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August 2, 2019

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Across Instinctif Partners’ Financial Services team, we are always keeping an eye on the key developments taking place across the sector to evaluate their impact on the many businesses we work with. Here we share our picks of the week’s most interesting news, and our expert views.

Lagging land sales

The Public Accounts Committee is predicting that the UK will miss its 2020 target of public land sales, as its calculations show that the government’s land sale failure will result in 91,000 fewer homes in 2020 than previously thought. The Government has also been accused of not paying enough attention to delivering affordable homes, as an investigation by Huffpost and the Bureau of Investigative Journalism earlier this year found that only 6% of the new homes built on land sold by local authorities were likely to be used for social housing. (From BBC, 24 July 2019)

AIM listings hold strong

Research by accountancy group UHY Hacker Young shows that only 66 companies delisted from AIM during the year ending 30th June 2019, a significant decrease compared to ten years ago. A spokesperson for UHY Hacker Young claims the fall in delisted companies reflects the improved quality of AIM’s offering, with companies increasingly seeing the cost of listing as worthwhile. (From City AM, 29 July 2019)

Playground money launderers

Banks are warning about the dangers of children as young as eight being coerced into handing control of their bank accounts to money-laundering gangs who target them at schools. Older children are being coaxed into taking on the role of “middlemen” for criminal gangs and are rewarded with cash or gifts for obtaining the bank details of younger children. This “money muling” process is promoted on social media, with platforms such as Snapchat hosting videos that encourage the activity. (From The Times, 28 July 2019)

The indebted Generation Z

There has been a 10-fold increase in the number of young people going bankrupt, as Generation Z is further pushed into debt by the rise of self-employment and easily accessible credit cards. Under-25s now make up 6.5% of all personal insolvencies, up from 1% three years ago. The news comes as debt charities raise concerns about sub-prime credit cards increasingly being targeted at people with low credit scores. (From The Telegraph, 30 July 2019)

Banks told to publish ‘living wills’
Banks including Lloyds Banking Group and Royal Bank of Scotland will have to publish “living wills” from June 2021, with the Bank of England confirming it will also give assessments of how well lenders can be wound down without recourse to a taxpayer bailout. The central bank will focus on assessing whether lenders have made sufficient progress towards becoming “resolvable”, leading to lenders having to detail plans on how banking services would continue should authorities wind them down. (From Financial Times, 30 July 2019)

Results announcements: lessons learned from Sports Direct

Results announcements are a mainstay of any listed firm’s financial communications. With investors and analysts using financial results to evaluate a firm’s past performance and future profitability, it’s vital the story is told right – particularly when there is bad news to convey. But as Sports Direct chief executive Mike Ashley found out last week following a rather belated announcement, when it comes to results, delivery can be just as important as content.

The trouble began when Sports Direct’s results were pushed back from their initial publication date of 18th July to the following week, with the retail giant citing complexities stemming from its recent takeover of beleaguered department store House of Fraser.

Having already got off to a less than positive start, journalists were then dismayed to learn the day before the revised publication date of 26th July that reporters would not be allowed to ask any questions of management at the meeting. The unusual move was dubbed by the media as outrageous and certainly didn’t promote much sympathy for what would prove to be an even more tumultuous turn of events the following day, when the announcement of results was repeatedly delayed.

When the statement was eventually issued (10 hours late) it unveiled the business was facing a number of serious financial difficulties, including a £605m unpaid tax bill owed to Belgian authorities following its House of Fraser purchase.

Sports Direct auditor Grant Thornton promptly announced its intention to quit and the city made its reaction clear; shares in the group plummeted and analysts issued damning verdicts, with one noting the persistent delay to the results was an “exasperating and rude means of avoiding wide analytical questioning”.

The story rumbles on and while it isn’t clear what the future holds for the business, some hard lessons will have been learned about how not to issue results announcements.

When it comes to results, timing is key: the merest hint of a delay can result in the rumour mill speculating what might be going wrong behind the scenes, so self-set deadlines must be met. And while attempting to brush bad news under the carpet is always ill-advised, any hiccups in the logistics of the announcement will only serve to emphasise these aspects. Journalists also appreciate clear timings that are duly delivered, as well as appropriate opportunities to engage.

In short, while the perfect results announcement may be challenging to pull off, financial communicators can certainly look back on the Sports Direct fiasco as a masterclass in how not to do results.

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