Pros for Shelter (Wall Street Journal, Jinjoo Lee) shows that the home improvement retailer showed a better-than-expected decline in same-store sales in the latest quarter (its fourth consecutive quarter of decline following the massive pandemic frenzy!) thanks to demand from professionals rather than amateur DIY-ers. Pros now account for about 50% of Home Depot’s revenue, according to an estimate by UBS, and the company is looking at ways of increasing their market share in this segment by adding features that they want like the use of trade credits and having products delivered to site. * SO WHAT? * DIY over in the UK has also slowed down since the pandemic (B&Q’s owner Kingfisher recently cut its full-year profit guidance) but I’m not sure whether demand from pros is going to be all that great given the slowdown in construction.

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!

Company collapses increase, Babcock profits from war and Landsec sees a shift…

Company collapses on course for annual record (The Times, Helen Cahill) cites research from accountancy company Azets which says that corporate collapses are on track to reach their highest ever levels as stubbornly high interest rates kill off “zombie” companies and provide the coup de grace for those who have been struggling since the pandemic. * SO WHAT? * I would have thought that many businesses will be doing their best to hang on until the new year to see if they experience “a Christmas miracle” and therefore expect there to be more failures going into the New Year.

Meanwhile, war continues to benefit defence companies as per Babcock pays first dividend in 4 years ‘with confidence’ (Financial Times, Sylvia Pfeifer) which shows that higher defence spending by governments around the world (especially since Russia invaded Ukraine) has enabled Babcock International to pay its first dividend in four years. It expects to hit its full-year target for organic revenue growth and operating margin expansion. Its share price has shot

up by 42% since the start of the year but you would have thought that defence spend isn’t going to fall any time soon…

Then in Landsec shifts focus from City of London to West End as tenants seek ‘vibrancy’ (The Guardian, Julia Kollewe) we see that one of the country’s biggest property developers is shifting the balance of its London portfolio from the City of London to the West End as demand for smaller offices in buzzier locations is increasing. * SO WHAT? * Land Securities has sold off various big buildings in the City and Canary Wharf since 2020 and now almost 75% of its portfolio is in the West End and Southwark – a significant increase from the 58% in 2020. It is also very interesting to know that, at the moment, 8.8% of London office are vacant – with 4% in the West End, 12% in the City and over 20% in Canary Wharf! I guess the thing is that companies have been trying to “tempt” employees back to the office in the WFH revolution by giving them better working environments. However, I do wonder whether the current trend of return-to-office will take the edge off this and companies will just take advantage of the extra space available in the City and Canary Wharf as time goes on…

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!

Wise sees balances rise while Pfizer makes headcount reductions…

In a quick scoot around some of today’s other interesting stories, Wise looks to pay back clients as balances boom (The Times, Patrick Hosking) shows that the cross-border money transfer business, one of Britain’s biggest fintechs, has seen a massive 848% increase in profits made on customer balances in the six months to September. * SO WHAT? * Other financial companies, like wealth managers, have benefited enormously from the high interest rate environment and enjoyed earning revenues with zero effort! Wise is clearly no exception! The company says that it “wants” to pass more of this interest income onto clients via things like cashbacks but I guess it’s just too juicy not to keep!!!

Then in Pfizer to shed half of workforce at Kent site (The Times, Alex Ralph) we see that the US drugs company Pfizer plans to cut over 500 jobs at its site in Kent as it rejigs its business. There will be more headcount reduction in the US and Ireland as part of a cost-cutting programme after it experienced its first quarterly loss since 2019 as demand for Covid jabs waned. Tricky times – but it’s not alone in going from Covid hero to post-pandemic zero.

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…

I’ve shown you an epic trick (which I’ve still yet to do on my kids – but I AM going to do it 😁!) from these guys before but this party game looks like fun, if a little messy 🤣!