An energy challenger set up a decade ago is closing in on an audacious deal to buy the electricity and gas supply business of power giant SSE (SSE), upending the industry. Ovo Energy, founded by Stephen Fitzpatrick, is in advanced talks for the struggling household supply division, SSE confirmed last night. It plans to pay £250m upfront, with the promise of further payments. A deal would add SSE’s 5.7m domestic accounts to Ovo’s 1.5m — putting it second only to British Gas, which has 12m domestic accounts. The deal illustrates the seismic changes sweeping through an industry that has been shaken by the growth of renewable power sources such as wind and solar, carbon taxes and price caps, undermining once-stable companies. The market share of the big six energy suppliers — British Gas, Eon, Npower, SSE, Scottish Power and EDF — has plummeted from 99% in 2011 to about 73%. They have been undercut by smaller and more nimble brands such as Ovo, Octopus and Bulb. Oil and gas giant Shell has also entered the market with plans to become one of the world’s largest power suppliers.
The City watchdog has launched an investigation into alleged fraud at five-a-side football group Goals Soccer Centres (GOAL), as a report claims that directors deleted emails to avoid detection. The Financial Conduct Authority (FCA) has acted after Goals, backed by Mike Ashley’s Sports Direct, said it had uncovered “improper behaviour” stretching back almost a decade. The inquiry comes as a report, prepared by forensic accountants at BDO, alleges that former finance chief Bill Gow sent email requests to former chief executive Keith Rogers asking him to “work your usual magic” and create false invoices. According to the report, the pair also made adjustments to the financial results with the intention of preventing Goals breaching key banking covenants with lender Bank of Scotland.
Royal Bank of Scotland Group (RBS) is set to make Alison Rose its first female chief executive as Ross McEwan prepares to leave the taxpayer-owned lender. Rose, head of commercial and private banking at RBS, is understood to have fought off competition from Ian Stuart, head of HSBC UK, and Mark Bailie, who leads Bó, RBS’s new digital bank. The appointment would make Rose, 49, the first woman to run any of the big four banks — RBS, Barclays, Lloyds and HSBC. Sir Howard Davies, RBS’s chairman, has been leading the hunt for McEwan’s successor since April. Rose’s selection, first reported by Sky News, could be announced this week. It is subject to regulatory approval, which can cause delays. One source said the selection process had extra complexity as the government is the bank’s biggest investor with a 62.4% stake, a legacy of its £46bn bailout during the 2008 financial crisis.
HSBC Holdings (HSBA) ran two separate board processes before deciding to oust John Flint as chief executive — one of which excluded its chairman. Mark Tucker asked the HSBC board to hold a parallel process on Flint’s future, led by Jonathan Symonds, deputy chairman. The highly unusual move will fuel speculation about a breakdown in relations between Flint, 51, and Tucker, 61, who, in effect, recused himself from part of the decision-making. Verdicts on executives are typically taken by the board in a single process led by the chairman. The news of Flint’s exit after barely 18 months at the top of the bank shocked the City. HSBC grooms chief executives who tend to stay in the job for years.
A notorious short-selling activist has joined the attack on litigation funder Burford Capital (BUR), claiming its shares were overpriced before last week’s broadside by Muddy Waters. Gotham City Research, which toppled the insurance technology provider Quindell in 2014, is understood to be preparing to publish its own criticism of Burford, which was hit by a scathing report last week from Muddy Waters, another short-seller. Gotham will reveal it made a bet against shares in Burford, which funds lawsuits, last year over fears about its debt-fuelled litigation, but did not make its concerns public.
Britvic (BVIC) is preparing to cut payments to 6,000 members of its final salary pension scheme. The drinks giant, which employs 4,700 people, including 1,770 in the UK at Leeds, Rugby and Hemel Hempstead, is seeking court approval to scrap the retail prices index as a measure of inflation in favour of the consumer prices index. RPI stands at 2.8%, while CPI is 1.9%. That would result in lower annual increases for the 6,000 former and 250 current employees in Britvic’s defined benefit pension scheme, meaning they could miss out on up to £12,000 over the course of their retirement, according to research on the shift to CPI by trade union Unison. Switching from RPI to CPI for pension increases, which saves companies money, has proved controversial. The High Court dismissed an application by BT to switch the rate for 80,000 pension fund members last year. However, public sector pensions are now calculated using CPI rather than RPI.
Eve Sleep PLC (EVE) and Simba are in early-stage merger talks as the loss-making online mattress retailers look to shore up their struggling businesses. Simba is said to be driving talks over a deal that would enhance their buying power and allow them to cut costs. Senior executives have held discussions, with further talks scheduled this week, although a source cautioned they may come to nothing. Chief executive James Sturrock tapped investors for £12m in January to support his refocus on the UK, Ireland and France. Eve posted losses of £19.2m on £34.8m sales last year. Questions linger over Simba and Eve, given that Amazon has entered the market.
Carphone Warehouse is suing the Spanish owner of O2, claiming the mobile network caused it to suffer a £21.7m shortfall in profits by breaching its obligations. The retailer has issued a High Court writ accusing Telefonica of failing to make enough special offers available, refusing to hand over customer data and offering “uncompetitive” standard tariffs. Carphone Warehouse — part of Dixons Carphone (DC.) — alleges that this stopped it hitting sales targets agreed with O2. As a result, the retailer claims, it lost £9.6m of profits plus £4.5m it would have received from Telefonica for achieving targets. Telefonica allegedly said it would make special-offer tariffs available only if Carphone Warehouse accepted a cut in its share of sales, which it refused to do. In addition, Carphone Warehouse claims that Telefonica reneged on a deal to pass on details of customers eligible for upgrades so the retailer could target them with advertising. It claims this cost it another £7.6m in lost profits.
Sirius Minerals (SXX) plan is to mine 20m tons a year of the fertiliser polyhalite and sell it to potato, corn, soybean and rice farmers around the world to boost their crops. Yet Sheffield and the rest of Sirius’s 85,000 retail investors — about a quarter live in Yorkshire and the northeast — now face a potential wipe-out. Last week, Sirius pulled plans to raise $500m (£414m) in high-yield bonds, thereby preventing it from accessing a $2.5bn credit line and $400m of bonds held in escrow. That leaves Sirius rapidly running out of cash — and throws into doubt the UK’s first deep mine in 40 years. Bosses blamed market volatility amid US-China trade tensions. Chief executive Chris Fraser and his bankers at JP Morgan are set for some sleepless nights as they gear up to relaunch the bonds next month. They are betting on calmer markets and more attention from holiday-fresh fund managers. However, success is far from certain, and time is pressing. Sirius is due to run out of cash by the end of September, while the $2.5bn credit line offered by JP Morgan lapses at the end of October if Sirius has failed to raise $500m in bonds. If bosses are looking at other options, they are not saying so. Previously upbeat on the stock, Berenberg analysts last week said that the risk was now “too high to argue that the shares represent an attractive investment”.
These are lean times on Britain’s forecourts: higher car financing costs and confusion over future tax policy on petrol, diesel and hybrid fuel contributed to a 4.1% drop in new car registrations in July, the fifth straight monthly decline. So Pendragon (PDG) is focusing on used cars with Car Store. Car Store has a glut of excess stock and is expected to lose £25m. Pendragon does have some advantages that its competitors lack. It has a stable and profitable fleet leasing business and a growing software business, which licenses tech solutions to other auto retailers. Car manufacturers are being forced to change the way they test for emissions to better reflect real-world driving habits, which could lead to bottlenecks in the supply chain as companies come to terms with changes — a risk flagged last month by Pendragon’s rival Lookers. If manufacturers have fewer shiny new cars to send to forecourts, they may not end up in Britain, because a weak pound means a thinner margin for the manufacturer. Then there is the growing risk of a disorderly Brexit battering the industry and dragging down consumer spending, plus a £240m debt refinancing looming for Pendragon in 2021. Investors could be forgiven for feeling a sense of déjà vu. In 2011, Pendragon shocked the market by announcing a 10p-a-share cash call to help reduce its debts, which then stood at £300m. The brave ones who backed it more than quadrupled their money over the next four years. Pendragon is not yet at that point, and even with the share price near its lowest level for seven years — 11.2p, down by half since January and valuing the group at £157m — investors should steer well clear. Avoid.
