Issue71:2016 09 15:Week in Brief Financial

15 September 2016

Week in Brief: Business and the City

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BOLD BRANDING:  “Barings is an iconic brand which has been around a very long time…” says Tom Finke, chief executive of what on Monday this week became Barings; a new conglomeration of four brands owned by the Boston headquartered life insurance company MassMutual.  Mass Mutual has major operations in London and in Hong Kong specialising in capital management and asset investment, particularly in real estate.  The businesses have been run as separate units to reflect their different specialities, but in a world of increasingly globalised marketing, investors now prefer to have one point of contact, a powerful balance sheet, and one recognisable brand for their different requirements.  From now, that will be Barings for MassMutual group clients, a recognisable name, as Mr Finke says.  Mr Finke says that he was not unaware of recent history of the Barings brand, but that was more than counter-balanced by the 275 years of Baring history, during much of which it was a highly respected world leader in financial management and banking.  Although the Baring name had pretty much disappeared from the UK market after the difficulties of the early 1990’s, it had continued to be used in the Asian markets, by Baring Asset Management, a MassMutual business, and has become respected once more and easily recognised.  The new merged operation will employ 1,700 people, and be active in 17 countries, managing assets of close to US$300bn.

WHO NEXT?  Another bank carefully managing its image at the moment is Lloyds Banking Group, whose chief executive Antonio Horta-Osorio has been a little too much in the press recently – and not on the financial pages.  Mr Horta-Osorio is respected in the City for a very accomplished job in bringing Lloyds back to health from the low point of 2010, but it is being muttered that there is no obvious successor to him within the bank, an operating risk that any credit risk man would see as key in any business.  Mr H-O is only 52, but he may not be looking to stay at Lloyds for life, and  have ambitions for another big job – indeed his reputation is that he particularly likes a business challenge.  A complex and highly visible business such as Lloyds (with the government as a 9% shareholder, though maybe not for much longer) needs to have a succession plan in place to reassure investors that it is shockproof.  Mr Horta-Osorio may soon have a new addition to his work load – to identify a couple of potential successors and get them trained up.

NOT NO VACANCIES:  Even those pleased by the Referendum result thought that the brakes would come on in the City until the uncertainty of the negotiations for exit had cleared somewhat.  No sign of that so far though. Job vacancies in August (never the busiest month in the City) rose by more than 8,000 according to City recruitment agencies – that is a rise of 5% on the position last year which was itself a busy month.  Actual hires were at a similar level, and the numbers of those seeking new roles also went up.  Most cheering of all – if finance and related City activities are your key talent – those who got new jobs got an average rise of 16% on signing up.   In spite of all this cheer, these are key statistics which will be closely watched as the fall-out from Britain’s opening of the exit door continue and the implications become more understood.

ZOOPER RESULTS:  A few months ago we looked at the battle between the three big on-line residential property selling sites.  Undisputed market leader is Rightmove, but last year saw number two Zoopla, which also owns the upmarket portal PrimeLocation, being challenged by newcomer OnTheMarket.  Agents are normally only allowed to list on one site so the competition for signings is fierce.  Early indications were that Zoopla had suffered a considerable knock from OnTheMarket with turnover down and new high street agents defecting to the challenger.  Zoopla rejigged its site, sharpened up its marketing, and focused on keeping its existing clients loyal and signing new ones.  It also improved the market information on its site. That seems to have paid off, it says that over the last year it has grown the number of residential estate agents on its site – it has over 13,000 now – and they were listing 925,000 properties this August, as opposed to 882,000 last August.  The market liked this news – the share price went up 8% on the announcement with positive comment from several brokers.

COOKING UP A STORM:  Thomas Cook, the travel agent with getting on for two hundred years in the business, has long organised the vacations and travel of many Brits.  In recent years the competitive and price sensitive nature of the business has made life very difficult, not helped by changes of ownership and brand positioning.  But recently Cook has found a niche that seems to work, returned to profitability, and got back into expansion mode.  Now it has taken a step into what could well be a major growth market – it has formed a joint venture with Shanghai based Fosun, to be called Thomas Cook China, which will sell package holiday deals to Chinese travellers and tourists, both within China, but especially overseas.   Fosun initiated this by buying 5% of Cook, who are FTSE listed, and discussions led to the new venture.  China is forecast to see a major growth in world travel for holidays as China continues to open to the world and wealth increases, so Thomas Cook management are very positive about the prospects – the market is forecast to be 170 million travellers within 5 years.  Just as well – European travel prospects are not great at the moment with “staycations” growing in popularity, increased cost of foreign holidays because of the weak pound, nervousness about terrorism, and political troubles in Cook’s key Turkish market.

SPORTING HERO:  Mike Ashley, major shareholder and chairman of Sports Direct is not having a good year.  Having been kicked around by a committee of MP’s investigating working practices at his warehouses and endured hostile bowling from City analysts over a recent and unexpected profit warning that profits for the year could be 25% down this year, he has now been overtaken by his great rival JD Sports Fashion, who announced their results for last year – profits were up 66% to £77m on turnover 20% up to £971m.  Most of this strong performance was from the sports division, so right onto Sports Direct’s middle stump.  Mr Ashley is fighting back – after years of building a business based on a “pile it high and sell it cheap” approach, Sports Direct is now investing in its key stores to take them upmarket and make the shopping experience more pleasant, but this is going to take a while before benefits come through.  No early bath for Mr Ashley…


(as at 13h September 2016; comments refer to changes on last 7 days; $ is US$)

Interest Rates:

UK£ Base rate: 0.25%, unchanged: 3 month 0.45% (rising); 5 year 0.47 (rising).

Euro€: 1 mth -0.35% (rising); 3 mth -0.29% (rising); 5 year -0.24% (rising)

US$: 1 mth 0.57% (rising); 3 mth 0.65% (rising); 5 year 1.21% (rising)

Currency Exchanges:

£/Euro: 1.18, £ steady

£/$: 1.32, £ falling

Euro/$: 1.12, € steady

Gold, oz: $1,329 falling

Aluminium, tonne: $1,556, falling

Copper, tonne:  $4,641, steady

Oil, Brent Crude barrel: $46.57, slight fall

Wheat, tonne: £122, slight rise

London Stock Exchange: FTSE 100: 6,665 (falling).  FTSE Allshare: 3,643 (steady)

Briefly:  A general pushing up in interest rates this week seemed to provoke falls in many key trading markets; the FTSE fell, as did many metals (though copper reversed recent declines with a slight uptick).  Oil is holding steady, though recent evidence of rising output and lower costs in USA shale extraction may soon weaken the price.


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