Archive for June, 2011

FPS’ Friday Fiver

posted by Edward Jones

Welcome to our Friday Fiver. This week we look at Nick Clegg’s proposals for public ownership of bailed out banks, the ever growing tech bubble and cybercrime, whilst we shift effortlessly from speaking to ourselves in the first person to a collective, as our minds wonder what the weekend might hold. With a few nuggets of information at the very end – so worth reading all the way through!

Thanks to Ben, Dave and Jo for contributions.

The People’s Bank…

It’s not often that ‘I agree with Nick’. But despite the naysayers who say that it’s pie in the sky, the administration of such a project would be impossible, or that Nick Clegg is only mentioning it now to get himself some press attention while he travels in Brazil, I have to say I like the idea of those who bailed out the banks getting something back. I also like the idea of reintroducing share ownership to the public at large because it goes some way to bridging the gap between what people perceive of financial services and equity ownership and reality.

It also helps with the financial education theme which is so popular amongst politicians and financial services companies, but rarely actually really delivers change because at the end of the day it is a one way message. Repeated surveys show the public never really engage or feel comfortable with finance, however well intentioned the various programmes are that exist. If they owned shares, they would pay attention, they would engage, they would also probably make some money in this instance, and get something back for the tax revenue they provided to the banks.

Surely that is worth further investigation?

The bubble keeps growing…

We’ve written before about the soaring valuations of tech companies, and in particular, social media companies. The likes of Facebook, Twitter, Groupon and Foursquare have seen their potential values skyrocket as investors queue up to get a piece of any potential IPO. We (or to be blunt, Dave) have been somewhat sceptical about the value being placed on these businesses, chiefly because the profits most of them are making are barely correlated to the huge valuations put on them.

Over the past week, we’ve had two more cases in point. The first is Pandora, an online music and radio service based in the USA. It floated for $2.6bn mid last week, and its value briefly soared above $4bn according to an in-depth article about this issue in Tuesday’s FT. The second is Shazam, which secured $32m in new funding from venture capitalists on Wednesday. This means a float is unlikely for a while, but it didn’t stop ‘sources’ claiming the company “was now worth hundreds of millions of dollars” according to an FT blog.

The missing element here? Profits. Shazam is making them, but only just, whilst Pandora hasn’t made one yet, and its current revenues of $110m are a tiny fraction of its valuation.

This sceptic remains unconvinced I’m afraid….

Cyber crime

The threat of ‘cybercrime’ loomed large this week after news of the arrest of a 19 year-old hacker suspected of carrying out attacks on the C.I.A and the UK’s serious organised crime agency. After the WikiLeaks saga and arrest of NASA hacker Gary McKinnon it would seem that security agencies are struggling to keep a handle on…well, security. But this isn’t just any security, the issue of ‘cyberspace’ is a particularly tricky one as currently there is no transnational law to define what happens next.

This is an issue policy makers have been keen to address since the National Security Strategy identified cybercrime as a tier one priority risk.

But the question remains, how do we control this vast and intangible area? In the FT this week former British cabinet minister John Reid says innovation is the key to cracking the cyber crisis. What is needed, says Reid, is an ‘elite cadre of innovators able to lead a workforce with a different, entrepreneurial ethos’. We’d like to think they might look like this.

Anyone up for the job..?

Summer Solstice

June 21 saw the longest day and shortest night of the year and despite this marking the official beginning of the summer season it also means that from now on our days will be getting shorter and our nights longer and we might as well all be starting to get ready for Christmas.

But for those of us who haven’t yet embraced the summer months you might want to have a look at Visa Europe’s (client) Third Annual Travel Report which revealed that holidaymaking Britons are increasingly venturing out of the eurozone. Visa Europe analysed international spend trends of 105 million UK cardholders to reveal the countries with the highest annual increase in consumer spend in 2010. While Zimbabwe tops the list, fellow African countries, Gambia (4th), Nigeria (5th) and Morocco (10th) all featured in the top ten.

Definitely food for thought if you haven’t yet planned your summer getaway, but if you would like to keep your feet on home turf, you might want to try and find some at Glastonbury this weekend, which despite its muddy start, festival goers are expected to enjoy the hottest day of the year on Sunday! Excellent.

On the theme of live music…

And fitting for a Friday afternoon, we’ve noticed recently an upward trend in people singing out loud on trains along to their ipods, regardless of the fact that their fellow commuters are either staring at them and tutting, or sniggering quietly behind their copy of the Evening Standard. It’s not surprising given the tendency of City workers to drown their sorrows before boarding the train back to the home counties and with more mobile music, it was bound to happen.

Last night’s performance was a classic though, not only the odd word being sung, but the full nine yards. Eyes shut, belting out a rambling drunken version of what sounds something like a combination between Blur, The Streets and Bob Dylan but with one of the most awful voices ever heard. The whole carriage falling about laughing, the commuter/singer totally oblivious, eyes still shut, finger pointing in the air and occasionally tapping on the table in front of him. Never mind karaoke, this is surely a new national sport. Is this is continuing influence of reality TV? Dave, we think you might know the answer, but can anyone think of a name for it?

The best of the rest…

If you haven’t read a transcript of this week’s treasury questions, never mind, but for *the record* this summary from Paul Waugh comes highly recommended.

H&K’s very own Candace Kuss has written an excellent article for CNN on her experience at this year’s Cannes Lions advertising festival.

And BIS published a consultation on consumer empowerment this week, which we think you might like to know about.

Have a good weekend.

Taking the fear out of PR

posted by Edward Jones

In a highly entertaining piece on Thursday, the FT assessed what lessons can be learnt by today’s businesses from those who have made a living from illegal means – you can read it here.

Among the more colourful reflections; my favourite being, “Don’t end up in a truck of a car”, I was struck by the relevance of the comments made by Curtis Jackson – otherwise known as rapping superstar, 50 Cent. Jackson, or should that be Cent talks of fearlessness as a basic strategy in business. Clearly, we can all recognise the need for a certain bravado in the rougher parts of New York, but what’s the potential learning for communicators?

In light of the invariable challenge we face as PROs in winning over sceptical stakeholders, be they clients, or management boards, our fearlessness is fundamentally all about the courage of our convictions. Put simply, if we’re to shape conversations, to use an expression from these parts, we need not only to be bold in our thinking, but downright brazen in our delivery. Whether it’s a crisis strategy, or a consumer campaign, our plans will be undermined from the start if we lack the certainty of our decision making. Others will, quite rightly, challenge our thinking – especially if they’re paying for it – so essential is the need to have guts and opinions, together with the industry’s oft-cited requirements of passion and creativity.

Please note: This post was originally posted by Peter Roberts.

FPS’ Friday Fiver

Hello again all. It’s been a frantically busy week here in the Financial & Professional Services team, but as ever we bring you the Friday Fiver which rounds up this week’s events. Thanks to contributors Mel, Nick, Jo and Jonathan this week.

Freedommmmmm…Braveheart bonds, kilt edged bonds, Connery bonds and Jonathan’s own personal suggestion of shortbread bond are just some of the names being used to describe new powers that will allow Scotland’s government to issue debt.

Mel's adopted country is about to issue its' own bonds

The Scotland Bill makes provision for the country to raise up to £2.2bn from markets to fund infrastructure projects. There had been calls to permit up to £5bn of borrowing but this idea has been dismissed and Treasury ministers are at pains to emphasise that this does not amount to writing a blank cheque. It remains to be seen what ratings agencies will make of Scotland’s credit worthiness.

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FPS’ Friday Fiver

Hello All, and apologies for a slightly late Financial & Professional Services Friday Fiver this week, but we’ve all been a little hectic. To round out the week we bring you banking, more banking, an Archbishop and Blackpool football club. Happy weekend all!

The Big Four Banks feel the heat….The big four revealed deep divisions on restructuring at Wednesday’s treasury select committee appearance as their CEOs jockeyed for position with the powers that be. Stark divisions were revealed on the Independent Banking Commission proposed scope for ring fencing core retail banking functions. RBS’ Stephen Hester alluded to the “moral hazard” problem if government effectively insulated the market, which could perversely encourage excessive risk taking, a view supported by Barclays.

In contrast, HSBC and Lloyds support a broader separation and more diverse mix to encourage the much needed supply of credit to the market – note the Q1 figures which reveal banks failed to stay on track with “Project Merlin” pledges.

Vince Cable - back on the banker bashing trail this week (image from Telegraph.co.uk)

Finally, Vince Cable rattled the sabre again, unveiling a not so “veiled threat” to link bank bonuses to SME lending! Will this create the required traction on this fragile detente between the City and the Government? Watch this space, but maybe don’t hold your breath.

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Labouring forward

posted by Edward Jones

In recent days, I have read an increasing amount of commentary on the relative inability of Labour and its leader Ed Miliband to cut through to the media and by default, reach the public. Those I’ve spoken to have suggested that in opposition, Labour just weren’t prepared for the lack of column inches they would get. A problem exacerbated by the presence of Liberal Democrats as the main agitators to Government by virtue of their, albeit limited, status as coalition partners.

Two articles particularly caught my eye: Dan Hodges posted on Labour Uncut Time for Labour’s flat earthers to get real, an insightful commentary of Labour’s self perception as being too right wing, when in fact, the contrary is true; I’d thoroughly recommend reading it. Most I’ve spoken to have said this is spot on. So I was interested to read this morning on FT’s Westminster blog about Labour’s attempts to re-engage with business, an area most would associate with those on the centre-right of the political spectrum. Not a prawn cocktail offensive on the scale of the mid-nineties, John Denham (Shadow Business Secretary) is keen to establish, but it is telling to see Labour’s recognition of the need to rebuild credibility with this audience.

I suppose acknowledging the problem is the first hurdle to remedying it. Others would argue Labour needs to go much further in acknowledging the extent of the problem(s). However, engaging business is wholly necessary if Labour are to hold the Government to account more effectively and longer term, be a credible alternative to the Coalition.

Business too should not ignore the importance of engaging Labour given they’re currently undertaking a policy review, their role in holding the Government to account and the fact that they will in time, be an alternative to Government.

As highlighted by PoliticsHome’s Dot Commons’ Diary, Ed Miliband himself was at pains to thank journalists for their kind words following his wedding day. In Social Care, he seems to have found an issue to generate media traction. It will be interesting to see whether he can take this form into business and economic issues.

FPS’ Friday Fiver

This week’s Fiver questions bubbles and bookings as well as a look at Generation “R”, the latest political poll and a glance at governance. The Fiver borders on weighty tome status this week but stick with it as it has been lovingly prepared. Thanks to Jo, Ross, Clare and Dave for their contributions.

Digital business, bubbles and customs

Digital business is big business. It has become a feature of the economy as the front page of today’s Financial Times’ Companies & Markets section illustrates. The three leading stories relate to Groupon, the discount voucher website’s IPO, Asos, the online fashion retailer’s share price and Betfred, the online gambling company’s bid for the Tote.

The dotcom bubble of the late 1990s may feel like a distant memory for many investors but large sums of money has made its way into online ventures in recent months. LinkedIn was valued at $3.3bn but since listing on the NYSE the company’s market value has jumped to $9bn, Groupon is looking to raise $750m and Microsoft purchased Skype at a value ten times its sales.

[Nasdaq exchange pre and post the dotcom bubble]

There are many challenges for those considering investment. The most commonly discussed is the process of finding a fair value for these companies and whether the relatively meagre earnings justify the price tags.

A second, and perhaps less discussed aspect of valuation is the scalability of these businesses.  Internet businesses are intuitively transferrable between countries and consumers, but an insightful piece from Philip Delves Broughton this week pointed out that “just bec­ause the world is connected does not mean it is all the same.” The article highlighted many examples, such as Google in Russia and Facebook in Japan where the business has not caught on. MoneyWeek does not believe we are on the cusp of another tech crash but it will be interesting to see whether current activity is sustainable.

Cardly friendly

Low cost operator Monarch made quite a statement in the world of controversial surcharges by being the first airline to abandon these on bookings made by debit cards. The airline’s message to the consumer is to provide upfront, transparent and easy to understand charging for customers. This has been offset however, by raising the charges for payments made by credit card to a minimum of £10 – better news for family travellers perhaps, but certainly not if you’re going solo.

 

There has been growing pressure from consumer rights group such as Which? surrounding charges it views as unreasonable and they have called on the Office of Fair Trading to investigate.

Low cost airlines are some of the worst offenders when it comes to excessive card surcharges and Monarch’s recent announcement will certainly put the pressure on others to follow suit, but in a bid to squeeze more of our hard earned cash I’m sure the love to hate airline Ryanair will find yet another way of doing so.  Most recently the airline (Ryanair) told The Independent they have been looking at introducing a 10 euro ‘reserve a seat’ service on certain flights, to add to the £6 on debit card booking fee. This should come as no surprise considering the £1 suggestion to use the bathroom on board!

Under the radar

Wednesday’s ComRes poll, showing that under Ed Miliband Labour has lost its lead over the Tories, has been scantily covered. Perhaps parliamentary recess and political focus on the proposed NHS reforms has meant ComRes’ poll has largely gone unnoticed. But should it have?

 

Labour party members must be growing concerned that Ed Miliband is failing to build traction with the electorate and that he isn’t ushering in a new dawn for Labour as promised. With the Lib Dem’s wanting to heighten their own identity following a disastrous No to AV campaign, they have been trying to highlight their own differences to the Tories and have thus stolen much of Labour’s natural thunder as the Opposition.

 Undoubtedly, Ed Miliband and the wider Labour party have failed thus far to convincingly communicate alternative policies to the Coalition Government. Until Miliband and his team beef up their policy and communicate this effectively, Labour’s support is at risk of further decline.

Generation R
I do pity ‘R’ generation (get it?). We were not able to access student grants and so shouldered university tuition fees and student loans, before entering the world of work (if we could get a job in an increasingly challenging marketplace) with substantial debts. Now the self-pitying deepens as according to a survey by the NCSR, two-thirds of 20-45 year olds who do not own their own home believe they have “no prospect whatsoever of buying a home”.

The survey, commissioned by Nationwide, found that 95% of those surveyed said they have no spare cash, no interest in saving for a deposit or were trying to save but failing to do so. I hate to be a naysayer, but Generation Renter, if you do not do/will not save, then of course you will not be able to afford to buy your own house! Yes, it will probably take you longer to own your own home (a survey by Moneysupermarket found that the average age of a first time buyer will soon be 38 years old) but if that means you are in a position where you can comfortably afford your mortgage repayments and can realistically dream of paying it off, then surely the wait will be worth it? Apparently, good things come to those who wait…

Shareholder governance

At a conference held by the Investor Relations Society, one third of attendees voted that companies should put shareholder interests at the centre of their decisions but tellingly, two thirds believed that it was important to balance the needs of shareholders with those of company employees and other stakeholders such as the communities in which the business operates.

Governance is a broad subject but its importance was emphasised by Anthony Hilton in PR Week where he said that following;

“People’s initial instincts are still more inclined to trust rather than distrust. But as long as the culture of business is rooted in progressing the interests of one set of stakeholders, it is unlikely to be trusted by anyone else.”

 These developments may not have gone unnoticed by Friday Fiver regular Glencore. It has been a bumpy ride for initial investors in the commodities giant and in part this has been due to questions of corporate governance.