The Mail 16/03/19 | Vox Markets

The Mail 16/03/19

Two foreign hedge funds pushed Interserve (IRV) into administration – and left 16,500 small shareholders with nothing. In a humiliating blow to the Government contractor’s chief executive Debbie White and chairman Glyn Barker, investors rejected a rescue package that would have slashed their stake in the company to just 5% and handed the other 95% to Interserve’s lenders. The rebellion was led by New York-based hedge fund Coltrane Asset Management, the largest investor with a 27% stake, and Dutch fund Farringdon, which held about 6%. The Mail understands that if ballots from the two hedge funds were removed, 95% of the vote was cast in favour of the company’s plan, known as a debt-for-equity swap. But investors holding 44% of Interserve’s shares did not vote at all – meaning the rescue was rejected by 59% to 41%. It means shares held by an army of 16,500 small investors are wiped out. Last night Interserve said it had completed a ‘pre-pack’ administration within hours of the vote that handed control to its lenders, including Barclays and Royal Bank of Scotland, and hedge funds such as Cerberus. It insists that operations will continue as normal on Monday morning.

Two High Street bank bosses have had more than £400,000 cut from their annual pension payments amid an investor outcry. Antonio Horta-Osorio, chief executive of Lloyds Banking Group (LLOY), and HSBC Holdings (HSBA) boss John Flint, took the reductions amid claims blue-chip firms are using the payouts to top-up boardroom salaries. Rival bank Standard Chartered, as well as FTSE 100 groups Astrazeneca, Reckitt Benckiser and Burberry have also come under fire for handing bosses pension contributions worth hundreds of thousands of pounds. But both Lloyds and HSBC said their bosses would take reductions to their pay. HSBC said Flint’s payments will fall from £372,000 to £124,000, taking it from 30% of his salary to 10%. The 50-year-old was handed a total package worth £4.6million in 2018. Lloyds said Horta-Osorio, who was paid £6.3million last year, will also see his pension contributions cut. He will get 33% of his salary, or £419,000, down from 46%.

Mike Ashley has made a grab for LK Bennett just days after it crashed into administration. In the latest effort to add to his sprawling retail empire, the 54-year-old tycoon put forward an initial offer for the collapsed upmarket fashion retailer, according to the Financial Times. Administrators for LK Bennett – a favourite of the Duchess of Cambridge – are thought to have made presentations to potential buyers this week in a race to save the business. The company fell into administration last week, putting almost 500 jobs at risk across its 39 stores, 37 concessions and at its head office.

Demand for lightweight foam-sheet materials boosts Zotefoams (ZTF). The company makes extremely lightweight foam-sheet materials for a range of applications, including aviation, transporting goods, padding for shoes and cover for prosthetic limbs. Its customers include Toyota, Boeing, Nasa and Nike. Their products are in demand and sales are soaring, and it is trying to add more capacity at US, UK and Polish sites. A £20.6million fundraising last May means the balance sheet has relatively little gearing, and operating income covers interest payments more than ten-fold. Leading shareholders include Miton, Schroders and Blackrock, which own around a third of the shares between them. Even allowing for the costs of the capacity expansion, it has had a streak of annual profit increases dating back to 2013 and a string of dividend hikes that runs to almost a decade. However, the biggest risk is still probably posed by the valuation. A market capitalisation of £28million compares to forecast pre-tax profits of £10million for 2018 and the dividend yield is barely 1%.

ASOS (ASC) targets millennials, so it should be in a sweet spot right now. But its share price has halved in the past few months after a shock profit warning in December. The online fashion retailer had to downgrade its sales growth target to 15% as a result of poor trading at the back end of last year. Weaker consumer confidence was largely to blame, though not so much on these shores – UK sales actually held up pretty well. The real damage was done in the international business. Asos has shown it is adept at connecting with customers through social media, and its tiny share of the vast global clothing market gives it plenty of room to grow. That will require investment, though, so investors do need to be patient.

Foresight Solar Fund Limited (FSFL) aims to provide an inflation-linked income stream. A portfolio of 53 solar farms in the UK and Australia. Some 83% of its investments are in the UK and 17% in Australia. In total it owns 869 megawatts of generating capacity. Around 52% of its revenue comes from subsidies, mainly a British one called the Renewable Obligation Certificate, which is inflation linked. The dividend for 2018 was 6.58p. The underlying assets are pretty stable, says Ben Yearsley, director at Shore Financial Planning. He adds that a high yield of more than 5.5% and the dividend broadly inflation-linked makes this an interesting income play. A risk could be if the Government reneged on subsidies, though that seems unlikely. Another downside is a long-term one, in that the subsidies only last for a set period. Originally it was 25 years, but we are well into that now. You are not going to get much capital growth and it does sit on a small premium today of about 4.5%.

Shares in Frankie & Benny’s owner Restaurant Group (RTN) soared amid signs it is finally turning the corner. The company, which bought noodle chain Wagamama for £559million last year, reported profits of just £13.9million for 2018 – around half the £28.2million it made the previous year. The shares rose 10.1%, or 12.8p, to 139.4p after bosses revealed sales were up 2.8% over the past ten weeks. Graham Spooner, investment research analyst at The Share Centre, said the figures ‘have helped provide some much-needed relief for shareholders’. But he added: ‘We regard the shares as a high-risk buy for investors who believe the management will be able to counter the current problems in the casual dining sector, and benefit from the Wagamama acquisition. The big question is, can the early signs of improving sales be maintained?’


Shares in luxury housebuilder Berkeley Group Holdings (The) (BKG) rose after it played down fears of a housing market slowdown. The London-focused group said that business from November to February had been in line with previous years, despite concerns about Brexit uncertainty. Its comments came as fears grew about falling transactions and prices in the capital. But Berkeley said it had a strong balance sheet and it was optimistic about sales in the South East.


Profits at Wetherspoon (J.D.) (JDW) tumbled in the first half of the year as rising sales failed to cancel out an increase in costs. The pub group’s pre-tax profits in the six months to January 27 fell 18.9% to £50.3million as costs rocketed, especially labour, which increased by about £33million. However, revenue rose 7.1% to £889.6million and like-for-like sales were up 6.3% in the period. Chairman Tim Martin warned that costs would continue to rise in the second half. He said: ‘As previously indicated, costs in the second half of the year will be higher than those of the same period last year. ‘The company anticipates an unchanged trading outcome for the current financial year.’ He added that, in the six weeks to March 10, like-for-like sales increased by 9.6% and total revenue jumped 10.9%, helped by good weather.


Mentioned in this post

Berkeley Group Holdings (The)
Foresight Solar Fund Limited
HSBC Holdings
Wetherspoon (J.D.)
Lloyds Banking Group
Restaurant Group