The chairman of Marks & Spencer Group (MKS) has ruled out breaking up the retailer, saying that it would be completely impractical to split the clothing and food divisions. Archie Norman made the comments as M&S said that a fall in sales for its struggling fashion department had dragged down profits. The retailer suffered a 17.1% drop in adjusted pre-tax profits — which strips out the cost of its restructuring programme to shut more than 100 shops — to £177 million. Total sales for the six months to September 28 fell by 2.1% to £4.86 billion. The retailer said that the benefits of its turnaround plan were beginning to be seen in its food division, with total sales up by 1.2% and like-for-like sales rising by 0.9% as it outperformed supermarket rivals.
Jupiter Fund Management (JUP) has hired a former Northern Rock director as its chairwoman without requiring any regulatory approval, raising eyebrows among shareholders burnt by the failure of the bank in 2007. Nichola Pease, who sat on the board of Northern Rock as a non-executive director from 1999 until its collapse, was named as successor to Liz Airey at the FTSE 250 asset manager, which looks after £46 billion of small investors’ savings. Northern Rock directors, including Ms Pease, 58, were criticised by MPs on the Treasury select committee for their “high-risk, reckless business strategy” and for failing to act as a restraining force on executives. They also were indirectly criticised in an internal report by the Financial Services Authority, which said that boards of financial institutions were ultimately responsible for financial soundness.
European countries must work together to prepare for a severe economic shock because the central bank is out of ammunition and risks are rising, the International Monetary Fund has warned. “Given elevated downside risks, contingency plans should be at the ready for implementation, not least because the scope for monetary policy action has diminished,” the global economic watchdog said. “A synchronised fiscal response could become suitable.” Last month the IMF cut its euro area growth forecasts to 1.2% this year and 1.4% next, from 1.3% and 1.6%, respectively. The biggest downgrade was to Germany, Europe’s economic powerhouse, where the growth estimate for 2019 was cut from 0.7% to only 0.5%, its weakest in four years.
BT Group (BT.A) was dealt a blow yesterday when Virgin Media said that it was ditching the EE mobile network when its contract expires and would move its three million-plus mobile customers to Vodafone Group (VOD). The loss of the deal, worth up to £200 million a year, sent shares of BT lower. Virgin Media’s agreement with BT Enterprise, which has been in place for almost two years, will end in late 2021, at which point its mobile offering will switch to Vodafone, although Virgin will launch 5G services on Vodafone earlier. Customers will not have to change Sim cards. Analysts described the sharp fall in the BT share price as an overreaction, with Jerry Dellis, at Jefferies, the broker, pointing out that the lengthy winding down of its contract “gives BT plenty of time to mitigate the issue by adjusting investment plans”. He estimated a hit of £100 million to its free cashflow from 2023.
Intu Properties (INTU) the indebted owner of vast shopping centres in Essex and Manchester is preparing to raise equity and sell stakes in its best-known retail malls next year. Intu is trying to reduce its £4.5 billion debt and thus lessen the risk of it breaching its debt covenants because of falling property valuations, which have pushed its debt-to-asset ratio up to 57.7%. The landlord said in July that a cash-raising effort was on the table and that prospect has increased as uncertainty over the worth of retail property has made it difficult to sell shopping centres. It sold only £21 million of assets in the third quarter.
AstraZeneca (AZN) is to set up a new research and development centre in China and will jointly establish a $1 billion fund to invest in healthcare innovation companies in the country. The pharmaceuticals group said that it would more than double its research and development staff in Shanghai to about 1,000 people with the new centre. It would focus on “diseases that are prevalent in China, home to around a quarter of world’s disease burden, as well as other parts of Asia”, it said. Astrazeneca said that it was also establishing a healthcare industrial fund jointly with China International Capital Corporation, the Chinese investment bank, with a target size of $1 billion. This will back domestic and international companies seeking to establish a presence in China.
Advisers on the London Stock Exchange Group (LSE) purchase of Refinitiv hit the jackpot, scooping total fees of £281 million, the two sides revealed. Goldman Sachs, Morgan Stanley and Robey Warshaw for LSEG and Evercore, Canson Capital Partners and Jefferies for Refinitiv are thought to be the main beneficiaries. The London exchange is paying about $27 billion in newly issued shares for Refinitiv, the financial data group carved out of Thomson Reuters in 2018 and now part-owned by Blackstone. LSEG shareholders will vote on the deal on November 26.
Almost a third of Redrow (RDW) shareholders have revolted over executive pay and the reappointment of John Tutte as chairman. The rebellion at the housebuilder came after ISS and Glass Lewis, the investor advisory groups, urged a vote against the re-election of Mr Tutte, 63, citing his defiance of corporate governance guidelines by moving from the position of chief executive to chairman in April. ISS also raised concerns about the pay of Steve Morgan, 66, the founder, who stood down this year as chairman after carrying out a farewell tour, using his helicopter to visit every Redrow regional office. The advisory group raised the alert about Mr Morgan still being entitled to long-term incentive payments, while Glass Lewis took issue with the board’s bonus targets being lowered.
A leading shareholder in Breedon Group (BREE) sold its stake and amid rumours that another big investor might cut its holding. M1 Cement offloaded its 8.3% stake in Breedon, pocketing £82.4 million as it sold the shares at 59p apiece — a small discount to the prevailing share price. The group quickly reassured investors that Amit Bhatia, its chairman, was not involved with M1 and retained his sizeable interest in the business. It did not help that Davy trimmed its forecasts for the company, citing weaker British construction activity in September and October. There also was a rumour among City traders that Invesco, Breedon’s biggest shareholder with a 17.2% stake, may be looking to reduce its holding. The investment group first bought Breedon shares in the days of Neil Woodford, the former star stockpicker, whose successor, Mark Barnett, has held on to the investment. Breedon declined to comment on the gossip, while Invesco, which is understood to have last met the company’s bosses in September, could not be reached.
Ultra Electronics Holdings (ULE) was on investors’ radars after a bullish trading update. The company, formed in a buyout from the old Dowty defence group in the 1990s, said: “Our major markets are growing and our strong technology base is positioning us well on existing and potential future programmes.” In August it signed a joint venture with Sparton, of the United States, to win a billion-dollar contract for its marine listening devices.
Frontier Developments (FDEV) caused a commotion when it launched Planet Zoo, which lets players build and run their own park. Critics loved it, one describing it as its “undisputed game of the year”. Investors also bought into the hype and the shares zipped up 94p to £12.14, valuing the company at almost £475 million.
Mothercare (MTC) enjoyed its best day for almost 20 years, surging by 3p to 12½p as the market got behind its turnaround plans. Administrators at PWC confirmed that all 79 stores in the UK would be subject to a “phased closure”, putting 2,800 jobs at risk, but Mothercare has more than 1,000 stores in more than 40 countries, which will be the focus as managers target a return to profitability by the end of 2021.
Tempus – BT Group (BT.A): Avoid. Pressures on cash flows at a company that has been struggling to find growth cast too much doubt over dividend
Tempus – Hill & Smith Holdings (HILS): Hold. Well placed to benefit from intrastructure spending, but shares are volatile
