10 September 2018

Scott Reid

10 September 2018

Good Morning,

Another one bites the dust? 

The Sunday Telegraph reported yesterday that Debenhams has hired KPMG to assist with restructuring options. Not exactly welcome news for a Monday morning, but perhaps inevitable given the current state of Britain’s high streets.

 The company was quick to point out that they “frequently work with different advisers on various projects”, but prospects are undeniably bleak. Debenhams has suffered three profit warnings and several credit rating downgrades already this year, whilst its share price has slid by almost two thirds to 13p, valuing the company at about £157 million at close on Friday. Investors seem less than impressed by developments, with Debenhams' share value down by 17% at the open of markets this morning.

Sports Direct owner Mike Ashley last month rescued House of Fraser from administration with a takeover price of £90 million, so perhaps that valuation has a bit further to fall before talk of potential suitors can gain traction. It's not the most far-fetched idea; following the sale of House of Fraser, there was speculation Ashley might also seize the opportunity by bidding for a merger with Debenhams given he already owns just under 30% of the department store’s issued share capital.

And like BHS before it, the options for Debenhams are familiar ones; pre-emptively close excess store space or pursue a company voluntary arrangement insolvency process that allows retailers to close shops and reduce rents to cut costs. 

But with John Lewis & Partners also expected to report lower first half profits on Thursday, you have to ask - what can department stores actually do to remedy their current woes? Amazon has the ecommerce market wrapped up with highly competitive prices, and there’s only so much that taking more business online can help in a sector which is reliant on footfall to cover rent and rates.

John Lewis has opted for a cosmetic fix, rebranding to emphasise its ‘partnership’ with owner-employees in the department store division and also with its Waitrose grocery chain. The occasion was marked by a questionably successful long-form advert last Tuesday during the Great British Bake-Off, which set the music of Queen’s Bohemian Rhapsody to a ragtag primary school drama production. Another one bites the dust, indeed.

Amid the bad press, John Lewis has maintained its traditional price-match pledge of “Never knowingly undersold”. But if the appointment of KPMG is anything to go by, a cynical commentator might suggest that the line rings truer for Debenhams as its board keeps one eye on a potential sale scenario.


Centrist parties have held up amid a surge in votes for the far-right in Sweden’s general election yesterday. Although less than campaign polls had suggested, the nationalist Swedish Democrats are on track to take nearly 18% of seats in the Riksdag with the governing centre-left coalition and the centre-right opposition each securing just over 40% of the vote. Counting is still ongoing though analysts now expect a long period of horse-trading to form the next government.

The EU is expected to agree a modified negotiating stance in order to acknowledge Theresa May’s Chequers’ compromises, The Times reports. If agreed when the heads of the 27 member states meet in Salzburg next week, the arrangement would allow countries to engage directly with the UK to agree the kind of trade-offs the prime minister has hinted would be necessary to break a stalemate in negotiations. Neither side expects an agreement to be struck in time for the next formal EU summit in October, although an extraordinary Brexit session is expected to be organised for November.

In other Brexit-related news, the former DExEU minister Steve Baker has told the Press Association that he expects as many as 80 Conservative MPs will vote against the prime minister’s Chequers plan. He warned that the party will suffer a “catastrophic split” if Theresa May continues as planned. Baker is former chairman of the European Research Group which plans to publish alternative Brexit proposals ahead of the Conservative Party conference later this month. 

Novak Djokovic and Naomi Osaka have won their respective titles in the tennis US Open in New York. Djokovic beat Juan Martín de Potro to secure his third US Open, and 14th grand slam title, whilst first-time winner Osaka beat Serena Williams in a match mired by umpire allegations of cheating against Williams.

Business & Economy 

The chief executive of Alibaba, Daniel Zhang, will replace chairman and founder Jack Ma from September 2019 in addition to retaining his current role, the company has announced. Ma’s intention to stand down as chairman of China’s most valuable company had been reported over the weekend, saying he would planned to focus his efforts on philanthropy and education. (£)

The estimated $30 billion IPO of Volvo Cars on the Swedish stock market has been delayed over concerns that the carmaker may be impacted by rising global trade tensions. Geely, the Chinese owner of Volvo, has said that much of the financial backing it has secured for the IPO is reliant on Swedish pension funds, which would see stock slip after the float in current trade conditions. Had it gone ahead this year, Volvo’s IPO would have been the largest on the Swedish stock market since Telia in 2000. (£)

UK GDP is set to grow at its slowest rate in ten years even if the government agrees a favourable Brexit deal. According to a report by KPMG,  GDP will grow by 1.4 per cent in 2019 in the event of a good deal, but by only 0.6 per cent in the event of no deal. The report also suggests a significant slowing in the UK housing market, growing by only 2.6 per cent this year, compared against 4.5 per cent growth in 2017. (£)


The week ahead

The commercial world will turn its attention towards Apple on Wednesday for this week’s front-page event, as the tech giant prepares to launch its suite of new products. Apple is expected to unveil three new phones, new iPads and Macs. Chief executive Tim Cook is also expected to showcase the company’s plans for development in AI and augmented reality as the focus of Apple’s strategy over the next few years.
Also on Wednesday, European Commission president Jean-Claude Juncker will give his final State of the Union speech at the European Parliament in Strasbourg. According to officials, his speech will focus on migration, security and foreign policy and will also formally announce plans for EU governments to decide their own time zone. With a view to European parliamentary elections in May, Juncker will warn against foreign interference in a bid to ward off rising populist and anti-EU sentiment.
The latest sitting of the Bank of England’s monetary policy committee occurs on Thursday. Expectations of another increase in interest rates following a rise above 0.5 per cent for the first time since the financial crisis last month are very low, and are unlikely to change at any time before the UK leave the EU in March.

An otherwise quiet week in corporate earnings reports, key names to look out for include JD Sports on Tuesday and John Lewis & Partners, Adobe Systems, GVC and WM Morrison on Thursday.





Gulf Keystone Petroleum Ltd Com Shs (DI)

HGCapital Trust

MD Medical Group Investments GDR (Reg S)

Trading Announcements

Associated British Foods


Aggregated Micro Power Holdings

Live Company Group



UK Economic Announcements

(09:30) Balance of Trade

(09:30) Gross Domestic Product

(09:30) Index of Services

(09:30) Industrial Production

(09:30) Manufacturing Production

Columns of Note

Boris Johnson has caused fresh tensions in the Conservative Party after writing in the Mail on Sunday that Theresa May has “strapped a suicide vest around the British constitution”. In a blistering attack on the proposed Chequers negotiating stance for Brexit, Johnson labels the UK’s position as “humiliating”, calling to scrap existing plans for the Withdrawal Agreement and a Canada-style free trade agreement. He also writes in today’s Telegraph calling for the PM to promise no new taxes or increases to tax rates after Brexit in order to help “striving” families. 

The FT Big Read looks into the collapse of Dubai-based private equity firm Abraaj as the group is picked over by liquidators. The article tracks the rise and fall of the outfit, suggesting the reputation of Abraaj’s once widely-respected founder, Arif Naqvi, as a philanthropist and future investor hinges on the political fall-out of the liquidation, and the extent of the regulatory and legal backlash. (£)

Did you know?

Baby elephants suck their trunks, just as baby humans suck their thumbs.

Parliamentary Highlights


House of Commons

Oral questions

Education (including Topical Questions)

General debate

Legislating for the Withdrawal Agreement - Theresa May


Gypsies and Traveller policy - Andrew Selous


House of Lords

Oral questions

Report of the Independent Inquiry into Child Sexual Abuse regarding safeguarding failures at Downside and Ampleforth schools - Baroness Walmsley

Ensuring that all former Ministers seek advice from the Advisory Committee on Business Appointments before taking up appointments within two years of leaving ministerial office - Lord Hunt of Kings Heath

Extent to which the implementation of immigration policy has led to the separation of children from their parents - Lord Kennedy of Southwark

Opportunities for UK citizens who have reached the age of 18 since the EU referendum to have a say on the UK's future relationship with the EU - Lord Foulkes of Cumnock


Ivory Bill - Committee stage (day 1) - Lord Gardiner of Kimble

Short debate

Implications of the decline in the use of cash for the “poverty premium” payable by the most financially disadvantaged - Lord Hodgson of Astley Abbotts


Scottish Parliament

No business scheduled



House of Commons

Oral questions

HM Treasury (including Topical Questions) 

Ten Minute Rule Motion

Online Forums - Lucy Powell


Counter-Terrorism and Border Security Bill - remaining stages 

Money Resolution

Motion to approve a Money Resolution relating to the Organ Donation (Deemed Consent) Bill - Mel Stride


Roll-out of Personal Independence Payments - Hugh Gaffney


House of Lords

Oral questions

Extent to which the financial settlement agreed with the EU will be justiciable, in EU, national or international legal systems, in the event of the UK renouncing the agreement - Lord Balfe

 Plans to commemorate the 75th anniversaries of D Day and the Battle of Arnhem in 2019. - Lord Black of Brentwood 

To ask HM Government whether their policy towards withdrawal from the EU remains that no deal is better than a bad deal - Lord Robathan

UK's contribution to Europol after 29 March 2019 and during any subsequent transition period - Lord Cormack


Trade Bill - Second reading - Baroness Fairhead


Scottish Parliament

Topical Questions (if selected)

Ministerial Statement

Preparations for EU Exit

Scottish Government Debate

The Social Enterprise World Forum 2018

Members’ Business

The Ecology Centre, Kinghorn, Marks its 20th Anniversary – Claire Baker