Suspicious Minds 11 March 2021
February was another good month for the Dubai property sector. Month on month, there was a 15.6% hike in the number of property transactions to 3.8k, along with a 10.6% rise in the value of deals to US$ 2.0 billion. According to Data Finder, the two-month total now stands at 7.1k transactions, valued at US$ 3.86 billion – an indicator that the long-awaited recovery has started. Of the total February transactions, 68% (2.65k, worth US$ 1.59 billion) were for secondary or ready units and the 32% balance, (of 1.15k, worth US$ 438 million), for off-plan properties. On the month, the number of off-plan transactions was 35.8% higher, with the secondary or ready property transactions 8.2% higher.
The five most popular sales locations for villas and townhouses were Nad Al Sheba, (accounting for 10.3% of all sales in February), followed by Dubai Hills Estate, Green Community, Arabian Ranches and Dubailand. Business Bay was the top location, in relation to apartments, with 14.9% of the total, followed by Dubai Marina, Jumeirah Village Circle, Downtown Dubai and Palm Jumeirah. One interesting feature that has come to the fore is that there is a rise in tenants exchanging apartment-living for a move to villas, with gardens and pools, as families seek more space due to home-schooling and working from home continues.
Last year, the most expensive villa sold in Dubai was for just over US$ 20 million, with this figure already superseded in 2021. It is reported that a Swiss family from Monaco has paid a touch over US$ 30 million for a Palm Jumeirah villa, which will be used as a rental investment property. A video of the new custom modern contemporary villa – One100Palm – has already received over one million views. Spanning three floors, with a built-up area of 14k sq ft and five spacious VIP bedroom suites, it also boasts three indoor/outdoor cinema lounges, including a rooftop outdoor cinema, along with an infinity glass Jacuzzi, with a pop-up TV. It had been on the market for sale since June 2020.
HH Sheikh Mohammed bin Rashid Al Maktoum has issued a ruling that will see all CEOs of Dubai’s public sector entities being appraised, under a new performance management system, and assessed by a ‘competencies and performance committee’. The actual performance appraisal will be carried out either by the director-general, line manager, chairman of the board of directors or board of trustees. The system will match the performance of the individual, including their vision, leadership and achievements, and attainment of specified KPIs, with the individual entity’s goals and objectives. If the CEO has two successive below expectations’ appraisals, the assessor will notify the Dubai Government Human Resources department to take the necessary action.
It appears that the proposed visit of the Israeli Prime Minister, Benjamin Netanyahu, has been put on hold due to his wife’s illness. However, following a discussion with HH Sheikh Mohammed bin Zayed, the UAE has announced the establishment of a US$ 10 billion fund, aimed at bolstering economic ties in strategic sectors, including energy, manufacturing, water, space, healthcare and agri-tech. This comes six months after the historic Abraham Accord was signed by both countries in Washington.
With an expected US$ 1.2 billion investment to build a port and industrial logistics park in East Java, DP World, and Canada’s Caisse de dépôt et placement du Québec have signed a long-term agreement, with Indonesian conglomerate Maspion Group, to build a port and industrial logistics park in East Java. Work will start in Q3 this year and commercial operations are expected to begin two years later in 2023, to be managed by DP World Maspion East Java; the international container port will have a capacity of up to three million twenty-foot equivalent units and will become a key trade gateway for Indonesia, SE Asia’s largest economy. This will not be the first partnership between DP World and CDPQ – since its 2016 launch, the US$ 8.2 billion platform has invested in ten port terminals globally.
In the past four years, since signing a twenty-five-year agreement with the Republic of Cyprus, DP World Limassol has served more than 250 cruise ships and processed the arrival of over 400k passengers and a total of over 3.5k commercial vessels, shipping three million tonnes of cargo. The Dubai-based company has recorded impressive results, leading to a considerable increase in government revenue from the Limassol port’s operations. The Company’s CEO, Nawaf Abdulla, commented that, “despite the difficulties of the past 12 months”, “we remain dedicated to our goal of making the Limassol port a leading port of choice for trade and cruises in the Eastern Mediterranean”.
According to Brand Financing ranking, DP World is the fastest growing brand in the UAE. The London-based consultancy estimated that the global ports operator’s brand value had jumped 17% to US$ 1.1 billion, driven by strong performances in some of its global markets, specifically India, the UK, Netherlands, Belgium and Egypt. The Dubai-based company had expected a “relatively stable” financial performance last year, but the 2021 outlook remains uncertain due to the continuance of the Covid-19 pandemic. The study placed Aramco as the region’s most valuable brand, with Abu Dhabi National Oil Company (Adnoc) claiming the title of the UAE’s number one brand, as Etisalat replaced Emirates as Dubai’s strongest brand.
The DIFC welcomed a record 915 new financial entities in 2020, as their fintech firms’ numbers doubled to 303; the number of employees rose by 4% to 26.8k by year end. There was a net 20% increase in new companies, bringing the total number of operating firms at the Dubai International Financial Centre to over 2.9k. Tata Asset Management, Samba Financial Group, Caixabank and AfricaRe. Ebury, Ripple, Adyen opened their regional offices in the period. During the year, total banking assets booked in DIFC increased 6% to US$ 189 billion, with an additional US$ 64 billion of lending being arranged by DIFC firms. According to Sheikh Maktoum bin Mohammed, deputy ruler of Dubai and president of DIFC, the performance in 2020 “reflects the UAE’s and Dubai’s ability to partner with its business communities to facilitate continued growth despite the most challenging conditions we have seen in the international economy.” The centre’s three-year target is to triple in size and reach assets under management to US$ 250 billion.
The emirate’s February non-oil private sector economy nudged 0.3 higher to 50.9, as the early introduction of vaccinations improved operating conditions for the third consecutive month, that saw employment and output moving northwards. 50.0 is the threshold between expansion, being any figure above 50.0, and contraction any figure below. Key sectors such as construction, wholesale and retail, came in higher, whilst travel and tourism continued to be a drag on business activity. However, with Dubai still having relatively high cases – and the fact that international travel continues to be battered – Dubai’s tourism sector is bound to feel the heat; in days gone by, tourist chiefs would have been swinging from the lampposts on news that oil prices were over US$ 70 and the dollar was trading a lot weaker against international currencies such as sterling and the euro. Notwithstanding weaker sales, an air of optimism was evident that the current slowdown is temporary and that there could be a sharp rebound in output later in the year, with expectations that Dubai’s economy will pick up by 4%.
In the eleven months of Emirates’ fiscal year to 28 February, dnata has handled over 5k cargo-in-cabin flights, safely moving 50k tons of shipments at DIA. Although passenger traffic numbers slumped, because of international lockdowns and restrictions, there was a strong demand for air cargo which saw Emirates/flydubai making use of passenger planes just to carry cargo. To adapt to this change, dnata had to update services, enhance processes and train more than 500 employees to efficiently handle passenger planes carrying cargo only. dnata has been working closely with government authorities, customers and suppliers to maintain global trade and the flow of essential goods, including PPE, vaccines and other pharma goods.
Last Thursday was the last time Coinbase shares were sold on the Nasdaq Private Market before the company goes public in late March. Based on their last week of trading, the company could be worth between US$ 90 billion to US$ 100 billion on share values of US$ 350 to US$ 375. The Nasdaq private market is a division of Nasdaq and used by companies to trade their shares before they go public and are often a good guideline to how the shares will trade following an IPO. This will be the first time that Nasdaq Dubai has been involved in a major direct listing, an alternative to a traditional IPO. Founded nine years ago, Coinbase posted a US$ 322 million profit last year, on a doubling in revenue to US$ 1.14 billion
A resolution to regulate Dubai’s collection and management of public revenue has been issued by the Crown Prince, Sheikh Hamden bin Mohammed .bin Rashid Al Maktoum. Resolution No. (5) of 2021 on the Executive Regulation of Law No. (1) of 2016 specifies procedures for government payments and expenditures, whilst also streamlining payment procedures for suppliers and contractors, and specifying that all payments to the suppliers need to be made within a maximum of 90 working days from the date of the final handover or as per the timeframe specified in the contract. Only last year, the Dubai government pledged to cut average payment times to SMEs to just thirty days.
Another of Sheikh Hamdan’s Resolutions this week specified that the use of systems, applications and smart financial solutions can be selected by individual government departments but have to be approved by the Department of Finance. All such financial operations are considered legally enforceable, provided they are compliant with regulations, pre-approved by the Department of Finance and Smart Dubai. The resolution also regulates the collection and management of public revenue.
Sheikh Hamdan bin Mohammed also announced that the freeze on Dubai government fees has been extended until early 2023. He also added that no new fees would be imposed, except in the case of the introduction of “new vital services”. The aim of this latest announcement is to assist the emirate’s businesses and ease any financial challenges brought on by the pandemic. The extension of the freeze will help boost Dubai’s competitiveness and improve the confidence of businesses, as well as to strengthen Dubai’s ability to adapt to changing market realities, accelerate the pace of recovery and boost sustainable development.
There are hefty fines for a section of the professional community if they do not register with the Financial Intelligence Unit (goAML) and the Committee for Commodities Subject to Import and Export Control system before the end of the month. Estate agents, gold dealers, auditors and corporate service providers have been urged to register with the relevant anti-money laundering system to avoid revocation of licences, company closure and imposition of fines. Penalties for non-adherence to AML regulations could range from US$ 13.6k to US$ 272k (Dhs 1 million). The registration of these four target groups, in the government’s networks, will help in their battle to combat money laundering and financing of terrorism in the UAE. Last month, the Executive Office of Anti-Money Laundering and Counter Terrorism Financing was established to carry out surveillance and monitor possible cases of money laundering or of financing terrorists. Three months earlier, the MoE set up an AML department to ensure all non-financial businesses and professionals comply with local laws. Furthermore, the banking regulator has adopted a tough stance on non-compliance and has been quick to penalise banks for non-compliance.
Tuesday’s General Assembly approved that Meraas Leisure and Entertainments LLC acquire 100% ownership in embattled in theme park operator, DXBE, which comprises Motiongate Dubai, Legoland Dubai and Bollywood Parks. One resolution approved the conversion of the senior bank debt of the company acquired from Emirates NBD and DIB as at 28 February 2021; the balance totalled US$ 1.16 billion and will be converted into 53.391 billion new ordinary shares with a par value of US$ 0.272, at a conversion price of US$ 0.0218 per share. It also authorised the company to increase the shareholding of the company by US$ 14.450 billion to US$ 17.117 billion, with the issuance of 53.391 billion new ordinary shares with a par value of US$ 0.272.
Network International posted a 90% slump in 2020 profit to just US$ 5.6 million, as revenue was 15% lower at US$ 285 million; 71.2% of the revenue emanated from ME operations and the balance from Africa. The Dubai-based and leading ME payment processing firm noted that trading and revenue were naturally subdued during 2020 and that there was “a progressive recovery of volumes and transactions and a pickup in the pace of new business”, by year end. In 2019, Network International listed on the London market, and raised US$ 1.4 billion, with Mastercard taking a 10% stake, and subsequently pledged to invest a further US$ 35 million in the business over the next five years. It is also on track to acquire African payments firm DPO Group, the largest online commerce payments platform on the continent, in Q2, which will inevitably boost future revenue; its imminent entrée into Saudi Arabia will also help enhance the firm’s future stream.
By the end of last year, the number of UAE telecom subscriptions had touched 21.9 million in a country with a 9.9 million population; these figures include users of mobile phones, landline and internet services. Mobile phone users accounted for 76.2% of the total, of which 13.2 million were pre-paid mobile phone subscriptions, with post-paid accounting for 3.6 million of the users. Landline subscriptions increased to 2.1 million, while the total number of internet subscriptions stood at 3.0 million.
A study by Alvarez & Marsal shows that the aggregate net profit of the top ten local banks in the country sank by 38.3% in 2020, driven mainly by increased impairment provisions and reduced operating income. This year, the firm expects less volatility, but banks’ assets may deteriorate further, following the completion of the UAE Central Bank’s deferral programme in June 2021. In 2020, overall net interest income was 2.0% lower, with many banks slashing interest rates in the wake of Covid-19; operating income also declined – by 4.0% – attributable to the introduction of lower interest rates, with fee income down 9.0%, with lockdown impacting on card income and business volumes. The aggregate net interest margin tightened over the year by 28bps to 2.30%. One worrying – but not surprising – feature was the 79% increase in loan provisions to US$ 7.7 billion, whilst the cost of insurance jumped 69bps to 1.71%. Profitability ratios also headed south, with the return on equity and return on assets down 5.6% to 7.7%, and 0.7% to 0.9% respectively.
The bourse opened on Sunday 07 March and having gained 32 points (1.3%) the previous week, nudged 4 points higher to close on 2,573 by Thursday 11 March. Emaar Properties, US$ 0.06 higher the previous week, shed US$ 0.03 to close at US$ 0.98. Emirates NBD and Damac started the week on US$ 3.02 and US$ 0.33 and closed on US$ 3.17 and US$ 0.31. Thursday 11 March saw the market trading at 192 million shares, worth US$ 50 million, (compared to 153 million shares, at a value of US$ 64 million, on 04 March).
By Thursday, 11 March, Brent, US$ 9.86 (17.3%) higher the previous four weeks, gained a further US$ 2.60 (3.9%) in this week’s trading to close on US$ 69.46. Sunday’s drone and missile attacks on Saudi Arabia’s main export terminal at Ras Tanura saw oil prices hitting US$ 70.82 on the day, its highest level since May 2019. Gold, US$ 105 (11.1%) lower the previous six weeks, reversed its recent downward trend, moving US$ 33 (2.0%), by Thursday 11 March, to close on US$ 1,721.
There are some analysts, including the Bank of America, who are forecasting that Saudi Aramco, is “well placed” to raise its dividend guidance beyond US$ 75 billion, as prices are in line to tip over the US$ 70 bpd level. At its IPO in 2019, the world’s biggest oil-exporting company pledged that it would pay investors a minimum of that figure which would be the largest ever dividend pay-out in the world, This would come about even after its Q3 profit slid 44.6% , because of lower output and lower prices, but since then, mainly because of the action of the Saudi-led (with Russia) Opec+, it has managed to cut industry production and push prices higher; last week, the oil cartel decided to roll over its current level of cuts of 7.2 million bpd for a further two months until the end of April, whilst Saudi has also slashed a further one million bpd from its own production.
Aer Cap has finalised a US$ 30 billion deal to acquire GE’s leasing arm GECAS, with the combination of the world’s two largest aircraft leasing companies controlling more than 2k jets. The deal comprised US$ 24 billion in cash, US$ 1 billion paid in AerCap notes or cash, including 111 million new shares. The new entity, which will be easily the largest buyer of jetliners built by Airbus and Boeing, will now wield greater bargaining power when out buying stock. Citi and Goldman Sachs have provided AerCap with US$ 24 billion of committed financing for the transaction. This deal could be a forerunner for further consolidation in the global air finance industry, but initial market reaction was negative, with both companies’ share values dropping more than 6% following the news on Wednesday. It is noted that the new entity will have three times more assets than its nearest competitor, Dubai-based Avolon, and this in itself could be a red flag that it may have to offload some planes to meet anti-trust requirements.
The agreement marks a real transformation of GE, which will own 46% in the new entity, into a more focused, simpler and stronger industrial company and will result in a marked reduction in debt levels, as well as enabling it to focus on its core strengths in the power, renewable energy, aviation and healthcare sectors. GE said it planned to reduce debt by about US$ 30 billion, using transaction proceeds and existing cash, but announced a US$ 3 billion write-down in connection with the deal.
After making a US$ 813 million profit the previous year, Rolls-Royce posted a US$ 5.58 billion loss in 2020 after Covid-19 played havoc with air travel which dropped significantly over the year; the engine-maker makes most of its money servicing engines and if there is little or no flying, this will lead to little or no income. To overcome some of the problems, that have arisen because of the pandemic, the Derby-based company has already cut jobs, raised cash from investors to bolster its finances, raised more cash through asset sales (although the planned US$ 210 million divestment of Rolls’ Norwegian unit, Bergen Engines, was scrapped on security grounds), and started to restructure the business going forward, which includes cutting 9k jobs worldwide. In 2021, it expects a cash burn of up to US$ 2.8 billion but is anticipating a better year, as the vaccine rollout should see a pick-up in air travel in H2, dependent on the vaccine programme working and there is a global agreement on checking passengers’ health. Even if there is no aviation rebound, Rolls Royce has enough cash to see it through until Q1 2023.
Having declared a record H1 loss of US$ 1.27 billion, there was no surprise to see Cathay Pacific post a US$ 1.52 billion H2 loss to bring the 2020 deficit to US$ 2.79 billion; 2019 profit was at US$ 220 million, which had been disappointing because of the political turmoil in Hong Kong. Apart from the impact of Covid-19, the negative 2020 results were also driven by major restructuring costs. The figures would have been worse if not for the performance of cargo, even though it witnessed a downturn as a cutback in passenger flights, which also carry cargo, caused a reduction in capacity. Another reason for the group’s downturn was the fact that Cathay is one of the few international airlines, which does not have a domestic travel market to fall back on; last October, it announced it would close its subsidiary Cathay Dragon, a regional carrier flying mainly to mainland China and other Asian destinations, with Cathay Pacific and its budget carrier Hong Kong Express taking over Cathay Dragon’s routes. The extent of the impact of Covid and international lockdowns can be seen by this January’s figures that show the Hong Kong carrier’s passenger number at 30.4k, a massive 99% lower compared to January 2020. To make matters worse, IATA has forecast that air travel will not return to pre-pandemic levels until 2024.
After posting its fastest growth in five years in 2020, up 13% to US$ 7.0 billion, as profit rose 19.0% to over US$ 2.0 billion, Lego plans to recruit hundreds of computer experts in the UK and Denmark to expand its digital games and online sales operation. The lockdown has seen the Danish toy giant sell bigger Lego sets, (as families had more time at home to make models together), and during the year it launched a new Super Mario set, which blends physical bricks with online games. This success has encouraged the firm to speed up its digital plans, with its latest Lego VIDIYO release, in partnership with Universal Music, allowing children to make their own music videos, with special effects and filters. The firm has confirmed that over the past two years, it has invested heavily in accelerating digital transformation within the operation.
Following a profit of US$ 40 million a year earlier, John Lewis posted a 2020 loss of US$ 141 million and also warned of further “painful” store closures, noting that “it does not expect” all of its department stores to reopen once lockdown restrictions ease; it had already announced last year that at least eight stores would not reopen post lockdown. The big drivers behind the loss were write downs in the value of its stores, because of the shift to online shopping, as well as restructuring and redundancy costs. It is not yet known how many of its 42 outlets will be closed but it was said to be a “small number”, as talks with landlords continue. Before the pandemic, the retail giant estimated that 60% spent on its websites was driven by its shops – now the figure has halved to 30%. On the surface, the fact that revenue figures were flat could be interpreted as good news, but the real reason was the surge in online sales made up for the fall in bricks and mortar retail operations. By 2025, the retailer expects 70% of its revenue will be driven by on-line shoppers. The partnership, which also runs Waitrose supermarkets, is now targeting annual savings of US$ 420 million by 2022; the supermarket’s annual revenue stream is now in excess of US$ 1.4 billion – a lot of which is online business as it takes 240k orders weekly.
Over the past twelve months, Tesla has managed to lose a third of its value three times. The latest sees the electric car company’s share value fall from its 26 January high of US$ 850 billion to US$ 550 billion; on Tuesday it lost a further 4%, having shed 35% of its value over the previous six weeks. With such volatility, it is difficult, dangerous and potentially costly for the rational investor to trade in such equity.
According to Elon Musk, there are only two profitable carmakers in the US – Tesla and Ford – as the others have become bankrupt. In Q4, the electric car company posted revenue of US$ 10.7 billion, achieving free cash flow of US$ 2.8 billion, after spending more than $3 billion on building new factories and other expenditures. Over 2020, Tesla produced and delivered more than 500k vehicles, as well as starting production of its Model Y in Shanghai. Earlier this year, it registered its Indian subsidiary with the Registrar of Companies in Bengaluru. Meanwhile, Ford announced last month plans to double its investment in electric and autonomous vehicles to US$ 29 billion, having previously committed to spending US$ 11.5 billion on electrifying its vehicle line-up through 2022. Ford’s immediate strategy is to catch up with the EV market leader Tesla and keep pace with other automakers, such as GM and Volkswagen.
At last, there was some good news for the UK car industry, with Aston Martin pledging to manufacture all of its electric cars in the country from 2025, according to its Canadian billionaire owner, Lawrence Stroll. All of its battery sports cars will be made at its plant in Gaydon, Warwickshire, whilst its electric SUV models will be made at St Athan in Glamorgan. The luxury car-maker will start making hybrid versions of its cars over the next four years, followed by battery-only models. This follows the UK government announcing plans that it will ban the sale of new petrol and diesel cars from 2030. Mercedes also has a 20% stake in Aston Martin, with both companies in a technical partnership.
Most investors will get concerned when they see the chairman divesting shares in his and their company and this is what has happened with Virgin Galactic Holding. Its share value slumped 9.9% on the news late last week, when the US Securities and Exchange Commission was notified, that its billionaire chairman Chamath Palihapitiya, had offloaded 6.2 million shares worth about $213 million, in the space-tourism company he had also rid himself of about US$ 100 million worth of shares last December. He still owns 15.8 million shares with his partner Ian Osborne through investment company Social Capital Hedosophia, but the share value has dropped more than 50% since their mid-February peak.
The latest high-profile IPO sees Roblox floating on the New York Stock Exchange, valued at US$ 30 billion, but floated almost 60% higher by US$ 17 billion to US$ 47 billion in its first day of trading, making the founder US$ 4.6 billion. The video-game platform, founded by David Baszucki, is already the world’s largest user-generated games site, mainly used by under-12s. It is free to play, relying on purchases paid for in currency known as robux which can be converted back into cash. Last year, it was estimated that at least 300 developers earned more than US$ 100k and 1.25k at least US$ 10k. The founder hopes to expand the platform, not just for gaming but also for work and learning.
ECB regulators have started investigating lenders about their exposure with stricken Greensill Capital and its main client, Sanjeev Gupta’s GFG, which operates steel mills all over the world, employing 30k and turning over US$ 23.8 billion, and was heavily reliant on Greensill funding facilities. There are concerns that there is a risk of a further fall-out from the crisis when all details become known. After Credit Suisse abandoned a US$ 11.9 billion supply chain funding facility last week, and Germany’s watchdog BaFin froze its Bremen bank account, along with filing a criminal complaint alleging balance sheet manipulation, alarm bells stared ringing. There are also worries on the insurance front with Greensill’s exposure and that it was reported that it was trying to restore up to US$ 4.6 billion of credit insurance, without which there would be an inevitable wave of insolvencies.
On Tuesday, administrators were formally appointed to Greensill Group, with Grant Thornton chosen to two of its major entities in the UK and its Australian parent company also in voluntary administration with local counterparts. The UK liquidator noted that “Greensill Capital is the parent company for the Greensill Group and provides administration and head office support to the group but operates only in a limited capacity.” The joint administrators also indicated that they were “in continued discussion with an interested party in relation to the purchase of certain Greensill Capital assets” but would not comment any further. Last year, the company, named after its founder Australian billionaire Lex Greensill, engaged in US$ 110 billion of financing for ten million customers in 175 countries. The company’s modus operandi was that it provided debt coverage to companies, who were awaiting payment from their customers, and then sold off this debt in bundles to other investors. These packages were insured but problems started to arise when some insurers began to get nervous about their potential exposure to risk. Earlier in the month, Greensill went to court but failed to get IAG to renew its policies.
The other major problem is that Greensill is the principal financial backer of one of the UK’s largest industrial groups, Sanjeev Gupta’s sprawling empire, which includes Liberty Steel. There are obvious worries that this crisis may soon envelop his firms and earlier in the week, it was reported that UK Business Secretary Kwasi Kwarteng had held an emergency meeting with the chief executive of Liberty Steel UK, John Ferriman; the main topic on the agenda was the consequences of Liberty Steel failing. One of the main problems was the fact that last week, Credit Suisse froze any withdrawals of up to US$ 14 billion because of Greensill’s heavy exposure to Mr Gupta’s business which constitutes about 50% of Greensill’s lending volumes. It has been estimated that Gupta’s daily funding requirements are just under US$ 100 million. It was reported that some of his metal sites had missed payments to UK tax authorities, covering outstanding VAT and PAYE.
The Restaurant Group is planning to ask shareholders for a further US$ 245 million to tide it over the coming months of potential future lockdowns and to pay off outstanding debts. The owner of Wagamama, and other restaurant chains, including Frankie & Benny’s, Chiquito and Food & Fuel, saw 2020 revenue drop 57% to US$ 640 million, resulting in a pre-tax annual loss of US$ 175 million. Chief executive Andy Hornby added that its short-term outlook remains “uncertain”, while lockdown restrictions remain in place. With the current lockdown set to ease early next month, TRG has a trimmed down portfolio of four hundred restaurants, pubs and concessions.
With an IPO imminent, Deliveroo is set to reward both its customers and drivers., with the latter sharing a fund of up to US$ 23 million; those who have delivered the most for the firm are in line for a pay-out as high as US$ 14k, whilst customers will be able to buy up to US$ 1.4k worth of shares in the IPO. 2020 results are still unavailable but in 2019, the company saw revenue 62% higher, at US$ 950 million, with losses coming in 30.6% higher at US$ 440 million.
As part of its push into digital tokens, PayPal is acquiring the three-year-old Israeli cryptocurrency security firm Curv; although no financial details were made available, it is thought the amount paid would be south of US$ 200 million. Last October, the fintech giant, with 375 million users in over 200 hundred markets, introduced a new service to allow customers to trade in cryptocurrency, and also created a dedicated business unit to focus solely on blockchain and crypto. In two 2020 funding rounds, Curv raised US$ 23 million in July and US$ 7 million in October.
According to a regulatory filing, Eric Yuan transferred 18 million shares, valued at US$ .5.5 billion, in Zoom, the company he founded; this equates to 40% of his total number of Zoom shares. The shares were shown as gifts to unspecified beneficiaries, in line with Mr Yuan’s estate planning practices. In the past year, the company’s shares have nearly tripled, with a current value of around the US$ 100 billion mark, whilst Eric Yuan’s personal wealth is estimated at US$ 13.7 billion.
Every cloud has a silver lining, and it seems that the increase in Covid-related excess deaths will see a boost of some US$ 2.0 billion to the Exchequer, as the state pension burden reduces, with less pensioners to pay out. It is expected that pension spending will be US$ 840 million and US$ 1.26 billion over the next two years. Most of the 144k Covid-19 deaths recorded in the UK comprised mainly of people over the age of 65.
For the second month in a row, UK house prices dipped 0.1% in February to US$ 348k – an indicator that the mini housing boom continues to soften – but still 5.2% higher over the twelve months, 1% down from January, the second monthly dip in a row, and 0.5% over the previous three months. Annual prices greatly benefitted when the Chancellor first unveiled the tax break in July last year, with the first US$ 700k of the purchase price of a main residence in the UK exempt from stamp duty.
In Australia, the Reserve Bank has warned about the dangers of the latest house price boom, and the possibility regulators may step in to deflate it, with its governor, Philip Lowe, admitting low interest rates were helping to drive up house prices; however, he did add that the central bank will not adjust its policy purely based on the housing market, noting there were “various other tools” to keep house prices in check. One interesting fact to note is that the prospect of lower population growth in the coming years could possibly outweigh some of the other factors driving property prices higher, as the country records its lowest population growth in a hundred years.
In a novel, but obviously welcome, move for the hospitality sector, the federal government will halve the price of nearly 800k airline tickets, as part of a US$ 920 million package, aimed at getting more Australians to spend big on domestic holidays in 2021; thirteen locations – including the Gold Coast, Cairns, the Whitsundays region, the Sunshine Coast, the Lasseter region which includes Uluru, Alice Springs, Launceston, Devonport, Burnie, Broome, Avalon, Merimbula and Kangaroo Island – have been selected by the government. Tickets will be available for discounts for four months from April, with all destination’s chosen being those normally relying heavily on international visitors. It is estimated that an average of 46k half-price fares will be offered each week, mostly with Qantas, Virgin and Jetstar.
At the opening of this year’sNational People’s Congress, China’s Premier Li Keqiang announced that the country is aiming for a 6%+ economic growth target; this comes after a 2020 growth of just 2.3%, (including a Q120 6.8% Covid-driven contraction) – its weakest annual growth in decades. The economy recovered strongly in H1 and the aim is to continue this robust rebound into 2021. The Premier commented that “a target of over 6% will enable all of us to devote full energy to promoting reform, innovation, and high-quality development,” “In setting this target, we have taken into account the recovery of economic activity.” To some analysts, the growth forecast may be very conservative, as it is coming off a relatively low base, with the IMF predicting a 8.1% expansion; others argue that the country may now be focusing on quality – not quantity and speed – with more room for structural reform and a transition to a more mature economy. The Premier is also predicting a two million increase in new employment numbers to eleven million and has set a budget deficit goal of around 3.2% of GDP. However, that may present a conundrum, bearing in mind the country’s “grey” debt problem.
Nothing has changed in Lebanon over the past twelve months, with demonstrators still out on the streets and burning tyres to block main roads all over the country, angry at the continued political paralysis and seemingly endless economic crises. The latest protests were the result of the country’s 2019 financial mess which brought hundreds of thousands onto the streets to bring down the government. Since then, the situation has gone from bad to worse, with tens of thousands of jobs being lost in the crisis, bank accounts frozen and many Lebanese have started to go hungry. After the massive August 2020 explosion, the government resigned and the new prime minister-designate, Saad al-Hariri, has been at loggerheads with President Michel Aoun and has been unable to form a new government to carry out the reforms that would unlock billions of dollars of international aid. The Lebanese pound tumbled to a new low last Tuesday, at 1,523 to the US$.
London Stock Exchange Group posted a 5% increase in 2020 profit to US$ 1.5 billion, with revenue nudging slightly higher to US$ 2.6 billion; it also increased its full-year dividend by 7% to US$ 1.03. The announcement came after the Chancellor, Rishi Sunak, unveiled details of an independent review, recommending updating rules around free float requirements, dual-class structures and special purpose acquisition companies (Spacs) to strengthen the UK’s position as a world-leading financial centre. There is no doubt that the Johnson administration is keen to make the UK stock market home to more tech businesses.
With US virus cases dropping, as the vaccination programme begins to make an impact, hiring rose last month. Even though employers added 379k jobs – a lot stronger than many analysts had predicted – it made little impact on the jobless rate which only dipped 0.1% to 6.2%. Most of the job gains in the private sector were found in the leisure and transport sector, with construction firms and local governments shedding positions, as other sectors remained little changed. Almost ten million are still unemployed but it must be remembered that this number excludes millions more that have stopped looking for work or identified as employed but are not working because of the pandemic.
There are reports that Pfizer-BioNTech, AstraZeneca, and Moderna are being sold on the darknet at inflated prices of between US$ 250 – US$ 1.2k and being paid for in Bitcoin. Most of the sales appear to emanate from France, Germany, the UK and the US.
Last week, this blog posted on a PPE scandal in Italy – this week it is the turn of Germany and (once again) the UK. This week, “maskgate” is hitting the headlines in the German press, just ahead of this weekend’s elections. It has been reported that two MPs from Angela Merkel’s centre-right bloc earned substantial commissions on PPE deals to procure urgently needed masks during the first wave last March. Nikolas Lobel of the CDU (Christian Democratic Union) quit the Bundestag with immediate effect, whilst CSU (Christian Social Union) member, Georg Nusslein, will leave later in the year. This is another episode that will put a major dint in Angela Merkel’s popularity, also not helped by her inept handling of Germany’s pandemic crisis and vaccine roll-out programme.
Instead of trying to put their own house in order, EU leaders seem to be waging some sort of war on the UK and US over the distribution of vaccines. The EU has still not got over the fact that the UK has actually left the bloc and now the EC president Charles Michel has wrongly accused the UK of banning shipments of jabs and their components. The Belgian, a son of a former European Commissioner, has also taken the fight to the US, accusing them also of banning vaccine exports and raw materials. Perhaps he should be knocking on the door of Cypriot European Commissioner, Stella Kyriakides, who has been roundly attacked in the international media, as her vaccine procurement programme was seen to be slow and inefficient, especially when compared to the UK and the US. Even the CEO of AstraZeneca, Pascal Soriot, blamed the EU for being three months slower than the U.K. in finalising its purchase agreements for the vaccine. How many lives have been lost on continental Europe over the past three months by the woeful efforts of the bureaucracy to implement a proper vaccination programme?
Despite the Prime Minister stating that all PPE contracts are “on the record for everyone to see”, it is reported, by the Good Law Project, that Boris Johnson’s assurance was “not true”, with government lawyers indicating that one hundred contracts, signed before 07 October, were yet to be revealed. They also admitted that 482 out of the 513 contracts award notices had been published outside the thirty days required by law. The Department for Health and Social Care signed deals worth hundreds of millions of dollars during the coronavirus pandemic which has to include a “contract award notice” within thirty days of the awarding any contracts for public goods or services worth more than US$ 170k. Some contracts have attracted scrutiny because many were awarded directly, without being opened to competition, because of the urgency of the pandemic. Last month, High Court judge, Mr Justice Chamberlain ruled that Health Secretary Matt Hancock had acted unlawfully when his department failed to publish award notices for contracts it had agreed during the Covid pandemic within thirty days of them being signed and that the public were entitled to see who the money was going to. Unfortunately, some of these contracts were handed to relatives, friends or business acquaintances and this to some may smell of cronyism. Maybe Gemma Abbott, the Good Law Project’s legal director, was right saying, “we have a government contemptuous of transparency and apparently allergic to accountability.”
The UK parliamentary watchdog has produced a scathing and damming report on Boris Johnson’s US$ 51 billion test and trace programme which failed its main target of averting more lockdowns. The Commons public accounts committee noted that the programme had an initial US$ 31 billion budget, with a further US$ 21 billion “thrown in” for spend over the next two years. One of its main concerns, other than its failings, was its dependence on expensive contractors and temporary staff. Even today, estimates are that 2.5k consultants are still being being employed with daily rates of between US$ 1.5k to US$ 9.2k! It seems that someone at the Department of Health and Social Care considers these to be “very competitive rates”. There is every possibility that some of these sub-contractors know people in the right places and just like in the early days of Covid, when proper checks were not being made on PPE equipment, some politicians have kept “their snouts in the trough”. No wonder more of the electorate of global democracies are becoming more cynical in their attitude and more wary of their elected representatives – they have begun to have Suspicious Minds.