City Voices: It’s time to end the EIS and VCT sunset clause for good
Tuesday 21 November 2023 18:47 , Simon Hunt
Economic growth is the hot topic of 2023. All political parties are talking about it, and all have a plan to accelerate it.
All parties also agree that early-stage companies are the engine of innovation and growth in the UK. They drive job creation and foster technological advancements.
But, despite all the talk, policies with the biggest impact on early-stage startups, who are the lifeblood of the future UK economy, continue to be met with deafening policy silence.
This silence needs breaking next week, in the Autumn Statement.
For almost 30 years, two government schemes have been instrumental in funding UK growth – Venture Capital Trusts (VCT) and the Enterprise Investment Scheme (EIS).During this period, the VCT and EIS schemes have evolved to become Europe’s top growth policies.
Not only have the schemes played a pivotal role in providing our early-stage companies with billions of pounds in capital each year, but our competitor economies want to emulate our success. This year, France has copied the blueprint and previously Ireland has too, while other countries are debating it.
Will OpenAI survive board bust-up?
Tuesday 21 November 2023 18:17 , Simon Hunt
ChatGPT maker OpenAI is in a state of turmoil following the abrupt dismissal of its former CEO Sam Altman. Will OpenAI survive?
A brief look through the regular carousel of board changes at FTSE 100 companies shows you that no CEO is irreplaceable. But it is hard to think of an exec who has been quite so unceremoniously dismissed as Altman, who until last week was a rising star at the helm of the world’s best-known AI firm.
And it is harder still to think of a corporate dismissal that has so strongly united staff in opposition to it. If internal reports are to be believed, more than 95% of OpenAI’s 770 staff have signed a letter calling on the board that sacked Altman to resign.
To make matters worse, Microsoft, who committed $10 billion in funding to OpenAI, has decided to hire Altman to its own internal research unit, with the firm’s chief information officer, Kevin Scott seeking to lure disgruntled staff at OpenAI to the unit with the promise of matched compensation.
And to rub salt in the wound, OpenAI itself was in the course of more fundraising in a deal that would have valued it at $86 billion. That funding, and the jaw-dropping valuation, now look to be in doubt.
All of the above is a veritable recipe for disaster. With no board, no money, and no staff, there will be no OpenAI. But can this perilous but plausible scenario be avoided?
Hargreaves Lansdown departs FTSE 100 as index closes flat
Tuesday 21 November 2023 16:41 , Simon Hunt
The FTSE 100 finished relatively flat at the end of the day's trading session in London, as a late-morning dip was superseded by a late afternoon recovery.
Hargreaves Lansdown is poised to leave the FTSE 100 index, while Intermediate Capital is set to join. The stock is down more than 17% since the start of the year.
Here's a last look at today's key market data:
Palantir sinks on NHS win
Tuesday 21 November 2023 15:23 , Simon Hunt
Shares in Palantir have fallen almost 4% following the news the software firm has won a £480 million contract with the NHS.
The contract, which Palantir bid for together with consulting firm Accenture, would see the company redesign the NHS patient data system.
The move has proved controversial, amid concerns expressed about data privacy and the choice of vendor, given Palantir's relationship with the US military.
The software will “never hold or have access to NHS data for any purpose other than as directed by" the NHS said.
Wall Street stocks edge lower with New York traders watching for Fed minutes
Tuesday 21 November 2023 15:00 , Michael Hunter
The S&P 500 slipped back in opening New York trade, adding to a lacklustre feel on global stock markets,.
With investors trading. carefully, the main Wall Street index was down 13 points at 4,536.14, a drop of 0.3%. Investors were waiting for a sense of direction from the Federal Reserve, with minutes from the central bank's last rate-setting meeting due out later today.
A looming set-piece event was also casting a shadow over London markets. Chancellor Jeremy Hunt is due to deliver his set-piece Autumn Statement on the government's tax and spending plans tomorrow.
In the run up to it, the FTSE 100 was down 15 points at 7,481.33. Energy and investment stocks were under pressure, with house builders and major retailers making progress.
Deliveroo shares go cold even after Supreme Court win
Tuesday 21 November 2023 14:02 , Michael Hunter
Deliveroo can carry on counting its network of riders and drivers as freelancers rather than employees, in a major victory for the company and a landmark moment for the gig economy,
Nonetheless, shares in pioneer of the dhal-to doorstep fast food delivery business went cold on the news, falling 1.6p to 139p, a drop of 1%.
Worries about the company's ability to achieve long-term profitability have surrounded it for some time, Even with today's case ending in a win, it came as a reminder of thin margins in a highly competitive marketplace,
It has recently pulled out of Spain and Australia.
Founded in 2013 by Will Shu – who was surprised at the lack of food delivery options when he moved to London from New York, – the app has grown fast to cover cities in 12 countries including Ireland, France and Italy as well as in Singapore and Hong Kong.
Midday markets: Gold and sterling shine, stocks and Bitcoin falter
Tuesday 21 November 2023 13:36 , Michael Hunter
There is not much appetite for risk around in midday trading, although sterling is ticking higher into the set-piece update on the government's tax and spending plans tomorrow.
Otherwise, gold is making the most headway and Bitcoin is out in the cold. Stocks in Europe are slipping back and the New York markets are expected to join the pattern.,
Wall Street on course for a lacklustre open
Tuesday 21 November 2023 12:41 , Michael Hunter
New York markets look set to drift at the start of their trading day, offering little chance of providing some energy to their lacklustre European peers, including London.
Futures trade expects the broad US stock index, the S&P500, to slip by around 6 points to 4557.0.
In midday trade, the FTSE 100 is at 7,455.83, shedding just over 40.53 points, or 0.5%, with energy stocks looking low on gas. Shell and BP are both down by about 1.3%, offsetting a rebound for house builders, where gains of around 1.4% are common.
Both sectors could feature in tomorrow's Autumn Statement when Chancellor Jeremy Hunt will update the markets, and the nation on his plans for the UK's public finances.
City comment: Hunt needs fancy footwork to calm the headbangers
Tuesday 21 November 2023 11:56 , Simon Hunt
Tomorrow’s Autumn Statement is the third and last seasonal set piece from Rishi Sunak’s floundering Government aimed at rebooting its dismal poll ratings.
The PM will hope for more impact from his Chancellor than he got from his own Tory party conference address in October or the King’s Speech at the opening of Parliament at the start of this month. By common consensus neither much flickered the dial of public popularity.
But as today’s disappointing borrowing figures confirm there is very little that his Downing Street neighbour can responsibly deliver beyond some well presented tax-cutting window dressing.
The nightmare memory of the mini-Budget last year will prey heavily on Mr Hunt’s mind. In the current febrile market mood he knows he is only ever one poorly judged unfunded election bribe away from another disastrous withdrawal of money fromUK plc. Neither can he risk stoking up inflation again after all the sacrifices made in pulling it back down below 5% and thus meeting his boss’s pledge to halve the rate in time for Christmas.
But equally the days are ticking down until the country makes its judgment on the past five years of Conservative party rule and the backbenchers will not easily forgive another dud. Expectations have been raised by headlines over the past week or so. As ever the political and economic cycles are out of alignment, and it seems likely that the short term political clamour for a tax-cutting sugar rush will trump the longer term priority — laying solid foundations for sustainable public finances and growth.
It will take some pretty fancy footwork for the Chancellor to leave the headbangers in the bond markets, as well as those in the 1922 Committee, with smiles on their faces when he sits down tomorrow afternoon. That is his Mission Impossible.
AO World shares rise after profit guidance boost
Tuesday 21 November 2023 10:55 , Michael Hunter
Shares in AO World rose today as the online electrical goods retailer lifted its profit forecast amid a move to prioritise earnings over revenue and market share.
The company has focused o direct sales to UK consumers, closing its business in Germany and pulling out of the market for fitting out new-build housing.
Best known for retailing big electricals like cookers, fridges and freezers, it has also dropped some lower-priced items from its range.
The change came about, in the words of CEO and founder John Roberts, so that "everything we sell makes money."
It helped the Bolton-based company increase its profit guidance for 2024 to a range between £28 million and £33 million. But revenue for the year was forecast to drop by around 10%.
The company has also introduced charges for delivery. But Roberts said the most important pricing for customers was the "total basket" price, "which is what drives comparisons.". He added:
"We want to put a value on delivery. The total relative basket to our competitors is still what we compare and reset three times a day. But we want customers to realise that the amazing quality we deliver has.value."
AO's stock has powered ahead this year, up by almost 60%. It gained a further 2p to 86.3p this morning
Russ Mould, investment director at stockbroker AJ Bell called the delivery charges "not the most consumer-friendly move but probably a sensible decision," adding:
"Somebody spending a few hundred pounds on a new washing machine is unlikely to baulk at a bit on top to get the item delivered to their door."
He said that the "trade off" in AO's focus on profitability was " a reduction in revenue, suggesting AO has surrendered some market share . It has to be careful to get this balance right or it could see competitors eating more of its lunch.”
Deliveroo wins Supreme Court case against union over employment status of riders
Tuesday 21 November 2023 10:14 , Simon Hunt
Deliveroo riders cannot be classed as “workers” and do not have the ability to form a union, the UK’s top judges have decided in a major ruling for the gig economy.
The Independent Workers’ Union of Great Britain (IWGB) fought a seven-year legal battle over the status of the food delivery giant’s army of couriers.
It argued they should be considered “workers” rather than “self-employed” and able to form a collective bargaining unit, relying on article 11 of the European Convention on Human Rights to mount the legal challenge.
But Lady Rose, announcing the court’s decision, said the contracts Deliveroo has with its riders include arrangements that mean it is not an “employment relationship” that would attract union rights.
She said riders currently have the “unfettered right” for someone else to substitute in for their deliveries, and Deliveroo does not police those arrangements.
FTSE 100 lower as heavyweights struggle
Tuesday 21 November 2023 10:09 , Graeme Evans
The performance gap between London and New York shares is evident again today amid another dour session for the FTSE 100 index.
The UK’s premier benchmark fell 0.4% or 28.88 points to 7467.48, whereas last night’s 0.7% rise for the S&P 500 index extended gains for this month to 8%.
In contrast to Wall Street’s technology-led rally, the FTSE 100 has struggled due to its defensive bias and impact of a stronger pound on overseas earners.
Heavyweights under pressure today included Shell, Glencore, Barclays and Flutter Entertainment. On a brighter note, Marks & Spencer and Admiral rallied thanks to upbeat City commentary.
M&S rose after appearing alongside B&M and ASOS on Deutsche Bank’s list of favoured retail stocks. The car insurer added 63p to 2685p on Citigroup’s 2941p price estimate.
The FTSE 250 index, which has experienced a decent November, dipped 23.64 points to 18,575.42. Strong performers included supermarket sausage supplier Cranswick, up 56p to 3700p on better-than-expected interim results.
AO World fell 4p to 79p in the All-Share, despite the online electricals retailer upgrading profit guidance.
Workspace takes a hit from drop in property valuations as rate rises bite
Tuesday 21 November 2023 09:34 , Michael Hunter
Major London landlord Workspace took a hit today from the drop in investment demand for real estate, caused by rising interest rates.
With yield-chasing investors getting more choice over where to stash their cash, property valuations have taken a hit across the sector.
Industry-wide trends pulled the value of its portfolio down by £178 million to £2.5 billion, taking the FTSE 250 company into a half-year loss of £148 million.
Its shares fell 18p to 572p.
But it remained confident looking ahead, not least amid hope that interest rates are at, or near, their peak with inflation cooling.
And Workspace's focus on small and medium sized enterprises (SMEs) as customers leaves it well-placed for when the economy bounces back. Meanwhile, occupancy rates are steady at around 89%.
Its CEO, Graham Clemett, hailed the capital’s vibrant SME scene, pointing to fast-growing firms, like Muddy Machines, based in Workspace's Chiswick’s Light Box development, which develops robots used in farming .
He said: “These SMEs are the unsung heroes of the London and the UK economy … We are back to where we were pre-Covid in terms of vibrancy, you’ll continue to see our customers growing with us.”
AO World hikes earnings outlook as overhaul pays off
Tuesday 21 November 2023 09:34 , Simon Hunt
Online electricals retailer AO World has hiked its full-year earnings outlook in spite of falling sales as cost-cutting actions bear fruit.
The group revealed it returned to profit in its first half, with pre-tax profits of £13 million in the six months to September 30 against losses of £12 million a year earlier.
Actions to cut costs and strip out unprofitable sales impacted revenues, which fell 12% to £482 million in the half-year.
But despite this, AO World said it now expects full-year pre-tax profits of between £28 million and £33 million, compared with previous guidance of £28 million.
Admiral shares lead FTSE 100, Cranswick up 4% after results boost
Tuesday 21 November 2023 08:51 , Graeme Evans
Shares in Marks & Spencer and Admiral have rallied in the FTSE 100 index after the pair benefited from City “buy” recommendations.
M&S rose 2.9p to 255.4p as Deutsche Bank highlighted a 310p target price as one of its three retail sector picks, with the others being B&M European Value Retail and ASOS.
Car insurer Admiral jumped 70p to 2692p thanks to Citigroup’s 2941p price estimate.
The gains came during another dour session for the FTSE 100 index, which lost 15.18 points at 7481.18.
Financial stocks were among those under pressure as Barclays retreated 1.8p to 140.7p and Lloyds dipped 0.4p to 42.6p.
The FTSE 250 index improved 29.71 points to 18,628.76, led by supermarket sausage and bacon supplier Cranswick after it reported better-than-expected half-year results.
Its shares accelerated 4% or 154p to 3798p, whereas the strong run for Workspace ended despite the office provider reporting a 9% rise in net rental income for the half year. Shares fell 12.5p to 577.5p.
FTSE opens flat
Tuesday 21 November 2023 08:26 , Simon Hunt
A few minutes into the day's trading session in London, the FTSE 100 has opened flat.
Here's a look at your key market data.
Outsourcer Capita warns up to 900 jobs at risk in cost-cutting drive
Tuesday 21 November 2023 08:02 , Simon Hunt
Outsourcing giant Capita said it would shortly launch consultations as it looks to save around £60 million per year from the early part of 2024.
The business said that the cuts would mainly hit “indirect support function and overhead roles”, putting around 900 roles at risk.
“We are, today, announcing the accelerated delivery of the efficiency savings announced in our half-year results, with a £20 million increase in overhead cost reduction to £60 million on an annualised basis from the first quarter of 2024,” chief executive Jon Lewis said.
Wall Street rallies ahead of Nvidia results, pound above $1.25
Tuesday 21 November 2023 07:23 , Graeme Evans
Wall Street shares have started the week on the front foot after last night’s gains of 0.7% for the S&P 500 index and 1.1% by the tech-focused Nasdaq.
The rally comes ahead of Nvidia results, which are due to be released after tonight’s closing bell and are hotly anticipated given the previous two updates included significantly higher forward guidance.
The semiconductor giant's shares have rallied by a fifth this month as the wider technology sector benefits from hopes that US interest rates have peaked and may be cut in the spring.
The upturn in confidence is reflected in the S&P 500 reaching its highest level since early August, having rallied by 10% since the end of October.
The performance of the FTSE 100 index has been much less spectacular due to the heavier weighting of defensive and energy stocks.
London’s top flight closed 7.89 points lower at 7496.36 last night and is forecast by IG Index to open slightly lower this morning.
The weaker dollar has also impacted London’s overseas earning stocks, with the pound today above $1.25 for the first time since early September.