Key events
Spotify shares hit 3-year high, up 15%
Spotify’s NYSE-listed shares have jumped 15% at the start of trading to hit a three year* high.
*Corrected: previously said three month high
US markets are open for trading and it’s a much weaker picture than the start of yesterday’s session:
S&P 500 is 0.02%
Dow is up 0.02%
Nasdaq is down 0.13%
Operating costs at Spotify dropped in the second quarter, primarily due to a wave of job cuts in recent months.
In the run-up to Christmas the company announced a 17% cut to its global workforce, about 1,500 jobs, having cut 800 staff in the previous year.
Spotify said on Tuesday that its operating expenses dropped 16% in second quarter, compared to a year earlier, the bulk of which “reflected a decrease in personnel and related costs” as well as the amount it spent on marketting.
Spotify shares surge in pre-market trading after profit margins hit record-high
Swedish streaming service Spotify has seen its shares jump 14% in pre-market trading.
It comes after the New York-listed audio platform reported record-high profit margins of 29.2% in the second quarter, as bruising cost cuts started to translate into stronger finances.
The company also benefited from a rise in the number of premium subscriptions, helping push revenues up 20% to €3.81bn. However, that was slightly below analyst forecasts for €3.82bn.
It also fell short of a self-imposed target of 631 million monthly active users, hitting just 626 million in the quarter.
Overall, profits rose to€274m profit, up from a €302m loss a year earlier.
Spotify CEO Daniel Elk told Reuters that he took the missed target “seriously”:
It’s definitely something we take very seriously, if we miss our own forecasts.
For me, it’s a question of when, not if: we will return to strong MAU growth, I feel good about it.
Rob Davies
Businesses are expected to cancel their attendance at this year’s Conservative conference in unprecedented numbers, in a chastening snub that could also undermine the party’s ability to raise funds, my colleague Rob Davies writes.
The annual gathering, due to be held in Birmingham from 29 September to 2 October, would usually attract corporate attendees willing to pay tens of thousands of pounds to get close to MPs with influence over policy.
But Labour’s landslide general election victory means this year’s event is on track to be the least popular in living memory, according to several public affairs firms and business leaders.
They said the conference was likely to be less well attended by business leaders than the one held after Tony Blair’s 1997 victory and even Labour conferences under Jeremy Corbyn’s leadership.
Katherine Morgan, head of public affairs for Europe at the global advisory group DGA said:
The lack of appetite among business for the Conservative party conference is no doubt fuelled not just by the attractiveness of Labour, but also a realisation that the Conservative party is at a real inflection point.
The challenge for the Conservatives will be ensuring that September marks the beginning of the journey towards re-establishing their credentials as ‘the party of business’.
Several large agencies are understood to have cancelled dinners they were due to host at the event or scaled back the number of people they are sending.
Read the full story here:
Jim Waterson
The BBC also revealed the large salaries paid to some of its biggest stars, with Gary Lineker once again topping the most-paid list on £1.35m a year.
The Match of the Day host’s contract is due to run out next year, amid speculation over whether he will remain after a long-running series of public clashes with the corporation that culminated in a staff mutiny last year.
Huw Edwards, who left the broadcaster earlier this year after a media scandal, was the BBC’s third highest paid star on £475,000 after spending most of the year signed off on medical leave.
The pay disclosures only cover payments directly from the BBC, meaning they do not cover income paid via third parties – meaning income earned by Amol Rajan and Fiona Bruce on University Challenge or Antiques Roadshow is not included.
Half a million households cancelled BBC licence fee last year
Jim Waterson
Half a million households cancelled their licence fee last year as the BBC struggled to connect with younger audiences drifting away to Netflix and YouTube.
The stark extent of the BBC’s challenges are set out in the corporation’s annual report, which shows the total number of British households paying the £169.50 licence fee fell to 23.9 million, suggesting a growing number of people feel able to go without BBC services.
The fall has hit the BBC’s income at a time when its finances were already struggling due to a decade of funding cuts and high inflation.
Some of the most worrying numbers for the BBC show how young people increasingly feel the broadcaster is not relevant to their lives. Just 69% of Britons aged under 16 said they consumed any BBC content in an average week, with a particular weakness among people from an ethnic minority background.
The figures are even worse for younger age groups, with under-7s in particular tuned out, with the BBC saying it is struggling to compete against “global media companies” for these crucial future viewers.
Read the full story here:
The number of new homes registered to be built across the UK fell by 23% in Q2, compared with the same period last year, the National House Building Council (NHBC) said.
The figures are an indication of the stock of houses in the pipeline for construction, since they have to be registered before being built.
About 29,281 new homes were registered to be built between April to June, down from 37,861 a year earlier, the data showed.
Meanwhile, 33,847 new homes were completed in the period, down 6% year-on-year.
Quarter on quarter figures were much better, though, suggesting an uptick as the year has gone on. New home registrations and completions increased by 34% and 29% respectively, compared to Q1.
The data will be closely watched, with the new Labour government having pledged to reform the planning system to unleash a building spree, and built 1.5 million more homes over the course of the parliament.
Last week, Housing Secretary Angela Rayner said:
We know we have a mountain to climb. That is why we’re already taking the first steps, starting with an overhaul of our planning system – a reform that will both help build the homes we need and speed up the infrastructure to support them.
We are committed not just to an ambitious target for overall housebuilding but the biggest wave of social and affordable housing for a generation. It’s a promise that we’ll bring back with meaningful housing targets.
Horizon inquiry: Ex-postal minister says she was ‘never told’ why prosecutions of sub-postmasters halted
Mark Sweney
Baroness Neville-Rolfe, the postal minister at the time the Post Office decided to stop prosecuting sub-postmasters, was never told that a key factor was because the Post Office could no longer find an expert witness willing to testify about the integrity of the flawed Horizon IT system and its data.
Neville-Rolfe, the former long serving Tesco executive who held the role of postal minister for 14 months until July 2016, has said that she only found out the reasons why the Post Office stopped the relentless prosecution of hundreds of sub-postmasters when it was revealed as part of the public inquiry.
During the time Neville-Rolfe held the ministerial position, the Post Office stopped prosecutions after internal advice concluded that Gareth Jenkins, a Fujitsu engineer who formed the backbone of the Horizon integrity defence against sub-postmasters, that his testimony was materially misleading and in breach of court rules.
“I didn’t know any of that at the time,” said Neville-Rolfe, who within three months of taking office asked new Post Office chair Tim Parker to look at the Horizon scandal with “fresh eyes” and examine the concerns about the IT system with an independent review,
Speaking at the inquiry on Tuesday, she said:
Looking back at hindsight I was getting unending, always the same, advice from the Shareholder Executive [Shareholder Executive, which manages government-owned assets and had a member on the board who is supposed to represent its interests].
It was very black and white.
I wasn’t aware [of the reasons prosecutions ended] until the inquiry. These were civil servants, I’d been a civil servant. You have a duty to be objective and truthful.
Neville-Rolfe also held meetings with Paul Vennells, the chief executive of the Post Office, which also served to reinforce the line that the Horizon IT system was not faulty.
I was told in all directions there wasn’t an issue. I was trying to find a way through to get further work done.
I was aware there were murmurings, especially among a few MPs, of some particularly troubling cases. I was worried I wasn’t getting broad enough advice from officials, the department or more broadly.
Porsches shares down after car maker issues profit warning
Porsche shares are down 4.5% and at the bottom of Frankfurt’s blue chip Dax index, after warning that a shortage of aluminium would drag down its profits.
The German luxury sports car maker said flooding at an unnamed European contractor would hit aluminium supplies would affect – and potentially lead to shutdowns of –vehicle production.
Analysts at Bernstein, who said the flooding had been at a Swiss supplier, explained that it would result in at least 10,000-17,400 fewer vehicles being produced in the second half of 2024:
Whether self-inflicted or genuinely outside its control, these have significantly tarnished what had been an extremely successful IPO in September 2022.
Porsche will certainly be closely questioned over its cluster risk management that has left it so vulnerable to one critical supplier.
The company said its operating profits margins would likely be between 14-15% this year, compared to earlier forecasts for 15%-17%.
Meanwhile, annual sales forecasts have been downgraded to between €39bn-€40bn, down from previous expectations for sales of between €40bn-€42bn.
Elon Musk’s comments, which revived humanoid robot plans, came just hours before Tesla is due to report Q2 earnings.
However, it’s unlikely to be a cheery affair, with the electric carmaker expected to see its profits fall for the sixth quarter in a row.
Ipek Ozkardeskaya, a Senior Analyst at Swissquote Bank explains:
Despite almost doubling its stock price between April and July, Tesla sees appetite for its cars and its market share under pressure, and the company’s operating profit is expected to shrink in the Q2 for the sixth straight quarter.
What keeps optimism alive for Tesla is the robotaxi plan.
But robotaxis will cost to the company before it can generate profit. Therefore, the recent gains may not find a solid ground to let the share price extend gains
The key support to the robotaxi-led rally stands at $220 per share, the major 38.2% Fibonacci retracement on April to July rebound.
Earlier this month, Tesla said its global sales fell for the second straight quarter despite price cuts and low-interest financing offers, in further signs of weakening demand for its products.
Tesla had knocked around $2,000 off the prices of three of its five models in the US in April.
That included the Model Y, Tesla’s most popular model and the top-selling electric vehicle in the US, and also of the Models X and S. It also knocked roughly a third off the price of its “Full Self Driving” system – which can’t drive itself and so drivers must remain alert and be ready to intervene.
All eyes will be on Tesla’s outlook, which will be released alongside earnings after US markets close on Tuesday.
Mark Sweney
Full story: The Tesla chief executive, Elon Musk, has claimed the company will produce “genuinely useful” humanoid robots to start working in its factories next year.
The world’s richest person, who has a penchant for making overambitious claims on social media, posted on his platform X, formerly Twitter, that he also hoped to expand into “high production” mode to make robots with a humanlike form available sell to other companies in 2026.
Musk, who owns X and is also the boss of SpaceX, has previously made bold claims about when the robot, called Optimus, would be ready for commercial use.
In 2021, the billionaire, estimated by Forbes to be worth $250bn (£194bn), said he expected the mechanoid to be ready for use in Tesla factories the following year.
Optimus is about 1.7 metres tall and weighs 56kg; it is designed to do “boring, repetitious and dangerous” work.
The name is an allusion to Optimus Prime, the powerful and benevolent leader of the Autobots in the Transformers media franchise.
Optimus is not the only Musk project to be running behind his initial projections. In 2019, he said he felt “very confident” Tesla would have self-driving taxis on the road the following year.
Read more here:
Mining stocks fall as copper hits 3-month low
Cooper prices have fallen to their lowest level in three months, amid concerns over the slowdown in consumer demand and economic growth in China.
Official figures released last week showed the Chinese economy expanding at an annual rate of 4.7% in the second quarter – much weaker than the 5.1% expected by the financial markets.
The central’s bank’s decision to cut interest rates yesterday also failed to ease concerns.
Jitters over what this could mean for demand for commodities and metals has now hit copper prices, with the three month copper on the London Metal Exchange falling 1% to $9,123 per metric ton this morning
It has in turn hit mining giants, which tumbled to the bottom of the FTSE 100.
Glencore is down 2.2%, Anglo American is down 2.1%, Rio Tinto is down 1.4%, Antofagasta is down 1.3%
Alphabet’s mega-offer for Wiz may be dead in the water, but analysts say that the rise in cyber attacks and demand for cloud computing means that M&A in cybersecurity is about to take off.
Matt Britzman, senior equity analyst at Hargreaves Lansdown says:
Alphabet’s bold move to accelerate its stack in the cybersecurity space has come to a quick end.
Wiz’s choice to instead grow revenue and look for an IPO will come as a blow, especially as the valuation offered by Alphabet was double the level at which Wiz secured its latest funding back in May.
Alphabet is behind its key cloud rivals Microsoft and Amazon when it comes to offering a complete stack of cyber security products.
With demand for cloud comput[ing] only going one way, and the risk posed by cyber attacks on the rise, having a strong set of cyber products will be a key attraction for enterprises.
More M&A action in the cyber space feels inevitable.
TSB profit falls 25% due to mortgage market weakness
High street lender TSB suffered a 24.5% drop in profits in the first half of the year, after being hit by heightened competition and a slowdown in the mortgage market.
Profits fell to £111.6m in the six months to June, down from £147.9m a year earlier.
The bank said it reflected “lower mortgage margins in challenging market conditions” as well as a jump in the money paid out to savers as it tried to avoid an outflow of deposits to rival banks offering higher rates. Year-on-year, customer deposits were down by £4m to £35bn.
Mortgage lending was impacted by high interest rates, which caused fewer consumers to borrow. But it meant banks were left to compete fewer customers, which put further pressure on lenders to reduce the cost of borrowing where possible.
It squeezed TSB’s net interest margin to 2.62%. That was 22 basis points lower than H1 2023, when it sat at 2.84%. Total income fell 6.1% to £548.7m.
The bank also took a £19m impairment loss on bad loans.
TSB CEO Robin Bulloch said.
Our focus in 2024 is making TSB simpler and easier to bank with and I’m delighted to see more customers choosing TSB.
We continue to make good progress against our strategy, and I’d like to thank everyone at TSB for their continued efforts to support our customers and communities, helping them feel more money confident.
The results comes as TSB prepares to defend itself in court today in a case related to historic mortgage debts.
A group of about 2,500 Northern Rock customers are seeking compensation from TSB’s subsidiary Whistletree, which bought their loans after Northern Rock collapsed. They say the became “mortgage prisoners” after being forced to pay inflated interest rates on their debts.
My colleague Hilary Osborne has the full story here:
European markets are open for trading, and unlike yesterday – when we saw broad gains – it’s a mixed picture this Tuesday morning:
FTSE 100 is down 0.3%
FTSE 250 is up 0.06%
Spain’s IBEX is down 0.09%
France’s CAC 40 is up 0.1%
Germany’s Dax is up 0.5%
Europe’s Stoxx 600 is flat
Introduction: Elon Musk says humanoid robots to be used and sold by Tesla
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
We start the day with comments from none other than Tesla boss Elon Musk, who has revived the prospects of his company rolling out humanoid robots.
In comments made on his social media platform X, Musk claimed the electric carmaker will start using and eventually selling “useful humanoid robots” from next year.
Tesla will have genuinely useful humanoid robots in low production for Tesla internal use next year and, hopefully, high production for other companies in 2026
— Elon Musk (@elonmusk) July 22, 2024
It could be a lucrative business plan, though Musk has previously said that Tesla could mass produce the robots and sell them for less than $20,000 each.
But whether he can meet the self-imposed deadline remains to be seen. Remember that Musk previously said he expected Tesla would have self-driving taxis on the road within a year…that was back in 2019.
Meanwhile, Google’s parent company Alphabet has had its $23bn offer for Israeli cybersecurity firm Wiz have been rebuffed.
It would have been the biggest deal in Alphabet’s history, and the largest takeover of a venture capital-backed company.
While there has bene no public statement explaining why Wiz walked away from talks, the company reportedly sent an employee-wide email on Monday, saying:
While we are flattered by offers we have received, we have chosen to continue our path to building Wiz.
However, reports suggest there were also internal disagreements. Some board members at both companies were said to be concerned over whether the deal would gain approval from regulators, while other directors actively opposed the takeover.
Wiz, which was founded by alumni of Israel’s cyber intelligence unit, and was last valued at $12bn, will now pursue an initial public offering, according to reports.
The agenda
Post a Comment