Friday, 27 February 2015

Weekly Wrap Up: Throwback to 1999

The financial world is, on the surface, abuzz this week as the FTSE 100 broke two records that have stood for over 15 years. On Tuesday, the FTSE 100 reached a new intraday high of 6,958.89 and also bettered its previous closing record by finishing the day at 6,949.63. While this is undoubtedly good news, undertones of uncertainty remain over what the repercussions of this success might be.

There is currently a great deal of talk about the strong tech start-up bubble that is forming around London. In 1999, Britain was in the peak of the dotcom boom, with telecoms and technology firms accounting for 23.4pc of the FTSE 100 index. However, that figure has now fallen to just 6.7pc. Nowadays, the index is dominated by raw materials: between them, the oil & gas and mining sectors account for 22pc of the FTSE compared with 15.1pc at the turn of the century. This shows that for a start, to compare the two periods is difficult due to the fact that the FTSE 100 is very different to the one in 1999.

But what does this new all-time high really mean for the real world? Guy Ellison, head of equities at Investec Wealth & Investment, said that the record is largely “symbolic” and that the London index is likely to kick higher in coming trading sessions. This was proved yesterday when the FTSE reached a new closing high of 6,949.73 – helped by a surge in the share price of the Asian focused bank Standard Chartered who announced the appointment of new Chief Executive, former JP Morgan investment bank boss Bill Winters.

Many will breathe a sigh of relief with the new records. As they have been so long in the making, the event holds great psychological significance, seeming to draw a line under the duel traumas of the dotcom bubble burst and the financial crisis. However this has led to speculation that the highs of the FTSE are a sign of a bubble, meaning that the burst might be around the corner. Peter Sullivan, head of European equity strategy at HSBC, said the new record “inevitably raises questions about how sustainable it is and whether it has got ahead of itself. Is this a sell signal? Absolutely not in our view.” Another reason why the 2015 high cannot be compared to 1999 is that the earnings picture is completely different. Sullivan adds that “earnings are 99pc higher than they were in 1999” meaning that we should be pleased and not worried that the FTSE is back to its best. Current earnings mean that we can start to worry when the index nears 10,000, which, according to Professors Elroy Dimson and Paul Marsh and Dr Mike Staunton of London Business School, has a 50pc probability of happening by the end of 2022 and a 50pc chance it will take longer

This week Abchaps hosted a market lunch, and enjoyed Shore Capital’s wine tasting wine event. The team is also hosting and attending the IPREX Global Leadership Conference in London, where our partners from all over the world are coming together to discuss integrating a wide range of modern services, channels and techniques in pursuit of client results and agency success.

Olswang appointed senior corporate TMT partner Mark Bertram as head of corporate, who has been at the firm since 2007. Charlie Jolly became accountancy firm Baker Tilly’s head of private equity, whilst Jurga McCluskey joined Deloitte from PwC as partner and head of its UK immigration practice.

A monthly late opening of the Natural History Museum and temporary exhibitions continues tonight. This event includes free entry to the Central Hall and Images of Nature gallery, changing discussions on timely themes, open-mic performances by up and coming musicians throughout the evening and British farmers’-market style food and drink in the pop-up restaurant.

For sports lovers, the Six Nations Championship is back on our screens this weekend with Scotland playing Italy (at the moment for the wooden spoon) and France versing Wales, both on Saturday. Then pick between the possible Championship decider on Sunday with England playing Ireland or choose to watch the footy, as Chelsea and Tottenham fight for the first major trophy of the football season, the Capital One Cup.

If you want a trip back in time on Sunday, head to Judy’s Affordable Vintage Fair at Lambeth Town Hall in Brixton. Browse hand-picked stalls packed with affordable vintage fashion, accessories and homewares.

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Friday, 20 February 2015

Weekly Wrap Up: A booster for energy companies’ PR

Public contempt for UK energy companies has hit an all-time high since the Great Recession. In fact, energy bosses managed to achieve the impossible: they became an even greater embodiment of greed than the bankers who actually caused the financial crisis.

So how did energy companies knock banks off the top position and assume the role of public enemy number one?

Well it certainly didn’t help that energy bosses decided to impose steep price hikes on a UK public enduring the longest ever squeeze in living standards. It helped even less that the decision to raise prices was apparently not a necessity but simply a way to increase profits. The average profit that energy companies made per household tripled from £30 in 2011 to roughly £105 by 2014. Those figures certainly make it difficult to fathom the claims by energy companies that the price increases were beyond their control.

Public outrage over the nearly 75% increase in profits has made the UK’s so-called ‘big six’ energy companies an easy target for both media and politicians. As some politicians began to call for an energy price freeze, the media gleefully produced a slew of damaging headlines about the evil energy companies.

This week is a prime example: news outlets published a number of stories highlighting the fact that energy companies are actually punishing customers for their loyalty after a report by the Competition and Markets Authority revealed that dual fuel customers were over-paying by up to £234 per year – for Londoners that amount is even higher at nearly £350.

Bad publicity isn’t just coming from the media: some politicians have jumped on the anti-energy company bandwagon, which means that depending on who wins the May 2015 General Election, there could be an energy price freeze. If this happens, the energy companies will finally really lose: they won’t be able to raise prices if they actually need to and the good publicity that lower energy bills will generate goes to the politicians that implemented the freeze.

This makes the recent drop in oil price a very interesting turn of events. It presents a massive opportunity for energy companies to turn around their battered image without hurting their bottom line, since oil and gas prices are expected to stay low until at least 2017.

Yet none of the big six have managed to do this. Yes, some energy firms announced price drops at the beginning of this year. But oil prices have been nearly halved since last June’s peak of $115, and the biggest reduction announced, by British Gas, was a measly 5%. EDF only cut prices by 1.3%. What’s more, these lower prices only come into effect at the end of this month – in other words when the worst of the winter cold is over and energy bills will reduce anyway.

This week the CEO of British Gas owner Centrica hinted that the company could cut prices again later this year, it will probably be too little too late.

Energy companies need to act fast. Passing savings onto the customer would generate plenty of good headlines and could relieve some of the political pressure. After all, if a company is not price gouging its customers with unjustifiably high bills, it is much less likely to incur the wrath of media, politicians and watchdogs.

Energy companies have certainly managed to dig themselves into a hole. But there’s a very good opportunity for any one of the big energy companies to turn this around, especially if they are the first to act. It seems almost incomprehensible that a business would not take the simple steps of following the law and introducing fair pricing and rewards for loyal customers. And since these are conditions that will very likely be enforced soon anyway, why not take the bull by the horn and benefit from all the good publicity that would follow?

Northland Capital partners appointed Mark Treharne, previously of Daniel Stewart & Co, to its corporate bank team, whilst FinnCap appointed Christian Hobart as Sales Director, who joins from Cenkos Securities.

"Price gouging" – a situation in which a seller prices goods or commodities at a level much higher than is considered reasonable or fair. In other words, a synonym for UK energy companies’ pricing methods.

This week we moved from horse to sheep, and not just in a Tesco Shepard’s pie. With the celebration of the Chinese New Year and the changing of the Zodiac, London will be awash this weekend with paper dragons, red envelopes, and Shou Sui. Our pick of the lot is the traditional Chinatown display, which is the largest in the world outside of China.

Love the history of the Tower of London but find the crowds something more akin to Dante? Well this weekend you’re in luck, as the Tower has just relaunched their twilight tours. Be guided round this 1000 year old castle by a yeoman warder, and see a side of the White Tower you’d never usually get to see.

Finally, if you like nothing more than a quiet beer on a Sunday, but Fosters isn’t quite your brew, Truman’s is your best bet. Craft Beer Rising are hosting their annual festival at the Old Truman Brewery, with 70 different producers in attendance, all hoping to remove the usual Sunday fear from your day.

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Friday, 13 February 2015

Weekly Wrap Up: Steering tech coverage in the right direction

It looks like soon Britons won’t have to worry about driving home from the pub after having had a few too many. At least that’s what the Daily Mail coverage of the UK Government’s decision to allow driverless cars to be tested on public roads suggests.

In case you missed this story, the self-driving vehicles that will be seen in the UK as of next summer are like traditional cars but can also sense their environment and navigate without human input. The driverless cars that will be tested on UK roads, however, will be required to have a fully qualified test driver who could take over, should anything go awry.

Still, the Daily Mail jumped on the news, writing that occupants of driverless cars, “…won’t even need a driving license. And even those now considered ‘unfit’ to drive will be eligible.” In the same article, the writer eventually concedes that current laws actually prohibit this, but not without mentioning that this could change in the future.

And it wasn’t just the Daily Mail that presented driverless technology in the most horrifying way possible. The Telegraph responded with a headline asking, “Driverless cars sound great, but can we stop the sat nav driving us off bridges first?”

This headline refers to concern about whether vehicles controlled by software can be hacked, causing cars to crash into each other or “drive off a bridge”. Then again, human driven cars already crash and there’s no software update that will ever prevent this.

The press coverage of this new technology demonstrates how much the media enjoys a good technology scare story. Findings by the Pew Research Centre, an American think-tank, support this theory: research shows that the press has a tendency to express wariness about the effects of technology on our lives. In other words, it’s common for the press to take the “robots are taking over” angle when it comes to reporting on technology. This is certainly true for the coverage of driverless cars in the UK, and exactly why it’s especially important for technology to be presented in a way that showcases the benefits, of which there are usually many.

The truth about driverless cars is that they won’t just make life easier by perhaps allowing people to have a few drinks before getting behind the wheel, or reading, surfing the internet and even taking a nap all while driving – these cars will actually save lives.

In reality cars with a human driver behind the wheel are the real danger: a staggering 90% of car crashes are caused by human error. That is one of the main reasons the UK insurance industry supports driverless technology.

Consider airplanes for a moment: It’s a well-known fact that you are much more likely to die in a car crash on the way to the airport than you are in a plane crash. That’s mainly due to the fact that airplane technology has advanced considerably in recent decades that planes basically fly themselves on auto-pilot, except at take-off and landing. In recent years almost all plane crashes have been due to human error, not the auto-pilot.

Furthermore it’s not just airplanes that have been improved by technology: Driverless underground systems already exist all over the world. And while this technology was met with resistance, it has proven to be safe and cost efficient.

In addition to significantly improving safety, driverless cars would be a boon to the British economy if this technology was developed here and exported. The industry is expected to be worth £900 billion by 2025, which is why the UK government wants to embrace the technology. The value of British car exports has nearly doubled in the past decade, but it could become vital to embrace driverless technology in order to maintain this momentum.

In short, driverless cars are poised to significantly improve our lives. However the negative media coverage seems to be having a significant impact on public opinion: 48% of the population would be unwilling to “drive” an autonomous vehicle, according to a survey by the price comparison website Of those surveyed, 16% were “horrified” merely by the idea of a driverless car.

There is an important lesson in the media coverage of driverless cars for tech companies: technology is an easy target for scaremongering. This is true not just for driverless cars, but all technology that will result in significant change, regardless of whether that change is positive or negative. When the media gets a hold of a good scare story, the facts can often become muddled. So the best approach for tech companies is to get ahead of the story and steer it in the right direction because even when it comes to reporting the facts, it’s almost always human error that results in disaster.

This week Abchaps attended the CIPR Speaker lunch where Chris Blackhurst of the Independent and Evening Standard was guest speaker. The event was very informative, discussing topics ranging from the future of journalism to current affairs. We also enjoyed an evening at the 48 Group Club Chinese New Year Icebreaker dinner.

Cantor Fitzgerald announced Deven Sthankiya as new managing director in its debt capital markets team. This appointment sees him move from HSBC. Edison, the investment intelligence firm added David Stoddart, Victoria Pease and Sara Welford to its research team. Finally, Robin Wilson, previously of Rightmove, was appointed Taylor Wessing’s new chief operating officer.

“Scare story” – the media’s tendency to take an issue wildly out of context in order to generate headlines.

Held almost every year since 1854, The Royal Photographic Society’s International Print Exhibition is the longest-running display of its kind in the world. With plenty of novelty on show, the photography ranges from documentary to natural history. The exhibition is free to view for people attending Royal Albert Hall performances or can be visited for free by the general public between 10am and 1pm on Saturday February 14.

Another exhibition, promising to be extremely thought provoking, is Mapping the City at Somerset House. This display of cartographic representations will allow you a glimpse of how more than 50 internationally recognised artists, from the graffiti and street art scenes, view the home towns they use as their canvas. Using digital technologies, illustration, sculpture, paintings, video presentations and even performances, its a very contemporary way to view cities from around the world.

Are you fan of Sunday’s involving kicking back and watching a good film? Head to the Barbican cinema where there’s a screening of The Hound of the Baskervilles (1921), with a live piano accompaniment by Neil Brand.

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Friday, 6 February 2015

Weekly Wrap Up: Can Tesco turnaround its tarnished image?

Say what you will about Tesco, but there is no denying that the UK’s biggest retailer has been very good at least one thing in the past few months: generating headlines. The problem is most of that press coverage was not exactly positive. In fact, it has been pretty bad.

Tesco’s trouble really started last year, when it faced a string of profit warnings amid falling sales as the British supermarket giant struggled to compete with Lidl and Aldi’s low prices, which led to the ousting of the Company’s directors. By the end of year, it went from bad to worse for Tesco when it was revealed that an accounting “error” led the Company to overstate its profits by a cool £250 million. (That number has since crept up to £263 million.) Not surprisingly, Tesco became one of the UK media’s favourite villains of 2014.

The New Year was looking like a fresh start for Tesco when investors actually responded quite well to new CEO Dave Lewis’ proposed turnaround plan. The plan, which involves slashing prices and closing stores, should save the company £250m per year. This led to a 22% increase in Tesco’s share price in the past month despite the fact that Tesco’s underlying business performance doesn’t seem to have improved significantly during this time and that the rating agency Moody’s decided to downgrade the supermarket’s credit rating to junk.

The increase is pretty good news for Tesco, especially after such a dismal 2014, and the jump in share price suggests that the market believes in Lewis’ overhaul plan. Yet a quick scan of the headlines shows that these positive developments are still being overshadowed by negative stories.

The turnaround plan has certainly been getting plenty of press coverage, but mostly because it has been revealed that 43 stores will be closing and thousands of employees will be losing their jobs. The positive story there though was that the turnaround plan has led to Tesco cutting prices, which is news that will definitely make consumers happy.

But the bad news just keeps coming. This week Tesco has again made headlines after a new investigation was launched by Groceries Code Adjudicator (GCA) into allegations that the supermarket has not been paying suppliers and in some cases even charging them for preferential treatment. In fairness to Tesco’s new management this is probably not something that happened under their tenure.

Another story that made headlines this week was that Tesco has agreed to pay its former CEO and CFO, who were in charge at the time of the accounting fiasco, a combined £2.1m. So-called golden goodbyes such as these tend not to go down all too well with shareholders. And really, why would they? A CEO can run a company into the ground and yet is still entitled to a big pay-out when he or she is fired. It’s certainly a good way to generate press coverage – just not the kind any company would want. But this is where Tesco actually deserves some credit – they did try to withhold the pay-out. Ultimately, the legal battle would have been pricier and that’s obviously not good for shareholders. So Tesco should really try and get that story out, along with the fact that they may even try to recover that payment.

What Tesco really demonstrates is the uphill media battle that most companies trying to make a post-scandal-comeback face. To give another example, since the financial crisis, many banks became and still remain easy targets for the media and key cultural influencers; Russell Brand springs to mind, to keep generating negative headlines and sentiment. So that’s why a company’s external message communications, and ultimately media relations are paramount. It will be a challenge, but Tesco’s promising turnaround plan and jump in share price gives the Company every opportunity to reposition itself in the media.

For now, it’s almost guaranteed that we will keep seeing Tesco headlines. It remains to be seen if these will be good or bad.

This week Abchaps were out and about at Zeus Capital's Evening with Sir Ranulph Fiennes at Claridge's; celebrating Aquatic Foods Group's IPO at the London Stock Exchange, and hosting a Market Lunch.

This week N +1 Singer made two new hires, Lauren Kettle joining the corporate finance department as a senior associate, having previously worked at Merchant Securities and Northland Capital Partners. Alex Laughton-Scott also joins the corporate finance team, arriving as an associate from PwC. Finally, Richard Hickinbotham, previously of Charles Stanley joins Cantor Fitzgerald Europe as their head of European equity research.

“Turnaround”: The financial recovery of a troubled company. Investors can profit from a turnaround by accurately anticipating the improvement of a poorly performing company

Are you a fan of vintage film? Is so, the BFI will be your nirvana this weekend, as Katherine Hepburn takes centre stage for her very own season, celebrating one of Hollywood’s most iconic leading ladies.

How about afternoon tea, like the little sandwiches but find the whole affair a little staid? Well you’re in luck, as Kettner’s in Soho is doing what Soho does best, and is offering a High Societease, the opportunity to enjoy scones, tea, (and of course Champagne) whilst being entertained by burlesque, cabaret, and circus performances.

Finally, if you feel you haven’t seen enough of the City this week, how about jazz inside the Gherkin? Usually the preserve of its own private members club, this Sunday you have the opportunity to see the inside of this iconic building, enjoy fantastic music with performers who shared stages with the likes of Jools Holland and Van Morrison, all with a free cocktail.

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Thursday, 5 February 2015

How to profit from Chinese consumers’ growing demand for food safety

When the Chinese government recently released its first policy paper of the year, known as the “number one document”, food safety was listed as one of its top priorities for 2015. It’s a policy decision that will certainly be welcomed by Chinese consumers. However, at the same time it serves as a stark reminder of the many food safety scandals that have plagued China in recent years.

First there was the tainted milk scandal in 2008 that sickened an estimated 300,000 babies, killing six, after they consumed milk powder tainted with melamine, a chemical compound often found in laminate flooring and dry erase boards. This scandal was followed by several incidences involving tainted pork. In one incident the pork was treated with paraffin and other industrial chemicals to make it look like beef, which is more expensive. In fact, selling fake meat in China is a fairly common practice.

However, the high number of nausea-inducing food scandals is very much at odds with the rapid rise of China’s consumer class. China’s strong economic growth has resulted in a wealthier population, which in turn has increased levels of consumption. With increased purchasing power comes the demand for higher quality, and this is especially true in terms of food consumption.

While the government has already made some efforts to crack down on food safety, the public remains sceptical. After the tainted milk scandal, for example, there was a significant drop in domestic output of baby formula. The Chinese consumer made it clear that safety matters, and subsequently almost half of the country’s milk powder market has now been dominated by foreign brands, which are perceived as more trustworthy.

What this tells investors looking to cash-in on China’s changing consumer class is that reputable food suppliers are a pretty good bet. Reputable doesn’t always necessarily mean foreign though: One high-profile food safety scandal in China involved a U.S-owned meat factory operating in China that sold tainted meat to clients including McDonald’s, Starbucks, KFC and Pizza Hut.

Aquatic Foods Group Plc seafood product
One company that defies the food scandal stigma in China is Aquatic Foods Group Plc. The marine foods and seafood processor, which recently successfully listed on London’s AIM market, spent many years adhering to international food safety standards and procedures that mitigate the risk to consumers. Aquatic Foods’ strong track record of exporting to international markets, has further enhanced the perception of quality and reliability at home something which the growing Chinese Middle Class demands. In short, Aquatic Foods is helping to fill the gaping hole in Chinese consumer demand for safe and healthy food.

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