Today Andy Silvester talks to Victoria Scholar, Head of Investment at Interactive Investor.
They go through some of the week’s economics data on GDP, unemployment, retail sales, and talk trading updates.
They discuss the latest from ASOS, Deliveroo, and EasyJet: ASOS is facing a raft of headwinds, as investors lose confidence in the online retailer; Deliveroo has recorded an uptick in orders compared to the same time last year; and EasyJet has been struggling to get staff in.
Andy also goes through the news — the UK’s accounting watchdog has ordered an investigation into Deloitte’s auditing of Go-Ahead Group; businesses have unleashed a wave of job cuts to avoid being hit by the National Insurance hike; and an Extinction Rebellion (XR) protest has caused the shutdown of Lloyd’s of London’s HQ.
Episode transcript (auto-generated)
Andy Silvester 0:08 Good afternoon and welcome to the City View podcast me Andy Sylvester and us are here at City a and in just a minute I’ll be joined by Victoria scholar from interactive investor we’ll have a quick look through the biggest stories of the day including each day job figures, retail sales updates, and also updates from a sauce delivery and EasyJet away from those stories however, and still plenty going on in the square mile today, the UK accounting watchdog launching today an investigation into Deloitte auditing of Go ahead group after the transportation company was heavily fined by the government for financial improprieties financial reporting council said this morning investigation will focus on the big four firms auditing of Go ahead between 2016 and 2021 godhood Deloitte spokesperson the company will cooperate to the fullest we’re committed to the highest standards of audit quality this in the statement. Meanwhile, the UK is audit watchdog itself is preparing to strengthen its powers to sanction Britain’s major accountancy firms the FRC, readying itself to take back control over the registration the UK auditing firms will give the authority new powers the stripped licences from companies that audit the UK’s major companies if they carry out poor quality work. Meanwhile, a London based Fintech is Bank of 50 million injection today as it looks to fill a funding gap for smaller trade focused firms. The fresh round for Stan which helps smaller trade firms access growth capital was led by us backers Centerbridge sends its valuation soaring to 900 million suggesting it will soon be yet another unicorn. On the London tech scene bosses said the cash will fuel the firm’s next stage of growth and businesses have unleashed a wave of job cuts it appears to cope with being hit by the National Insurance hike and in advance of energy prices going up even further the pipeline of redundancies has taken off in the last month alone triggered by firms scrambling to protect margins. Number of plant redundancies has more than doubled over the last month rising to over 18,000 in February. According to data from the insolvency service firms have to alert authorities of their plans to sec 20 or more staff and Lloyd’s of London insurance market forced to shut its iconic underwriting room today. For the first time since COVID-19. Wasn’t a pandemic this time. But the actions of climate protesters from extinction rebellion, they turned up at the lime street HQ this morning made it impossible to get in the building and spent much the rest of the afternoon outside dancing on the Richard Rogers designed staircases quite the scene. And it’s fair to say many brokers judging from my walk through Leadenhall market, lunchtime, enjoying the opportunity to have an excuse not to go back to the office. That’s all from me for now. So we’ll bring in Victoria scholar now from interactive investor. Victoria joins us every fortnight we go through the biggest stories and always worth listening to Victoria. Thanks for joining us. Thanks so much for having me back. Why don’t we start, and we do this quite often with some some relatively bad news. I think it’s fair to say that we’d all been talking about a coming slowdown in the UK economy for a while the warning lights were certainly flashing. It appears now the data is starting to tie in with those predictions and we are starting to see signs of all these price hikes and and various other pressures starting to hit UK economic output looking to hit unemployment, possibly hitting retail sales as well. And that was the conclusion a little bit of what we what we saw this morning.Victoria Scholar 3:21 Yeah, I mean, we’ve got a lot of data out this week GDP yesterday, unemployment today, and retail sales and inflation, tomorrow’s there’s a lot to sort of digest as well as quite a few trading updates from companies, which also give us some clues into the state of the economy as well. But we did see a significant slowdown in terms of those GDP figures, the services sector, and very pretty well on the back of a pickup in sort of travel related activities. But this was offset by struggles in the manufacturing sector, we saw notable drops, particularly for the automakers and computer goods. As the supply chain was continued. We’ve been so focused on the war in Ukraine, we’ve kind of forgotten about the supply chain issues, but they’re still very much there. And coming through in the data. And then the unemployment data today, at the headline figure was pretty strong. We saw an improvement to 3.8% for the unemployment rates. We also saw a pickup in the earnings number. But unfortunately, that wasn’t enough to keep pace with inflation. So real wages are actually still in decline. And, of course, all of this points to the Bank of England and they’ll clearly be looking at these figures and thinking about where they need to speed up their pace of tightening to combat that inflationary pressure. But of course that can have damaging effects on the economy as well. Andy Silvester 4:47 Yeah, absolutely. And it’s you know, it’s hard to see that it that it wouldn’t and it certainly seems to me that I was talking about this with with our economics markets correspondent yesterday jack that while last year there were live discussions about whether or not the bank needed to clamp down on inflation or whether it needed to just let the recovery bed and those conversations seem to very much have ended. And the decision has sort of been reached almost by osmosis in the city that you’re going to have to do rates more than you are going to have to allow that recovery to bed. And it’s interesting looking at the rising prices and the pressures on on retail such as it is, data can data can say an awful lot, right? The GDP figure yesterday was slightly skewed, because for instance, the UK is not, you know, the healthcare sector is not flying in the same way that it was last year. That’s a good thing, because we’re not vaccinating millions of people all the time, because there’s a global pandemic and a lockdown, right? So there are elements of it that that kind of needs to be taken in that context. But when you just look at what people are doing on the shelves, that’s a sign of the pressures that are going to hit the rest of the economy, because you can be sure if they’re starting to scrimp and save at the supermarket, there’ll be scrimping and saving on everything, from gym memberships, to going out to whatever else it might be. Victoria Scholar 6:07 Yeah, and that’s very, very much coming through in the retail sales data. I mean, we saw consumer confidence fall to the lowest level since the financial crisis. And clearly as the cost of living crisis deepens, it’s going to be those discretionary goods that are going to take a hit, you know, families are trying to focus on affording the essentials with food prices, energy bills, and taxes all on the rise. And then there’s this element around the war in Ukraine, which is weighing on confidence quite significantly. So we’ve got the inflation on the one hand, then the war on Ukraine, which itself exacerbates inflation, it’s no surprise that retail sales are slowing. Andy Silvester 6:46 Yeah, and let’s talk about two. Well, one retail company, but very much sort of new disruptive retail company in one on one in the hospitality space. But again, a disruptive hospitality company a source and delivery, both of them with, with updates out today. And both of those, when you look at the numbers also have to be taken in this wider context. Right. Let’s start with start with ACS first set of interim since transitioning to the main market, but the headwinds, including, of course, global supply chains, and the spending crisis for want of a better phrase hitting Brits pockets. Victoria Scholar 7:21 Yeah, I mean, there’s no doubt the investors have lost confidence in a sauce stock is down by around 70% Over the last year from the peak. And, you know, it’s a major turnaround from during the pandemic, when it was one of the key winners alongside zoom and delivery, which we’ll talk about in a second. But yeah, I mean, firstly, pulling out of Russia and Ukraine, that’s taken a hit on the back of that 4% drop in revenues, and about 20 million pound hit to profit. It’s also been dragged down by the broader tech. So that sell off amid fears about what higher interest rates could mean for some of the more debt heavy companies, then, of course, there’s a rising cost inflation, and a sources of price sensitive business, it can’t just give much higher prices to its customers, they expect low prices. So that’s eating away at margins. And then on top of that, it’s got the supply chain, whereas as well, so a lot of pressure on a sauce as well, not least to say, the whole raft of cheap competitors that have entered the market over the last five to 10 years. Andy Silvester 8:32 Yeah, indeed. I mean, sort of, it’s always a dangerous business model when you’re so price sensitive. Because even this environment, yeah. And yeah, have you not got that on the one hand, but then you’ve also got if you are competing on price in a global supply chain, like we’ve seen now, with Shane and other competitors, you can, frankly, out compete you. And it’s an interesting one, you can see why investors are slightly wary. And speaking, another company that certainly left investors very wary last year, which is Deliveroo. I saw depending on whether I was whether I was a buy or sell on delivery, I could find something in the numbers to cheer me up today. Victoria Scholar 9:11 Yeah, I mean, it’s the sort of headline is that it kept its guidance unchanged, and that food delivery orders are up versus the same period last year. And you were mentioning before about comparables last year actually was a tough comparable because we’re in lockdown. So clearly, this year is better, but the fact that it’s managed to deliver more food this year is a strong sort of thing to point to but you know, had a disastrous IPO just over a year ago. sky high valuation that didn’t match up with sort of overconfidence in terms of its expectations of demand. It was coming out of 2020 which was a stellar year for the company. But 2021 was very, very different. So the stock is down heavily. It’s trading in this downtrend and has really been struggling with the easing of lockdown restrictions. On top of that, again, this is a very, very crowded space, it has successfully look to move into grocery deliveries, it’s doing that well. But at the same time, there are all these new Q commerce players like gopath, and gorillas are all entering the market, and doing it really efficiently, promising groceries in just a few minutes with low delivery fees. So it’s a really, really tough space to be in. So the fact that it has kept its guidance unchanged is something to cheer. But the trajectory that we’ve seen in terms of its share price doesn’t look too promising. Andy Silvester 10:40 Of course, all those Q commerce competitors without the pressures of being on public markets, most of them backed with huge amounts of VC. And the other thing I saw in the delivery numbers, which again speaks to the economic situation that we’re in, although the you know, the orders deliveries were positive, the actual average spend per order, starting to slip, which suggests again, there’s that slight uncertainty that sure you might have the takeaway, or the delivery a couple of times a week, perhaps, but maybe if you focus on the mains, and you skip the dim sum now it might be the economic sort of the way of looking at it as people just look to and look to save where they can’t. Let’s just very briefly talk about something that sounds a little bit like good news. Since goodness knows we all need a holiday. EasyJet — signs of a recovery in terms of the number of people trying to book or be EasyJet, I’m missing that. It’s quite difficult to get the staff to, you know, ensure that those planes are continuing to leave airports. Victoria Scholar 11:36 Yeah, I mean, this was meant to be the combat year for airlines like EasyJet, which, of course, was really, really struggling during the pandemic when both flights were grounded. But now it’s facing fresh headwinds from the struggle to get staff, as you say, also the war in Ukraine, the rising oil prices, and actually their sharp jump in COVID cases in the UK because we are seeing significant outbound travel. The set was always in Heathrow’s numbers yesterday, lots of UK holidaymakers going abroad. We aren’t seeing the same traffic in the other direction, a lot of international travellers where it comes to the UK and business visitors as well. Probably not coming for the reason that our COVID COVID cases are still very elevated. But, you know, EasyJet, struggled in February on the onset of war, but has been trying to recover since then. And actually, on our interactive investor platform, it’s become one of the most bought stocks, I think, because it’s so heavily discounted now. People are seeing it as a bargain buy. Andy Silvester 12:40 Yeah, buy the dip, not something you can do on a plane, I suppose. But we’ll leave it there. Victoria. Always pleasure. Thanks so much for joining us. Thanks so much for having me back. Brilliant. That was Victoria scholar from interactive investor. All from me for today, plenty to chew on I’m sure you’ll agree. We’ll be back tomorrow. See you soon.