The Times 15/03/19 - Vox Markets | Vox Markets

The Times 15/03/19

HSBC Holdings (HSBA) backs down in boardroom pensions row. Top HSBC executives have agreed to take pay cuts of hundreds of thousands of pounds to defuse a row with shareholders over their pension payments. John Flint, chief executive of the bank, will take a £248,000 cut in the £372,000 payment he receives in lieu of pension to £124,000 to bring him in line proportionately with pension contributions made to ordinary staff. Other main board executive directors will also have their pension contributions slashed by two thirds. HSBC announced the changes today to placate shareholders who were furious that it had flouted the spirit of new boardroom pay guidelines intended to bring executive pension payments more in line with those of all employees, as first reported in The Times last Saturday.

Sun and sea at Mipim fail to brighten Brexit gloom for property investors. Bottles of rosé, a sea of blue suits and a line-up of yachts advertising the property industry’s biggest investors, lenders and advisers could only mean one thing. Mipim, the biggest networking event of the year for the property industry, was again in full throttle this week on the edge of the French Riviera in Cannes. But this was no ordinary Mipim. The more than 5,000 British investors, developers, advisers and local politicians attempting to carry on with “business as usual” while Brexit turmoil played out at home were unsuccessful. Overseas investors have pulled back from investing the UK market since the end of last year. The volume of overall investment transactions in British property is expected to be 40 per cent lower in the first three months of 2019 than the same period last year, according to the property advisory firm JLL. Mipim was subdued. One delegate said it was quieter than he had seen the conference since 2008.

Interserve (IRV) investors reject rescue plan. The troubled outsourcer Interserve is heading for a pre-pack administration after shareholders rejected a rescue plan put forward by its banks. Shareholders voted 59% against a debt-for-equity swap. Interserve said that the administration and sale of the assets to its lenders was expected to be completed this evening to ensure the business continued to operate “as normal for customers and suppliers”. The lenders had lined up EY to handle a pre-pack if the vote went against them. The rescue plan would have meant lenders writing off about £485 million of debts and injecting £110 million into the business in return for the majority of the company’s equity.

Interserve on knife edge before key investor vote. Last-minute bid to get restructuring deal over the line. The future of Interserve (IRV), the contractor that employs 45,000 people in the UK, is on a knife-edge before a crucial shareholder vote today. Investors will gather in the City to decide whether to back contentious restructuring plans for the troubled outsourcing company under which lenders will write off about £485 million of debts and inject £110 million into the business in return for the vast majority of the company’s equity. Interserve generates annual revenue of £2.9 billion, about two-thirds from state contracts such as maintaining schools, stations, Whitehall departments and hospitals.

Sorrell’s £2m WPP bonus . . . a year after departure. The tycoon is to receive about 250,000 shares in the advertising group for its performance between 2014 and 2018, in addition to dividends, WPP (WPP) revealed yesterday. It was a third of Sir Martin’s maximum entitlement after a sharp drop in the FTSE 100 company’s market value in the past two years. WPP explored withholding some of his bonus in of a row over a €300 million takeover deal. After taking legal advice, its remuneration committee decided there was no basis to axe his bonus. The 74-year-old has repaid an undisclosed sum, thought to be below £1 million in disputed expenses.

Shell boss Ben van Beurden paid ‘appropriate’ €20m. Royal Dutch Shell ‘B’ (RDSB) has come under fire after more than doubling its chief executive’s pay package to €20 million. The Anglo-Dutch oil group revealed it paid Ben van Beurden 143 times more than its average UK employee last year, thanks primarily to a bumper €15.2 million share award under its long-term bonus scheme. Shell’s remuneration committee insisted the pay was “appropriate” and decided against using its discretion to reduce the award, despite a shareholder revolt last year when a quarter of investors voted against Mr van Beurden’s 2017 pay of €8.9 million.

Ex-Superdry chief’s pledge to bring back glory days. The co-founder of Superdry (SDRY) has said he plans to return the clothing retailer to profit growth within three years and restore it to its “former glory” in the latest stage of an increasingly acrimonious war of words with the board. Julian Dunkerton urged shareholders to elect him to Superdry’s board and used a campaign website titled “Save Superdry” to lambast its management for a “catastrophic decline” in the company’s share price, which has suffered after declining sales and a string of profit warnings. The website includes a 34-page presentation outlining his plan to take control of Superdry’s design and revive the brand.

Alan Jope shakes up management team at Unilever (ULVR). The new boss of Unilever has shaken up its senior management and promoted one of his former rivals for the top job to a newly created role. Alan Jope, who succeeded the long-serving Paul Polman as chief executive in January, has made a series of changes in its product and international divisions. They include the appointment of Nitin Paranjpe, 56, as chief operating officer, a new position. As president of the foods and refreshment division, last year Mr Paranjpe was considered to be among the candidates to succeed Mr Polman, 62, but missed out on the position when Unilever appointed Mr Jope, 54, who was head of the beauty and personal care division, its largest.

DFS sitting pretty after late show by customers. Profits surged at DFS Furniture (DFS) as customers who stayed out of its furniture shops during the hot summer came back to purchase sofas in the last five months of 2018, the company said. The retailer, which also owns Dwell and Sofa Workshop, said its profits before tax more than doubled in the 22 weeks to January, rising from £6.2 million to £14.1 million. Revenues gained 29% to £422.3 million compared with the same period the previous year, thanks to the deferred purchases and a rise in online sales. The latest results followed a downbeat year in which profits fell by more than a fifth to just over £50 million. In June, DFS issued its first profit warning since it floated in 2015 after a drop in footfall at its stores and a slowdown in the housing market that dampened sales.

Cineworld boss marvels at rising Regal benefits. Cineworld Group (CINE) has found an extra $50 million of synergies from its $5.8 billion swoop on the American market and the cinema operator’s boss reckons there is more to come. The acquisition of Regal Entertainment had been forecast to generate $100 million of savings — $60 million in cost cuts and $40 million in extra revenues — but yesterday Cineworld upped that to $150 million, 60% in cost-cutting. However, Mooky Greidinger, 66, chief executive, said: “There’s still more potential on synergies. We are aiming higher.”

Political uncertainty will hit property deals, warns Savills. A leading estate agency has forecast a slowdown in property dealmaking this year because of global macroeconomic and political uncertainties. Savills (SVS), whose deals advisory work accounts for almost half the property agency’s business, is expected to be hit by declines in transaction volumes in a number of markets. The UK-based company, which has offices around the world, said it was “difficult to predict the impact of [the uncertainty] on corporate expansionary activity and investor demand for real estate”. However, as a result of expected growth in other areas, including property management and investment management, Savills maintained its guidance for this year. The FTSE 250-listed company, best known for its residential estate agency business, was founded in 1855 and employs more than 35,000 people in 60 countries.

Capita revival on track, new chief insists despite pain. The chief executive parachuted in to turn around Capita (CPI) insisted the overhaul was on track yesterday despite a sharp fall in profits. Jonathan Lewis, 57, is a third of the way through a three-year restructuring of the outsourcing group and said that its annual results showed it had “delivered precisely what we said”. The FTSE 250 company was recently thrown into crisis by botched contracts, competitive tendering and the downturn in the outsourcing sector, particularly the collapse of rival Carillion. It led to profit warnings, a slump in its share price and a clearout of executives.

Bank tie-up to create £17bn specialist mortgage lender. The merger between two banks to create a £1.7 billion specialist mortgage lender will create a business better able to withstand any turbulence from the UK’s looming departure from the European Union, according to one of the architects of the deal. OneSavings Bank (OSB) yesterday struck an all-share deal to buy Charter Court Financial Services Group (CCFS) to form a group with £13.2 billion in customer deposits and £15.6 billion in loans. One Savings shareholders will own 55% of the combined business, with the rest held by Charter Court’s investors.

Debenhams to consider loan offer from Mike Ashley. Debenhams (DEB) has said it will give “careful consideration” to a £150 million loan offer from its largest shareholder Sports Direct International (SPD). The struggling high street chain, which is already in talks with existing lenders about a £150 million financing package, said it would “engage with Sports Direct and other stakeholders regarding its feasibility”. It added that any third-party loan offer from Sports Direct, headed by Mike Ashley, would require both the consent of its existing lenders and its bondholders as well as “material amendments to existing facilities”.

Bank watchdog being too cautious, says Just Group (JUST). Just Group has accused the Bank of England of being “overly conservative” after it was forced to raise £375 million in fresh capital and axe its dividend in the wake of a crackdown on equity-release mortgages. Shares in the retirement finance company fell by 12% to 85.6p after it announced a £75 million placing of new shares and a £300 million issue of new convertible debt securities. After guidance from the Bank’s Prudential Regulation Authority (PRA) in December the group has been required to raise capital to strengthen its balance sheet to provide a cushion in the event of a crash in house prices.

TUI AG Reg Shs (DI) (TUI) was flying high yesterday after a broker recommended investors snap up shares in the unloved package holidays to airlines group. A surprise profit warning last month rattled shareholders and sent shares in the Anglo-German tour operator tumbling. Earlier this week the stock touched a record low. Analysts at Morgan Stanley gave Tui a boost after advising clients that the shares now looked cheap. Like other airlines it grounded its Boeing 737 Max jets this week following the Ethiopian Airlines crash. These account for 10% of Tui’s fleet, the Morgan Stanley analysts said, who used the grounding as one reason to trim their earnings-per-share forecasts for Tui. However, Tui’s share price slump this year has been an “overreaction,” the analysts told clients, adding that the company’s “dividend and balance sheet appear secure.”

Syncona Limited NPV (SYNC) fell a further 7½p to 246½p as investors continued to digest the sale of a £141 million stake in the biotechnology investment company by the Wellcome Trust a day earlier, which cut the charitable foundation’s shareholding in the business to 28.1%. The 57 million shares had been offloaded at 245p apiece and the stock fell to about that level yesterday.

Centrica (CNA), the owner of British Gas, lost 1½p to 120¾p on downbeat analyst comment from Citi, who told clients they saw “no reason to own the shares” and reiterated their “neutral” recommendation on the stock.

Standard Chartered (STAN), the emerging markets focused lender, was marked 4¼p lower at 608½p after it was among a group of investment banks that were fined by the Hong Kong securities regulator for failures relating to their work on stock market flotations. The Securities and Futures Commission levied a HK$59.7 million (£5.7 million) penalty on StanChart over its role as a joint sponsor on the initial public offering of China Forestry a decade ago. The timber company has since been put into liquidation after it was delisted from the Hong Kong exchange following the discovery of accounting irregularities. The SFC has fined StanChart for failing to verify the existence of the company’s forestry assets. The bank said it welcomed the opportunity to resolve the case with the regulator.

Tempus – Schroders (SDR): Hold. High quality and diversified business whose shares are off but represent good long-term value

Tempus – Elementis (ELM): Buy. Attractively priced with solid long-term potential

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Mentioned in this post

CCFS
Charter Court Financial Services Group
CINE
Cineworld Group
CNA
Centrica
CPI
Capita
DEB
Debenhams
DFS
DFS Furniture
ELM
Elementis
HSBA
HSBC Holdings
IRV
Interserve
JUST
Just Group
OSB
OneSavings Bank
RDSB
Royal Dutch Shell \'B\'
SDR
Schroders
SDRY
Superdry
SPD
Sports Direct International
STAN
Standard Chartered
SVS
Savills
SYNC
Syncona Limited NPV
TUI
TUI AG Reg Shs (DI)
ULVR
Unilever
WPP
WPP