Plans for the biggest energy company merger since privatisation have fallen apart after SSE (SSE) said it would not set up a new listed energy supplier with its rival Npower. The pair called time on the eleventh hour talks to save the troubled merger after they failed to agree on new terms needed to fortify the nascent company against deepening energy market woes. The new company was expected to debut on London’s premium stock listing within months, after more than a year of negotiations, as the second largest energy utility in the market. But the Government’s looming cap on energy bills, combined with rising costs and competition, have made the deal “unsustainable” in its current form. Both energy suppliers have been wracked by customer losses and rising costs ahead of the Government energy price cap which will take effect this winter. The same pressures have caused multiple energy supply minnows to fold, leaving hundreds of thousands of customers temporarily without a supplier.
Plunging consumer confidence and economic uncertainty have engulfed the retail industry in the run-up to Christmas after one of its former darlings reported a shock profit warning. Shares in online retailer ASOS (ASC) plunged by more than a third after it warned that sales and profits for the year would be lower than forecast after dire November trading. The shock update from high-flying Asos – previously thought to be immune to the woes afflicting the high street – clattered stocks across the sector as investors weighed the prospects of the worst retail Christmas in years. Asos chief executive Nick Beighton insisted the company had “hit a bump in the road” and blamed a high level of discounting in the market ahead of Black Friday for laying waste to its profit margins. This caused “significant deterioration” in trade in November, a key month for retailers. “It’s a very difficult consumer environment and there’s a lot of economic challenges for the consumer,” he said. “The underlying fragility of the customer is probably greater than we anticipated.”
US activist investor has attacked Just Eat (JE.), demanding it ditches £650m of “non-core” operations and changes “flawed metrics” on executive pay. Connecticut-based Cat Rock Capital, a top 10 shareholder in the food delivery company, hit out at Just Eat’s “significant underperformance”, which will see it dumped out of the FTSE 100 at the next reshuffle. In addition, in a public letter the 2pc shareholder said it was “imperative that Just Eat publicly commits to an achievable but appropriate three-year plan”. Shares in Just Eat have slumped by more than a quarter this year after enjoying rapid expansion since its 2014 float. Cat Rock said its valuation multiple against earnings had fallen behind rivals such as Takeaway.com, Delivery Hero and GrubHub. “Online food delivery is a rapidly evolving sector. We are concerned that the slow pace of planning and decision-making at Just Eat will not only continue to destroy shareholder value but will also result in competitors eroding Just Eat’s market leading position,” wrote Alex Captain, Cat Rock’s managing partner.
Norway’s central bank has raised its stake in West End landlord Shaftesbury (SHB) to almost a quarter as its battle with rival shareholder Sammy Tak Lee to dominate central London’s retail property intensifies. Norges Bank has picked up an extra 4m shares in the company, worth around £35m, taking its total stake to 24.5%, not far below the 26.5% controlled by Mr Tak Lee. The two parties have been ramping up their holdings in Shaftesbury, which owns swathes of Soho and Covent Garden, as they seek to tighten their respective grips on some of the country most high-profile high streets. Mr Tak Lee, who owns the Langham Estate of properties north of Oxford Street, first tried to buy Shaftesbury in 1991 and has been building up his stake over the past few years, leading to speculation he could be readying a takeover bid.
Political turmoil in Westminster tipped UK-exposed stocks into a bear market last week as investors rushed to grab protection from Government debt default amid mounting no-deal Brexit worries. The FTSE Local UK index – which tracks the mid- and large-cap stocks generating at least 70% of their revenue in the UK – has now slumped more than 20% from its 52-week high as investors cut their British exposure. Investors have now yanked a record $9.8bn (£7.8bn) from UK equity funds in the year to date, Bank of America Merrill Lynch data revealed on Friday. While London’s market has been hit by a global stocks slump – sparked by fears of tightening financial conditions for companies and signs of economic growth peaking – the Brexit stalemate has sent stocks generating the bulk of their earnings in the UK sliding further. The price of credit default swaps on UK Government debt – insurance taken out by investors to protect themselves from default – has surged 36% in the past month to hit its highest level since the aftermath of the referendum.
Frankie & Benny’s owner Restaurant Group (RTN) is now among the most shorted stocks in London after hedge funds ramped up bets against it in the wake of its controversial £560m takeover of Asian food chain Wagamama. Almost a tenth of its shares are on loan to short sellers, including Luxembourg-based Cigogne Management, which increased its short position by a third to 0.9% on Tuesday, and Mayfair financier Crispin Odey. The Wagamama deal will add hundreds of millions of net debt to TRG’s balance sheet, partly funded by £300m of new cash from shareholders, two fifths of whom voted against the acquisition last month. Some backers opposed the deal on the grounds that it was overpriced.
Thousands of Jaguar Land Rover jobs are to be cut next year under a £2.5bn turnaround plan as Britain’s biggest car maker is buffeted by “three big shocks”. JLR has suffered from weakening demand in China, a crackdown on diesel cars and concerns about the impact of Brexit. The Tata-owned company posted a £354m half-year pre-tax loss in October. Alongside this, JLR unveiled plans to slash costs by £1bn over the next 18 months, reduce capital investment by the same amount and target £500m of inventory and working capital savings. At the time it was tight-lipped on how many jobs would go as a result. But in January the car maker will reveal further details on its turnaround plans, which it has prepared in conjunction with specialists from Boston Consulting Group. Job losses could run into the thousands, sources told The Financial Times.
Struggling shopping centre owner Hammerson (HMSO) is attempting to fill empty space by playing the traditional role of department stores, renting out concessions direct to small brands. With House of Fraser, Debenhams (DEB) and even John Lewis under pressure, the owner of the Bullring in Birmingham and Brent Cross in London is faced with unoccupied property. The company is now seeking to assemble its own collection of fashion, beauty and food concessions on floors formerly used by department stores. “There is no need for there to be Debenhams or House of Fraser above the door when we can work directly with brands”, a retail source said. Shopping centres around the country are suffering knock-on effects from the collapse of House of Fraser and cuts at Debenhams. Last month House of Fraser’s new owner, , revealed plans to shutter all four of its stores in shopping centres owned by former Hammerson takeover target Intu Properties (INTU), after its demands for free rent were rejected . It is understood Mike Ashley, Sports Direct’s controlling shareholder, offered to pay only the business rates bill to keep the stores open. Debenhams has also said that it will shut 50 stores over the next five years.
