The new boss of Royal Bank of Scotland Group (RBS) faces the prospect of government intervention over its failure to persuade small business customers to switch to rival lenders. The official body responsible for overseeing the scheme may impose new conditions on the state-controlled bank to increase the number of switchers. This would represent an embarrassing start for Alison Rose, 49, who took on the top job a week ago and is the first woman to run a big British bank. RBS has been trying to transfer more than 100,000 small business customers over the past decade. It was ordered to make the move by the European Commission as part of state aid penalties after receiving a £46 billion taxpayer-funded bailout in 2008 and 2009. Under the latest version of the plan, launched in February, RBS was meant to switch 120,000 small and medium-sized customers via a specially created website to other banks by next August.
Standard Chartered (STAN) has promised to be more transparent about executive pay after its boss took a £237,000 cut to his pension allowance in an attempt to calm investors’ anger about his retirement benefits. Bill Winters, chief executive, yesterday agreed to halve the £474,000 cash payment he had been due to receive as an allowance. Andy Halford, finance chief, had his allowance halved to £147,000 from £294,000. The cuts, which were revealed by The Times, take effect from January and come after nearly 40% of the bank’s shareholders refused to back the lender’s new executive pay policy at its annual meeting in May.
International Consolidated Airlines Group SA (CDI) (IAG) the group behind British Airways and Iberia of Spain has slashed its expansion plans as it grapples with faltering demand for flights amid waning economic growth. Shares slid to 541¾p after the company said that it was cutting back its forecasts for capacity growth over the next three years. The business now expects “available seat kilometres”, an industry metric, to increase by 3.4% a year between 2020 and 2022, a significant reduction from its previous target of 6% growth between this year and 2023. The downgrade was disclosed at a capital markets day hosted by IAG and comes just a week after Willie Walsh, its chief executive, warned at the group’s third-quarter results that the wider economic environment had softened this year.
Two British budget airlines have bought prized take-off and landing slots at London Gatwick and Manchester airports from Thomas Cook Group (TCG), the failed travel company. easyJet (EZJ) bought Thomas Cook’s slots at Gatwick and Bristol airports for £36 million, while Jet2.com bought slots at Manchester, Birmingham and Stansted for an undisclosed price. Easyjet acquired a dozen summer slot pairs and eight winter slot pairs at Gatwick, as well as six summer slot pairs and one winter slot pair at Bristol. Jet2, which is owned by Dart Group (DTG), took to the air in 2003 and has a fleet of 100 aircraft. It is the third biggest UK airline behind British Airways and Easyjet.
Shares of Games Workshop Group (GAW) jumped after it issued a forecast-beating trading update. The company, which owns and licences the Warhammer game, said that it had performed well since its last update in September, with both sales and profits improved on the same period last year. Royalties were “significantly ahead of the prior year, driven by the timing of guarantee income on signing new licences”. As a result, the group upgraded its first-half guidance, forecasting sales up 12% to at least £140 million and pre-tax profit up 35% to not less than £55 million. Charles Hall, an analyst at Peel Hunt, its house broker, lifted his full-year forecasts by about 9%.
Phoenix Group Holdings (DI) (PHNX) said that Andy Briggs, 53, would join the group on January 1 and would formally replace Clive Bannister, 61, in March after a handover. Mr Briggs, who has spent more than 30 years working in the sector, was in the running for the chief executive’s job at Aviva, where he was in charge of the UK division, but was beaten to the position by Maurice Tulloch, 50, who ran the international business. He is also a former executive with Prudential and chairman of the Association of British Insurers, the industry body.
Funding Circle (FCH) has started diverting some borrowers away from its peer-to-peer lending site to rivals and traditional banks. The company, which aims to break the stranglehold of traditional lenders, is understood to be referring new customers to French bank BNP Paribas, as well as fintech competitors including small business lenders Iwoca and MarketInvoice. A source close to Funding Circle said the decision was made as a way to help borrowers seeking larger unsecured loans above £500,000, instead of turning them away. Funding Circle, led by Samir Desai, receives a fee for the referral.
The chairman of grocery chain Morrison (Wm) Supermarkets (MRW) is set to take the same role at gambling giant Flutter Entertainment as it closes in on an £11bn merger. Flutter Entertainment (FLTR), the owner of Paddy Power, is drawing up plans to appoint Andrew Higginson as chairman; he joined its board as a non-executive director last month. The imminent appointment raises the prospect of former Tesco executive Higginson, 62, stepping down from the board of the Bradford-based FTSE 100 supermarket. Higginson is understood to be in line to take over from Gary McGann, 69, when he retires from the gambling giant, where he is paid €450,000 (£390,000). A source suggested it could be announced as early as the annual meeting in May.
The German discount giant Lidl is set to ramp up the pressure on the big four supermarkets with bold plans to open another 230 stores. Christian Hartnagel, UK boss of the grocery chain, plans to open the extra stores in the next three years, taking its total to 1,000 by 2023. That accelerates Lidl’s growth plans after it previously said it would open 50 to 60 stores a year. Lidl and fellow discounter Aldi continue to spread across the UK despite the efforts of Morrison (Wm) Supermarkets (MRW), Sainsbury (J) (SBRY), Tesco (TSCO) and Asda to narrow the price gap that has allowed their upstart rivals to undercut them dramatically. Aldi plans to open about 50 stores a year for the next two years, and between them the discounters now account for 14% of the UK grocery industry, according to researcher Kantar Worldpanel. That is up from just over 5% in 2008. The German companies initially focused their expansion on areas where land was cheap, but are now pushing harder in London and the southeast, where the higher rents have historically acted as a deterrent. In recent years, they have both invested more heavily in their premium ranges, which has helped draw in more affluent shoppers.
The productivity crisis can be solved if big companies work more closely with the small businesses in their supply chain, according to a campaign launched this week aimed at boosting the output of Britain’s workforce. Companies including Amazon, Google, BAE Systems (BA.) and Rolls-Royce Holdings (RR.) will promise to boost the UK’s productivity by encouraging greater adoption of tech skills among their suppliers and offering mentoring programmes for managers. In total, 100 large corporations will sign up to the project run by Be the Business, a productivity programme funded by government and private money. Other corporate giants involved include Cisco, Salesforce, British Land Company (BLND) and Aviva (AV.).
American private equity giant Lone Star is understood to be among the bidders stalking parts of Kier Group (KIE) as the embattled builder attempts to raise cash. Kier is fighting for survival after racking up debts of about £500m amid turmoil in the construction industry. The company said in June that it would sell “non-core” assets including its house-building division, Kier Living. It has appointed advisers from CBRE to find a buyer for its investment and development arm, Kier Property. The division includes the Arena Central scheme in Birmingham, which it took control of last year for £30m. Early bids for the property business are understood to have been due last week, with several parties signalling an interest, including distressed-assets specialist Lone Star.
National Grid (NG.) is set to reveal a dip in profits when it reports half-year results on Thursday, as the threat of nationalisation hangs over it. Analysts expect the operator of gas and power transmission networks to post underlying pre-tax profits of £748m for the six months to the end of September, against £816m for the same period last year. The profit slide comes after August’s power cut, which knocked out 5% of the country’s power supply and caused blackouts. Two large power generators — the Hornsea wind farm off the Yorkshire coast and the Little Barford gas-fired power plant in Bedfordshire — failed simultaneously, leaving millions of commuters stranded on trains and at railway stations.
ITV (ITV) has seen advertising sales lifted by its televising of the Rugby World Cup. Analysts expect the broadcaster of Jane Austen period drama Sanditon to record a 0.5% rise in ad sales for the three months to September when it updates the market on Tuesday. The Rugby World Cup is expected to have attracted more advertisers — although the update will cover only the start of the competition. It comes after ad sales at ITV fell during the first and second quarters by 7% and 2% respectively. Uncertainty over Brexit caused advertisers to cut spending and the broadcaster has struggled to match last year when it was boosted by the football World Cup in Russia.
FDM Group (Holdings) (FDM) trains graduates and former servicemen and women to become IT experts and then contracts them out to blue-chip companies. FDM’s staff specialise in software testing, development and helpdesk services. HSBC is one of its biggest customers. The bank’s cost-cutting drive sparked concerns that FDM’s contract could be hit. That, coupled with fears that a Brexit blow to the economy could choke off demand from customers such as the government, has rattled investors. While rival IT services firms suffered when the financial services sector reined in costs during the banking crisis 11 years ago, FDM proved resilient. It recorded sales growth of 4.8% and 1.3% respectively in 2008 and 2009 — and remained profitable. Part of that is down to FDM’s price advantage: it charges a third less than the market rates. Analyst Peter McNally at Panmure Gordon backs FDM to remain strong, with sales up 10% to £270m and profits up 6% to £54m for the year. Of the £40.5m in expected net operating cash flow, he thinks £35.3m will be paid in dividends. McNally has set a target of £11.40 — 51% above the current share price. As digital transformation and the AI revolution sweep through the workplace, the need for IT services will strengthen. FDM should be a winning bet. Buy.
