FT : Aerospace chief warns on UK sector over delayed Brexit deal

Aerospace chief warns on UK sector over delayed Brexit deal
Industry trade body hits out at failure to prioritise aircraft certification standards

Ministers’ failure to prioritise agreement on aircraft certification standards in Brexit negotiations is threatening the future of the UK’s £34bn-a-year aerospace sector, according to the head of an industry trade body.

“We are now at that critical point where political decisions on the negotiating priorities with Europe need to be made,” said Tony Wood, president of British trade association ADS and chief executive of aerospace supplier Meggitt.

He added that the aerospace industry “absolutely requires a comprehensive bilateral agreement with Europe if we are to preserve our position at the top table and number two position in the world”.

Aerospace executives are frustrated that the government has focused on fishing rights in Brexit negotiations, hindering a wider trade agreement that would help protect the industry’s more than £30bn in exports.

Mr Wood said that there appeared to be “higher political priorities in other industries”.

“But it is time to choose,” he added. “The aerospace and defence industries underpin 375,000 jobs in the UK and they are some of the best-paid jobs in engineering and advanced manufacturing.”

Many in the sector fear that failure to strike a bilateral agreement will add cost and complexity to the certification process, just as the industry reels from the effects of the coronavirus pandemic and embarks on the biggest technological change since the invention of the jet engine. 

Aircraft and aero-engine makers are investing heavily in hybrid-electric and hydrogen-powered flight, in an attempt to achieve the industry’s pledge to be net carbon neutral by 2050. Airbus has said it aims to launch a green aircraft by 2030.

Currently, responsibility for certification lies with the European Union Aviation Safety Agency, which has mutual recognition agreements with regulators around the world. If there is no deal, however, all UK-designed parts, components and systems for aircraft will become invalid in the EU on January 1.

Big companies such as Rolls-Royce have already shifted design functions out of the UK to the EU to avoid the extra cost. But smaller companies in the supply chain do not have the resources to set up EU-based design offices.

The industry is anxious that once the transition period for Brexit ends on December 31, the UK’s Civil Aviation Authority will not yet have sufficient competence to certify both the existing and new technologies. “In my view, it is going to take five years for the CAA to become as fully capable as EASA is today, in order to be mutually recognised,” Mr Wood said. 

Another senior aerospace executive said: “There is a question as to whether the CAA will be a good enough regulator in what will be a potentially transformational period for global aviation.”

The CAA insisted that it was prepared for the demands of certification regardless of whether there was a bilateral agreement or not. Deals to ensure mutual recognition of safety inspections have already been signed with the US, Canada, and Brazil, although these include a period of “confidence building”.

Tim Johnson, director at the Civil Aviation Authority said: “Since the 2016 referendum, we have been preparing to take over design certification responsibilities for UK companies as we leave the European system for aviation safety. We look forward to playing our part in enabling new and existing aerospace technologies in the future.”

FT : UK considers shorter Covid self-isolation period

UK considers shorter Covid self-isolation period
Government reviewing quarantine for those who have been in contact with positive cases

The self-isolation period for people who have been in contact with someone who has tested positive for coronavirus could be reduced from the requirement of 14 days, ministers confirmed on Sunday.

Northern Ireland secretary Brandon Lewis said a cut was being considered following reports that suggested people were failing to follow the two-week quarantine rules.

However, Mr Lewis told the BBC’s The Andrew Marr Show that officials were now looking at whether there was scope for a cut to the period in light of new information.

“It would be looking at whether we can assess that incubation period of the virus, how people are reacting once we know if they have the virus and making sure that people understand what the guidance is so they’re isolating for the right period of time to protect people in the community around them,” Mr Lewis said.

Reports on Sunday said ministers believed a cut from the current 14-day period to as few as seven days could produce an overall public health benefit because those told to isolate would be more likely to follow the imposed restrictions. There has been anecdotal evidence that people asked to spend two weeks away from others after contact with an infected person have quickly started disregarding the advice.

Mr Lewis referred, however, only to slight reductions in the period and insisted that no firm decisions had yet been taken and that the priority was to “follow the science”. The science had always assessed the necessary isolation period to be about 14 days, he said.

“It’s whether the science will allow us to narrow that a bit,” Mr Lewis added.

The review will take place amid continued controversy over the effectiveness of the UK’s efforts to trace the contacts of people who have tested positive for coronavirus and ask them to isolate.

Figures last week showed that just 15 per cent of people tested received their results within 24 hours. While the faltering NHS track and trace system managed to reach 80 per cent of people who recorded a positive test, according to the figures, the system managed to make contact with just 60 per cent of their contacts.

Bernard Jenkin, the Conservative MP who chairs parliament’s public administration select committee, on Sunday called for Dido Harding, executive chair of the NHS Test and Trace programme, to stand down.

“It is the sense that there is a lack of an overall strategy which I think is at the heart of the problem,” Sir Bernard told Sky News.

He called for Lady Harding to be replaced by a senior military figure.

Rosena Allin-Khan, a Labour health spokesperson, agreed with the call for Lady Harding to stand down, saying on Sunday the executive chair’s position was “untenable”.

Business of Fashion : Luxury's Coronavirus Recovery: Who's Ahead and Who’s Behin

A fashion week attendee wears an Hermès Birkin bag and some Bottega Veneta pumps |
  • Last week, LVMH said 3Q fashion sales returned to double-digit growth
  • Hermès also returned to growth, rising 7 percent
  • Kering's Gucci sank 9 percent, smaller Bottega Veneta jumped 21 percent
  • PARIS, France — Last week, when luxury's biggest player LVMH reported a 12 percent jump in fashion and leather goods sales over the summer, the news that two of fashion's biggest and most profitable brands, Louis Vuitton and Christian Dior, had come roaring back to growth sparked hope for investors across the sector. Even as LVMH sales fell 7 percent overall, shares rose not just for the Paris-based conglomerate but also for rival companies including Gucci-owner Kering, Hermès and Moncler.
    On Thursday, a week after Louis Vuitton and Dior set a high bar, the sector got to see how the competition actually stacked up. Kering, Hermès and Moncler all reported fresh momentum in the third quarter after the coronavirus shuttered stores and crushed consumer demand this spring. But while some brands continued to sink year-on-year, others surged back to growth. And the gap between winners and losers appears to have widened.
    Gucci lags at Kering
    Kering reported a dramatic improvement over the summer with sales falling just 1 percent excluding currency shifts, after a 44 percent year-on-year decline in the second quarter. But flagship brand Gucci, which made up more than half of the group's sales and three-quarters of profit last year, lagged behind. Sales fell 9 percent year over year at the Italian fashion house, trailing peers.
    Market experts have predicted that luxury’s biggest and most recognisable brands, which already outperformed competitors in recent years, will race further ahead of smaller rivals during and after the pandemic. As the industry's third-biggest label (after Chanel and Louis Vuitton) and one of its most well-known names, Gucci should be on that winning team.
    Gucci's strength in digital marketing and a creative reboot that swung fashion’s pendulum and appealed to Millenials and Gen Z had been a defining edge on rivals during a phase of breakneck growth leading up to the pandemic, when the brand doubled its revenues in four years under designer Alessandro Michele and chief executive Marco Bizzarri. Its online prowess surely helped Gucci during months of lockdowns and store closures, but it wasn't enough to fuel a rebound as tax-exempt travellers remained grounded in their home markets, and local consumers — apparently a weak spot for Kering — became a key focus.
    The brand also seems to have been backfooted by its greater exposure to the ebb and flow of fashion trends compared to more timeless offerings: Michele had already been racing to supplement his decadent vision with sleek, classic styles, but the brand's renewal may not have been fast enough as consumers steered themselves toward products viewed as more durable investment pieces.
    "It's clear we have some work to do in comparison to peers to engage the local customer," Kering's CFO Jean-Marc Duplaix said.
    "Gucci's underperformance relative to Louis Vuitton and Hermès may be a cause for concern," said Harry Barnick, analyst at Third Bridge. "Mega-brands are recovering fastest in the luxury sector, [but] Gucci may now be falling behind the pack."
    That there would be some correction after the explosion of consumer appetite for Gucci in recent years seemed inevitable. But the brand has continued to clean up its distribution during the downturn, focusing on direct channels, and could come back stronger after pulling out of some less luxurious wholesale accounts.
    Bottega Veneta's surge
    Luckily for Kering, stronger performance at most of its smaller brands including Saint Laurent, Balenciaga and Alexander McQueen helped to pick up the slack.
    Bottega Veneta was a standout, with sales surging 21 percent year-on-year amid continued demand for designer Daniel Lee's revamped designs for the Italian heritage brand. That's the fastest growth reported by any luxury brand so far this quarter — and this at a brand that's neither logo-driven nor has the scale of Chanel or Vuitton.
    Bottega Veneta had stagnated in recent years as the more discreet image cultivated by previous designer Tomas Maier struggled to recruit younger clients. Lee’s more photogenic, social-media friendly designs pushed it back in the spotlight, and sales have continued to accelerate as consumers in key markets like China have seized on the new image since the start of the year.
    Hermès back to growth
    When it comes to its most in-demand leather goods, the Birkin and Kelly handbags, Hermès has never had a problem selling what it makes. After its leatherworking plants across France got back to work following the country's coronavirus lockdowns, sales quickly followed: leather goods and saddlery revenues rose 8 percent during the third quarter, followed closely by its second-biggest division, fashion.
    While Hermès' division selling jewellery and home goods surged 42 percent, silk scarves and neckties plunged 21 percent: the latter category is notably dependent on travel retail splurges and gifting for special occasions. And while advertisements for Hermès' new lipstick became inescapable from billboards to cinemas to social media, the division selling perfumes and beauty fell 10 percent.
    Moncler still retreating
    But then again, summer is hardly peak season for selling ski jackets. The months of July through September hardly make up Moncler's biggest quarter. And that could be for the best, since sales fell as much as 14 percent for the puffy-coat maker.
    It could also be for the worst: as coronavirus restrictions intensify in many regions, it may turn out that the summer months were brands' best chance to regain some ground after a very difficult year.
    Moncler's "short-term trajectory will depend on the severity of further Covid-19 related disruption to the peak trading season: 40 percent of sales are in 4Q," Bernstein analyst Luca Solca said in a note to clients. The third-quarter result, while falling double-digits, was still a marked improvement on the previous quarter when sales fell by around 50 percent. But the holiday quarter that drives sales for Moncler even more than others remains fraught with uncertainty.

Business of Fashion : Man Repeller to Shut Down

Man Repeller to Shut Down
Founder Leandra Medine Cohen confirmed the publication is ending operations and offering employees severance pay.
Leandra Medine Cohen, founder of Repeller, helped create a fashion publication known for its quirky writing and high-low styling. | Source: Getty Images
NEW YORK, United States — The fashion website Repeller, until recently known as Man Repeller, is winding down operations and plans to shut down, according to two people with direct knowledge of the situation.
In a team Zoom call on Monday, the publication's founder, Leandra Medine Cohen, told employees the publication would close. Employees have been told that an announcement regarding severance pay would be made on Friday, people close to the matter told BoF. At least two people have changed their social media accounts to reflect they are now "former" employees of the company.
In June, Cohen announced she would “step back” from daily operations after being publicly criticised by employees for what they saw as racist and classist behaviour, labels some also applied to the website. The company rebranded as Repeller and has made other changes, including new hires and efforts to publish more-inclusive content.
Man Repeller launched in 2010, at a time where bloggers were leading the digital disruption of publishing (Instagram was still two years away, and influencers, as we know them today, would not become a force in fashion until years later).
Cohen helped create the rubric that was quickly replicated by others in the fashion and media spaces, leveraging her digital following into a publication with a staff of writers, editors and other creatives that was meant to go toe-to-toe with the mainstream fashion press. Man Repeller made a name for itself with quirky takes ranging from whether the ripeness of avocados is similar to when single men under age 30 are ready for relationships to whether denim cutoffs are appropriate for adults. Along with Rookie and Jezebel, it was among a handful of digital-native publications that quickly found an audience among Millennial and Gen Z women.
The site frequently featured columns from Cohen herself, as well as first-person essays from its writers, several of whom became influencers in their own right.
But Man Repeller wasn’t immune from the challenges facing fashion media, including falling advertising revenue and competition for attention from Instagram. Then, the publisher was caught up in this summer’s racial reckoning, where current and former employees across publications ranging from Bon Appetit to Refinery29 publicly decried workplace discrimination against Black employees and other people of colour.
In Cohen’s case, she had penned a statement in response to Black Lives Matter protests dominating the zeitgeist, one that many said did not sufficiently address the issues with Man Repeller’s own publication. Cohen apologised, but one recently fired employee, Sabrina Santiago, said: “As a former POC employee that was let go during COVID-19, this ‘apology’ is a slap in the face. I have not been reached out to in any capacity. I hope everyone sees that this is another performative attempt to cover racist actions.” From there, Cohen stepped back from daily operations at the company.

Although Cohen retained ownership over the Man Repeller brand, the business suffered, according to people familiar with the situation. Advertising sales and other revenue from branded content and products weren’t covering the website’s operating budget.
In a statement to BoF, Cohen said, “I am confirming that Repeller, formerly Man Repeller is ending operations and offering employees severance pay. The company has been self-funded by its operations since its launch ten years ago as a personal blog but due to financial constraints, we are no longer able to sustain the business.”
As of Monday, fewer than a dozen employees were left at the company, down from a peak of around 15 employees in 2019, split between the editorial, partnerships and operations teams. At one point, Cohen had considered an opportunity to license the Man Repeller but ultimately declined, according to a representative. With no clear path to profitability, Cohen opted to close the business while it still had enough cash to offer employees severance. The company has not yet decided whether to preserve the site’s content online.

BArrons : A Stock for Hungry Investors: HelloFresh Is Up 180% This Year but Has

A Stock for Hungry Investors: HelloFresh Is Up 180% This Year but Has More Room to Run

It has been an exceptional year for German meal-kit delivery firm HelloFresh, which has seen demand soar from locked-down consumers desperate to add pep to their pandemic-hit evenings with exciting home-cooked meals.

Shares in the Berlin-based consumer stock have jumped 211% the past 12 months, and the stock (ticker: HFG.Germany) is up 180% year to date compared with a 3% drop in the DAX.

The firm, which sends subscribers preportioned ingredients with a step-by-step guide to create meals, has already raised guidance four times this year, noting that more citizens are dining at home due to restrictions on restaurants and socializing.

The stock could sate hungry investors post-Covid as it increases capacity in its main U.S. market, with new distribution centers in Georgia and Texas that will service its growing army of convenience- and health-obsessed customers.

The meal-kit market is set to grow 15% in coming years, according to analysts at private bank Metzler. This segment of the global food market was worth $2.5 billion when HelloFresh floated on the Frankfurt market in 2017; the entire global food market is now worth 7.5 trillion euros ($8.8 trillion).

Following the latest boost in guidance, the shares reached an all-time high of €55.20—and could have further to go, with investment bank Berenberg predicting a 17.7% increase to €65 along with Metzler, and investment bank Deutsche predicting a target price of €63.

In an October note, analyst Nizla Naizer wrote that given the guidance hikes, “one would assume that HelloFresh has already incorporated the increase in demand this year,” but she thinks revenue could nearly double in 2020 and that there’s more growth ahead. “We think given the superior growth and margin profile, HelloFresh should trade at a premium to its e-commerce peers,” she says.

But HelloFresh shares trade at a discount because the numbers give the illusion that the company has a high churn of users. Customers use the service for a few weeks and end their subscription, but crucially return some weeks later and take out a new subscription. It’s a bit like visiting a favorite restaurant—customers don’t go every night but are still loyal.

“We believe any material focus on the typical “churn” analysis is likely the result of a misinterpretation of HelloFresh’s business model, leading to an underestimation of the company’s future growth opportunities,” wrote Berenberg analyst Robert Berg in a September note. “We therefore believe that HelloFresh’s substantial valuation discount to e-commerce peers is unjustified.”

HelloFresh fetches 38.6 times this year’s expected earnings and is valued at a 50% discount to its peers. It has a market value of €9.4 billion, employs 7,000 people, and operates in 14 countries including the U.S., U.K., Germany, and Australia. It delivered 280 million meals in 2019 and had four million active customers in both the first and second quarters.

In March it posted a €25.8 million loss for 2019, an improvement from the €82.8 million loss in 2018 as it invests in expansion. Revenues for 2019 were €1.8 billion.

Chief executive Dominik Richter told Barron’s in a statement: “Pre-Covid, our consumers were already cooking 50% of their dinners at home, a much higher share than food delivery or restaurant visits.” He says that percentage has only risen since the pandemic took hold, and that HelloFresh is gearing up for what experts say will be a trend that sticks: “We’re improving our product and assortment continuously in order to help all consumers find exactly the meals they like to cook at any given weekday.”

The business was founded in 2011 by Richter, a former Goldman Sachs banker, and co-chief executive Thomas Griesel , and was backed by Oliver Samwer , an entrepreneur with a start-up incubator called Rocket Internet. The business was inspired by a Swedish start-up called Linas Matkasse.

Rivals Blue Apron and Plated were also formed around the same time, and the race to dominate the meal-kit space and disrupt the traditional grocery market was on. HelloFresh expanded aggressively internationally, acquired rivals, and listed on the German bourse in 2017.

Profit margins are set to increase as HelloFresh negotiates lower food prices from suppliers. It has also reduced unnecessary marketing because it has been close to operating at capacity.

Deutsche’s Naizer wrote: “We expect that by the end of the year, HelloFresh’s customer base will be up by 60% while margins for the full year could quadruple to 11% in 2020 from 2.6% in 2019.”

Despite the stellar rise, there could still be more for investors to chew on.