The Times 14/03/19 - Vox Markets | Vox Markets

The Times 14/03/19

Shell boss Ben van Beurden paid ‘appropriate’ €20m. The boss of Royal Dutch Shell ‘B’ (RDSB) earned €20 million last year after Europe’s biggest oil company concluded that it was “appropriate” for his pay to more than double. Ben van Beurden, 60, was paid 143 times the typical UK Shell employee thanks to a huge long-term bonus scheme award of more than 550,000 shares in the Anglo-Dutch energy group, worth €15.2 million. Shell’s remuneration committee decided against using their discretion to reduce the award, despite suffering a shareholder revolt last year when a quarter of investors voted against Mr van Beurden’s 2017 pay of €8.9 million.

Mike Ashley turns up heat in dispute with Debenhams. Sports Direct International (SPD) has accused Debenhams (DEB) of “misleading” the market and said that it had flagged its concerns to the financial watchdog as it outlined a new £150 million loan proposal to the struggling department store chain. In an escalation of hostilities between the retailers, Britain’s largest sportswear group questioned why Debenhams, the department store chain with 166 stores, had assured the market it was on track to meet its revised profit expectations in January, only to issue a profit warning eight weeks later. In a letter sent to the Debenhams board the night before it issued its profits warning this month, Sports Direct wrote: “We consider that your January 10, 2019 trading update was at best impossibly optimistic or at worst deliberately misleading.”

Doubts over Standard Life shake-up, A management shake-up at Standard Life Aberdeen (SLA) in which Martin Gilbert will cease to be co-chief executive has been branded “entirely cosmetic”. Analysts and senior industry observers expressed surprise that Mr Gilbert, 63, would become vice-chairman of Standard Life Aberdeen and focus on winning new business while Keith Skeoch, 62, would become responsible for the troubled asset management group. “It is entirely cosmetic. Martin’s role as vice-chairman is exactly the role he has been engaged in since the merger,” said one person close to the company. Another said: “What change? The new chairman has passed up the opportunity for more root and branch reform.”

Ashley turns up heat in dispute with Debenhams (DEB). Sports Direct International (SPD) has accused Debenhams of “misleading” the market and said that it had flagged its concerns to the financial watchdog as it outlined a new £150 million loan proposal to the struggling department store chain. In an escalation of hostilities between the retailers, Britain’s largest sportswear group questioned why Debenhams, the department store chain with 166 stores, had assured the market it was on track to meet its revised profit expectations in January, only to issue a profit warning eight weeks later. In a letter sent to the Debenhams board the night before it issued its profits warning this month, Sports Direct wrote: “We consider that your January 10, 2019 trading update was at best impossibly optimistic or at worst deliberately misleading.”

Carphone fined £29m over Geek Squad sales. Mis-selling mobile phone insurance and support products has landed Carphone Warehouse with a £29.1 million fine and it will have to stump up a further £2.3 million in compensation to customers. The fine follows an investigation by the Financial Conduct Authority (FCA), which found problems in the selling processes of the electronics retailer’s support division, which it calls the Geek Squad, between December 2008 and June 2015. After the FCA found that the company had fallen short of “expected standards” it agreed an early settlement. Carphone Warehouse is part of Dixons Carphone (DC.), which was created in 2014 through a merger between Dixons Retail and Carphone Warehouse. It has 42,000 employees in nine countries and about 1,000 shops.

Wm Morrison turnaround is ‘on track’ with new dividend. The boss of Morrison (Wm) Supermarkets (MRW) has hailed its “simple and pragmatic enough” turnaround strategy for delivering another year of rising sales and profits and a further special dividend for shareholders. The Bradford-based grocery group, which only a few years ago was fighting for survival, said that its recovery was “well on track” as underlying pre-tax profit rose by 8.6% to £406 million on revenue up 2.7% at £17.7 billion in the year to December 31. In further positive signs, Morrisons’ like-for-like sales excluding fuel and VAT, a key benchmark in the industry, rose by 4.8% and the group announced another special dividend of 4p, taking its total payout to investors for the year to 12.6p, up 24.9% on a year ago.

Drugmaker Hikma returns to health. One of the biggest London-listed drug companies has returned to the black, boosted by product launches, cost-cutting and a shortage of painkillers. Hikma Pharmaceuticals (HIK) posted a pre-tax profit of $293 million in the year to the end of December after a hefty $738 million loss the year before, raising hopes that the revival under Siggi Olafsson, 50, its chief executive, was on track. Hikma is a leading generic drug company, having expanded rapidly since it was founded by the Darwazah family in Jordan in 1978. It operates in more than 50 countries and has 29 manufacturing facilities and seven research and development centres.

Avast boss jumps ship after ten years to put family first. The chief executive of Avast Software (AVST) is standing down less than a year after overseeing the cybersecurity software developer’s stock market flotation. Vince Steckler, 60, said he was seeking a “better work-life balance” after a decade at the Prague-based company. He has been shuttling between the Czech Republic and Singapore, where his family moved after last year’s IPO. “It’s put a strain on my personal life. I travel a heck of a lot and I won’t see my family for four weeks,” Mr Steckler said. He stands down at the end of June and will be available as an adviser for a year after his departure. Mr Steckler is being replaced by Ondrej Vlcek, who joined the company as a teenager and heads Avast’s mainstay consumer division.

Shorter life makes Prudential (PRU) happier. A cut to life expectancy assumptions has produced a £441 million profits windfall for the closely watched division of Prudential that is poised to split from the main group into an independent FTSE 100 company. The slowdown in life expectancy improvements allowed M&G Prudential, an offshoot, to release reserves previously built up to ensure it had enough money to pay pensions and allowed it to claim operating profit growth of 19%. Without the one-off boost, though, underlying profit growth for the division was only 5%, disappointing some analysts, underwhelmed by the UK insurance performance and a profits slide at the fund management unit M&G.

Besieged Provident restores dividend. Provident Financial (PFG), the doorstep lender that is fighting off a £1.3 billion hostile bid, has stepped up its defence against the takeover by swinging back into profit, restoring its dividend and starting shareholder meetings to convince them to reject the offer. Malcolm Le May, chief executive, hailed a “year of strong progress” after the lender reported pre-tax profit of £90.7 million for 2018, reversing the £147.9 million loss it suffered a year earlier. Provident also declared a final dividend of 10p a share, fulfilling a pledge it had made at the time of its emergency £300 million rights issue last year to revive shareholder payouts. “It’s very much about delivering what you promise, which I’ve done,” Mr Le May said. The company scrapped its dividend in 2017 after it botched an overhaul of its doorstep lending business and revealed that the Financial Conduct Authority was investigating the mis-selling of a credit card product offered by its Vanquis banking arm. Since the departure of Peter Crook as chief executive Mr Le May, 60, has been in charge of rebuilding Provident’s fortunes.

Funeral price war takes toll on profits at Dignity (DTY). A price war and regulatory scrutiny has led to a sharp slump in annual profit at one of the country’s biggest funeral providers. Dignity posted a 43% drop in pre-tax profit to £40.5 million in the year to December 28 after it cut its prices in a bid to protect its market share from lower-cost rivals and competition from the Co-op. After a significant drop in market share over the past two years, it edged up to 11.2% from 11.1% last year, although average income per funeral fell to £2,973 from £3,222, due to a 25% cut in the price of its “simple” funeral and reductions to its “full-service” funeral. Revenue fell by 3% to £315.6 million.

Wellcome Trust yesterday offloaded about 57 million shares in Syncona Limited NPV (SYNC) at 245p a share, raising £141 million. The placing, handled by the brokers Goldman Sachs and Numis, cuts its stake from 36.8% to 28.1% and was priced at a 4.7% discount to the share price on Tuesday. Wellcome remains by far the biggest shareholder and said it would “continue to be a supportive, long-term shareholder”. It had agreed not to sell further shares for 180 days. The Syncona share price has doubled since it reversed into Bacit, a London-listed investment group, in 2016 and then this month sold Nightstar Therapeutics, a gene therapy specialist, to Biogen in the US for $877 million, its first disposal.

One of the biggest fallers was Gem Diamonds Ltd. (DI) (GEMD), which specialises in producing large diamonds from its mine in Lesotho. It produced a record haul of 15 diamonds greater than 100 carats last year, including the 910-carat Lesotho Legend, the fifth-largest gem diamond recorded in history. Yet despite a surge in profits, which more than doubled to $73 million, a weaker second half meant the result was short of expectations and Gem disappointed investors by failing to pay a dividend. The company blamed tough market conditions, with prices for smaller stones dropping amid ample production globally.

Investors in the Ladbrokes owner GVC Holdings (GVC) were nursing further losses yesterday as the bookmaker was hit by concerns over a coming vote in Germany to tighten up gambling rules, particularly on sports betting. Analysts at Bank of America Merrill Lynch said that Germany accounted for 9% of its revenues, of which 45% was sport. “While the proposals within these headlines clearly imply potential negative headwinds for GVC’s German sports betting operations, it is not clear at this stage whether these restrictions will be applied and it is equally possible that status quo prevails,” the analysts said.

Manx Telecom (MANX), which operates broadband in the Isle of Man, agreed a £256 million takeover by Basalt Infrastructure Partners. Shares surged 14.4%, or 27p, to 214½p, within a whisker of the 215p offer price.

Shares in British American Tobacco (BATS) wafted lower, despite the news that its Canadian subsidiary had been granted creditor protection in a multibillion-pound class action lawsuit. This month a Quebec court of appeal upheld a judgment from 2015, meaning the tobacco industry is liable for up to C$13.6 billion (£7.7 billion) over claims consumers were not made fully aware of the health risks. BAT’s Imperial Tobacco Canada is facing a maximum hit of C$9.2 billion. BAT said the creditor protection from the Ontario Superior Court of Justice provided its subsidiary with an “opportunity to settle all of its outstanding tobacco litigation under an efficient and court-supervised process whilst continuing to run its business in the normal course”. JTI-Macdonald, a rival, had obtained protection and BAT said that if its subsidiary had not also done so, it faced paying for JTI-Macdonald’s share of the Quebec judgment, as well as its own.

Tempus – Melrose Industries (MRO): Hold. Clear signs of a turnaround that will realise huge additional value when Melrose sells

Tempus – Lookers (LOOK): Hold. Shares are attractively priced but the economic backdrop is worrisome

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Mentioned in this post

avst
Avast Software
BATS
British American Tobacco
DC.
Dixons Carphone
DEB
Debenhams
DTY
Dignity
GEMD
Gem Diamonds Ltd. (DI)
GVC
GVC Holdings
HIK
Hikma Pharmaceuticals
LOOK
Lookers
MANX
Manx Telecom
MRO
Melrose Industries
MRW
Morrison (Wm) Supermarkets
PFG
Provident Financial
PRU
Prudential
RDSB
Royal Dutch Shell \'B\'
SLA
Standard Life Aberdeen
SPD
Sports Direct International
SYNC
Syncona Limited NPV