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In this week’s Commercial Awareness update, we discuss the FTSE 100’s record high, BlackRock’s assets under management, job cuts at Vauxhall and BAE Systems, diversity in the boardroom and whether a 31-year old is about to become Austria’s leader. Read all this and more below.
It was a good week for the markets, as the FTSE 100 reached a record high on Thursday, rising 0.3% to 7,556.24. Sky was one of the biggest risers - 1.4% up - after it announced a substantial increase in new customers in the first half of the financial year. On the FTSE 250, Just Eat’s shares jumped 6.5% after they got provisional clearance for their planned takeover of hungryhouse. The rise in the markets can be largely attributed to the fall in the pound, after chief EU negotiator Michael Barnier said the latest round of Brexit talks had stalled. The pound was 0.39% down against the dollar to $1.317 after news of the breakdown of talks. Many of the companies listed on the FTSE 100 export goods/services and earn in a foreign currency, therefore a weaker pound leads to greater profits and a more attractive proposition for investors. If Brexit talks continue to show no signs of progress, the pound is likely to fall further and some experts believe the FTSE 100 could reach a new record of 7,600.
If the Brexit talks continue to stall, more leading companies are announcing possible strategies for when the UK does leave the EU. Many firms are still waiting on more clarity from the negotiation process, but they will look to enact these strategies if talks breakdown. The latest big financial firm to discuss their strategy is JPMorgan Chase, who plans to move jobs to Paris after the Brexit negotiations are complete - especially if no trade deal has been reached.
Questions to ask yourself… What does the FTSE 100 high mean for UK business? What are the risks of being a majority export business?
Companies to watch
The world’s biggest asset manager announced it is close to $6 trillion in assets under management last week. After beating analysts’ predictions in the third quarter, it boosted net inflows by $96 billion, growing 17% year on year. Over half of the net inflows ($52.3 billion) came from BlackRock’s iShares - exchange-traded funds (ETFs) that track an index - which makes up around 27% of the firm’s total assets.
BlackRock’s revenues also grew by 14% year on year and totalled $3.23 billion. A growth in base fees, performance fees and income from their technology largely account for this. As a result, BlackRock’s shares (21% growth) outperformed the finance sector this year on the SP500, which is up 13% this year.
Ready meal and pizza maker, Bakkavor, is set to float on the London Stock Exchange (LSE), as it seeks to raise £100 million to pay down debt and fund investment for growth. The firm, which produces microwave meals for Waitrose, Sainsbury’s and Tesco, is believed to have enlisted Rothschild to advise on a potential IPO. Bakkavor claims it accounts for 30% of the UK market for freshly produced ready meals and could be worth up to £1 billion when it floats - it expects 25% of the company’s capital will be floated on the LSE, with Icelandic founders Agust and Lydur Gudmundson selling down some of their 59% stake.
Bakkavor employs 19,000 people and generated a pre-tax profit of £63.1 million last year - nothing has been decided on the IPO yet, but it’s worth keeping track of this potential deal.
Question to ask yourself… Why is an IPO such a good way to raise capital?
Job cuts in British Manufacturing
Last week, two firms announced they would be cutting jobs. Here’s what you need to know.
Car manufacturer Vauxhall is set to cut 400 jobs at its Ellesmere Port car factory due to lowering demand for its vehicles. It made the decision after ”facing challenging European market conditions”, but has ruled out that it has anything to do with Brexit. Vauxhall employs 4,500 in the UK, with about 1,800 being based in Ellesmere Port - the plant which is responsible for its Astra model. The car manufacturer is now owned by PSA Group - owners of Peugeot and Citroen - which claims that manufacturing costs at Ellesmere were higher than benchmark plants in the group. The job cuts and changes in the business aim to make the Ellesmere Port factory more competitive and thus to secure its future.
On Tuesday, Britain’s biggest defence contractor announced it would be cutting 1,915 jobs, after a lack of orders for its flagship Eurofighter Typhoon jet. BAE employs 34,600 people in the UK, so this constitutes a significant proportion of its workforce, with many of the cuts likely to affect BAE's Warton Plant in Preston. Britain’s largest union, Unite, is demanding talks with the defence firm, and is calling on the government to step in to save jobs. BAE Systems’ chief executive said the job cuts were necessary to streamline the business and ensure it remains competitive.
Questions to ask yourself… Should the government intervene to save jobs in a capitalist economy? How much power should the unions have?
Austrian Election: Kurz to become Europe’s youngest leader?
The 31-year old Sebastian Kurz is set to be the new leader of Austria, as his conservative People’s Party (OVP) was a clear winner in a the initial exit polls. After 85% of votes counted, the OVP had 31.7% of the vote, with the Social Democrats on 26.9% of the vote and the Freedom Party (who were leading the polls just months ago) on 26%. Due to the split of the vote, it opens up the possibility of negotiations with all three parties involved - it could be that the Freedom Party hold the balance of power. Kurz’s People’s Party has claimed a mandate for change, wanting a hardline approach on immigration which could be concerning for the rest of Europe. There has been a significant swing to anti-immigration parties across central and east Europe in recent elections.
Should we have more younger leaders?
The possibility of a 31-year old leader of a country will come as a surprise to many. Most FTSE 250 CEOs and leading politicians are usually in their 40s or 50s, if not older. However, should we be promoting younger people to top positions, if they possess the right qualities? The argument against younger leaders is often down to experience, not ability - someone with more years in the world of work, who has managed more crises, is likely to be in a better position to stay calm in the face of adversity. However, with the demands put on leaders in the modern world, maybe being younger is an advantage. Plus, the pace of modern technology requires knowledge right at the top of all big businesses and government.
Ethnic minorities in the boardroom
A government-backed review has given leading companies in the UK four years to appoint one board director from an ethnic minority background. Out of the 1,050 director positions amongst FTSE 100 companies in the UK, only 85 are held by those from ethnic minorities.
At Bright Network, we champion diversity in the workplace and hope that regardless of background, graduates have access to graduate roles and top positions in the future. During October, we’re running a Black Heritage Future Leaders event in London and an Equality & Diversity Week at the University of Bristol, in partnership with the Student Union. Our aim is to equip students with the network and skills to rise to the top of leading organisations.
Questions to ask yourself… Why is so important to have a diverse workforce? How can this help a business become more successful?