News & Insight • Weekly Newsletters

10 January 2025 | Charlie Todd | William Buckhurst

That Was The Week That Was

Wishing our readers a prosperous 2025!

MACRO

• President Carter sadly passed away.
• US job numbers blasted through expectations with 265,000 added, far outscoring the 165,000 estimated. This led market participants to expect rates to stay higher for longer and in turn equity indices fell
• Fake news! It was reported by the Washington Post that Trump’s aides were discussing selected tariffs compared to prior reports of a 10-20% universal cost. Trump then commented that was incorrect and it would not be pared back
• Russian gas was switched off as exports, via Soviet-era pipelines running through Ukraine, came to a halt on New Year's Day
• It is easy to see this as a short-term phenomenon, but the US 10-year government bond yield is up a whole 100bps since September (a large move in the bond market)
• Although the dollar remains strong against a basket of international currencies, commodities have started the year well. There was strength in the copper price, which is trading at a four-month high of $4.32 per pound

COMPANY NEWS

• Investors were focused on Nvidia CEO Jensen Huang’s keynote speech at the CES, focusing on data centres along with new partnerships with Toyota, KION and Accenture and announcing new products in gaming. Shares fell on the lack of new excitement
• Retailers reported their Christmas trading updates:
• Next highlighted its quality as it showed profits up slightly, with future guidance flat. UK performance was likely to ease, and they forecast a £67m increase in their wage bill due to the Budget
• Tesco reported like for like sales growth of 3.8% vs 3.75% expected as Booker like for like sales declined 2.6%. The company stated that it still expected full year numbers to be in line. They delivered their largest Christmas ever with continued market share and switching gains
• Marks & Spencer have performed very well but there was sense of ‘travelling’ and ‘arriving’ as shares fell 8.4% after their statement. Food was good (£2.58bn revenues vs. £2.53bn expected) but the Clothing & Beauty section underwhelmed, leading to profit taking
• Greggs shares fell by even further, with 25% taken off the value of the company. Full year sales increased 11% but this growth was slowing and led to downgrades
• Mining stocks BHP, Rio and Antofagasta drifted higher following the move in the aforementioned copper price
• Shares of Fast Retailing, the owner of the highly successful Uniqlo brand, fell 6.5% after reporting its quarterly results for the Christmas trading period, which showed sales growth in China had slowed materially
• Shell provided a trading update stating that trading results were expected to be lower due to expiring hedging contracts. Chemicals were also expected to be significantly below the prior quarter due to seasonality
• Sodexo finished 7.8% lower after results were below expectations across all regions. However, the company left full year guidance unchanged
• Tencent shares continued their recent weakness after being added to the US Department of Defence’s list of companies involved with the Chinese military
• On Christmas Eve we had the third profit warning from Vistry. Profit before tax is now likely to be £250m for 2024, versus previous guidance of £300m with several brokers downgrading. It announces results next week

NEW YEARS HONOURS

We would like to celebrate those businessmen and women who were named in the King’s New Year Honours List:

• Dame Ruth Cairnie – Chair of Babcock International. For services to Industry
• Sir Edward Braham – Chair of M&G. For services to Corporate Law and to Business
• Sir Warren East – ex CEO of Rolls Royce. For services to the Economy and to Net Zero
• Dr Sir John Lazar – co-founder of Enza Capital. For services to Engineering and Technology
• Sir Noel Quinn – CEO of HSBC. For services to Financial Services and to Net ZerO

MERGERS & ACQUISITIONS

Constellation Energy, the nuclear power specialists and one of the best performing utility companies last year (almost doubling) reached a $16bn deal to buy Calpine, combining two of the biggest electricity generators in the US into the largest independent power provider in the country, with some 2.5 million customers. Constellation will pay $16.4bn, consisting of 50m shares – which is sensible following the increased value of said shares – and $4.5bn cash.

Closer to home it was announced that some turkeys were safe for Christmas as the chickens got it! Just before Christmas the UK franchise of Wingstop was sold to US investment firm Sixth Street. Lemon Pepper Holdings, the master franchisee for the chicken wing chain in the UK and Ireland, received over £400m. Wingstop, which is listed in the US, made its UK debut in London in 2018 and has grown to 57 sites and created over 2,500 jobs, whilst just turning profitable. It is aiming to reach 200 restaurants within the next five years with revenue expected to exceed £150m at the end of the year. There has been a popularity boom for fried chicken, with other US chains planning expansion in the UK.

Sixth Street already owns Wingstop franchise Far West Services in the US and has also backed Airbnb, Spotify and football club Real Madrid. Kayvan Heravi, co-head of consumer at Sixth Street:

“We believe that the opportunity for the brand globally, and in the UK and Ireland specifically, is only just beginning.”

(At Vermeer, we want to champion entrepreneurialism, so if there is a transaction or company we haven’t mentioned please do send to charlie.todd@vermeerllp.com)

THE WEEK IN HISTORY

1782: The Bank of North America, the first US commercial bank, opened its doors. The bank would become the de facto central bank for the United States until the First Bank of the United States took over in 1791

1979: The peak of the UK’s Winter of Discontent as an unofficial strike of all TGWU lorry drivers begins. With petrol distribution held up, petrol stations closed across the country. The strikers also picketed the UK’s main ports, prompting the Sun newspaper’s famous headline "Crisis? What crisis?"

As at 10^th January 2025. Source: InFront