TP Icap sues over soured £1.3bn deal with Nex Group. City broker claims Michael Spencer firm broke promises. The broking giant TP ICAP (TCAP) has launched legal action against Nex Group (NXG), the trading business built up by the Tory donor Michael Spencer, accusing it of breaching the terms of a £1.3bn deal. The City firm Tullett Prebon bought the voice-broking business of Icap, Spencer’s company, in late 2016. The combined entity was renamed TP Icap, with the remainder of Icap becoming Nex. The takeover almost doubled Tullett Prebon’s voice brokers — dealers who match-make for banking clients looking to take bets in financial markets — to more than 3,000, and paved the way for Spencer’s exit. However, the integration has turned into a disaster for TP Icap. John Phizackerley, its chief executive, was ousted in July as a profit warning and a £25m cut to a £100m cost-savings target sent the shares crashing. They closed at 299p on Friday, down 44% since the start of the year. In papers filed at the High Court, TP Icap accuses Nex of breaking deal warranties that promised the voice-broking business was not exposed to any significant litigation. It says the business told staff they were entitled to incapacity benefits up to the age of 65 if they needed to take more than six months off work due to illness, when in fact the cut-off age was 55. TP Icap claims this meant staff had “actual or potential legal claims” against the voice-broking business when the deal was signed, representing “a potentially open-ended liability”. It says it has identified 12 workers who should have received total benefits of more than £15m. TP Icap is seeking costs, damages and interest. Nex declined to comment yesterday.
Travis Perkins seeks replacement for chief executive John Carter after shares slide. The builders’ merchant Travis Perkins (TPK) is hunting for a new chief executive as consumer confidence tanks. The FTSE 250 chain is understood to have hired headhunters to find a replacement for John Carter, who has been in post since 2014. Travis, which owns the Wickes and Toolstation brands, is slashing costs and selling businesses, including its plumbing and heating division, to cope with weak market conditions. The search has been started by chairman Stuart Chambers, who joined 13 months ago and also chairs mining giant Anglo American. Among the leading contenders is chief operating officer Tony Buffin. Carter, 57, who joined as a management trainee in 1978, has helped Travis expand through a series of acquisitions, buying Wickes and BSS, a distributor of industrial heating equipment.
Véronique Laury is running out of time to fix Kingfisher (KGF). Chief executive Véronique Laury is falling short of her over-optimistic promises for the Anglo-French DIY giant. Kingfisher’s chief executive showed a clear grasp of the City’s tastes when she took to the podium at the London Stock Exchange for her debut presentation. Véronique Laury, the fiery French successor to the patrician Sir Ian Cheshire at the helm of the Anglo-French DIY conglomerate, declared that once her five-year plan had run its course, investors could look forward to no less than £500m of extra profits a year — an eye-popping 73% increase. Three years on, Laury’s ebullience has given way to excuses, and she finds herself fighting for survival. Sales at B&Q in Britain and Castorama, Kingfisher’s biggest French business, are going backwards, group profits have barely moved and its cash reserves are being plundered to fund Laury’s costly push to consolidate Kingfisher’s unwieldy buying operations.
Hammerson accused of masking debts. Shopping centre owner Hammerson (HMSO) has been accused of understating its true debt position through creative accounting. Hammerson has kept its headline loan-to-value (LTV) — the ratio of its debts to its assets — below its self-imposed 40% limit by accounting for its retail outlets business, which includes the popular Bicester Village, in a way that is the most flattering, rather than most appropriate, according to Barclays analyst Paul May. The company said its accounting was transparent and it disclosed its LTV using both calculations.
Funds such as Cerberus queue up for Enterprise Inns pubs sale. A £350m portfolio of pubs put up for sale by the company formerly known as Enterprise Inns has attracted bids from a string of funds looking to cash in on its lucrative property assets. Davidson Kempner, Cerberus, NewRiver REIT (NRR) and Aries Capital are all thought to have tabled second-round bids for the 370 pubs, which are understood to be on the block for between £320m and £350m. Owner EI Group (EIG) has hired Rothschild to run the sale of its commercial property portfolio, which is made up of pubs free of ties to breweries and other former pubs converted to restaurants or convenience stores. The move was met with concern by beer campaign organisation Camra, which urged it not to sell the pubs to property developers.
Interserve mulls crown jewel sale of RMD Kwikform. The struggling support services giant Interserve (IRV) is exploring plans to hand a £250m building materials division to its lenders to try to salvage its finances. The company, which is also in talks with lenders over a debt-for-equity swap, is considering handing them RMD Kwikform as part of the deal, Sky News reported. Interserve, which builds schools, hospitals and waste plants, has been hammered by cost overruns in its energy-from-waste division. It told shareholders last week they were likely to face “material dilution”. Its shares ended the week at 13.4p, valuing the £3.3bn turnover company at £20m. However, it is unclear whether handing over RMD, one of its most profitable divisions, would be enough to repair its battered finances and preserve it as a listed company. Interserve has more than £600m of debts. Talks are understood to be at an early stage.
Kenny Alexander’s late-night poker skills appear to have come in handy for his day job. As the boss of the £4.2bn gambling giant GVC Holdings (GVC), the FTSE 100 owner of brands such as Bwin, Ladbrokes Coral and Sportingbet, Alexander has shown he knows how to play his cards right. While Britain’s biggest bookmakers have been hammered by ever-increasing regulation, which threatens to take a chunk out of their revenues, the Ayrshire-born chief executive has kept a trick up his sleeve. A key parliamentary vote tomorrow to enact legislation to reduce the maximum stake punters can wager in one spin on controversial betting terminals — from £100 to £2 — is set to hand GVC an early Christmas gift. On the surface, a purge on fixed-odds betting terminals (FOBTs) — dubbed the “crack cocaine” of gambling — is bad news for bookmakers. In the most part, it is. GVC has said it plans to close about 1,000 of its 3,500 shops when the tougher rules come in. However, it has also provided GVC a way to slip out of a £676m bill. When Alexander, 49, offered to buy Ladbrokes Coral last year, he agreed a deal with its former shareholders to pay more if the law did not change before the end of March. The shares are down more than 43% since July. However, now GVC can keep hold of its cash, those wary shareholders may want to take a closer look. GVC is widely viewed as one of the UK’s stronger operators. It has been among the most active in striking deals to take advantage of the legalisation of sports betting in the US. Analysts at Berenberg predict it could have 25% of the US market by 2023 through its tie-up with the casino giant MGM. The government measures have also been well flagged to the market by the company, which expects to report sales of £3.5bn this year. It is highly cash-generative, with underlying earnings expected to reach £739m. Cost savings from its acquisition of Ladbrokes should also bear fruit. Analysts’ expectations range from a bullish £15 from Citi, to £10 from Investec. It is worth taking note of recent share purchases — Stephen Morana, senior independent director, splashed out £99,623 last week. At 721.5p, GVC is trading on a low multiple — 8.8 times forward earnings — and it is well-placed to endure the pressures ahead. Buy.
Balfour Beatty (BBY) is close to successfully completing its four-year turnaround and says that its profit margins are back to industry norms, the business is performing better than expected and that it has more cash in the bank than forecast. An end-of-year trading update from Britain’s largest construction firm sent its shares up by 9¼p on the day to 255¼p, a rise of 3.7%. That helped to claw back a 12% fall this month after the unexpected rights issue fundraising by its smaller rival Kier, which was accompanied by a warning that lending banks had slapped a moratorium on financing the construction industry. Balfour Beatty employs 30,000 people and is at the core of the UK’s infrastructure. The company built and maintains the M25 London orbital motorway, it is a key contractor on the London-Birmingham HS2 railway and it is likely to play a significant role in the creation of a third runway at Heathrow. It also has large operations in the US and Hong Kong. Balfour Beatty said: “Group performance for the year will be above previous expectations as a result of an additional infrastructure investments sale in December. The group now forecasts that the 2018 infrastructure investments profit from disposals will be around £65 million.”
There’s a dogfight under way between the Civil Aviation Authority and Ryanair Holdings (RYA) over whether airlines should pay up when planes are cancelled due to strikes. Having axed 800 flights over the summer, the Ryanair boss Michael O’Leary insisted: “No EU261 compensation is due to customers whose flights are cancelled because of internal strike action, as such strikes are beyond the airline’s control.” So, no €250 compo for the 120,000 disrupted passengers. It’s a stance the CAA disputes, so much so, it’s taking “enforcement action”.
Ladbrokes’ owner GVC Holdings (GVC) hit the jackpot after a parliamentary vote on changes to fixed-odd betting terminals was scheduled for next week. The FTSE 100 gambling group has been under scrutiny as dealers feared the vote on Theresa May’s Brexit deal could delay the legislation to cut maximum stakes on fixed odds betting terminals from £100 to £2. GVC has an incentive to see it approved by the end of March. As part of its deal to buy Ladbrokes, it is liable to pay around £670 million to Ladbrokes’ shareholders if the move is not introduced before that deadline. The scheduling of a vote in both houses of parliament on Monday and Tuesday is a “significant positive catalyst for GVC shares”, analysts at Citigroup noted. “Given the cross-parliamentary approval there has been for this gaming machine regulation, we expect the vote to be uncontentious.” It will remove the “tail risk” of a payout that represents 18% of GVC’s market capitalisation, and has kept some investors on the sidelines, they added. Citi issued a “buy” rating and a one-year price target of £15.00 — more than double its current share price. Its rating was based on analysis of its future cashflow and valuation of its divisions.
Miners were among the biggest losers as weak economic data from China, the world’s largest metals consumer, sent prices into the red. Evraz (EVR) fell almost 19p to 464½p, Antofagasta (ANTO) dipped 16½p to 778p and Glencore (GLEN) closed down 5½p at 289½p.
Housebuilders led a fall in domestic stocks owing to concerns Theresa May will struggle to secure tweaks to her Brexit deal, making a disruptive no-deal scenario more likely. Persimmon (PSN) fell 52½p to £18.97, Barratt Developments (BDEV) dipped 12¼p to 440½p and Berkeley Group Holdings (The) (BKG) was down 66p to £34.32.
Dealers looking for a “buy” were drawn to Indivior (INDV), the opioid addiction treatment maker that has been unloved since a court ruling last month paved the way for a rival to sell a generic version of its treatment. Analysts at Bank of America Merrill Lynch judged the shares have been over-sold and raised their price target to 301p from 298p. The shares closed up 7¼p or 8.3% at 96¼p.
Capita (CPI) fell than 5% after the government’s auditor found that the outsourcer had consistently missed British army recruitment targets as part of a £495 million ten-year contract. The total shortfall ranged between 21% and 45%, the National Audit Office said. The report said that Capita had been hit by a £26 million deduction in payments between August 2015 and 2018 as a penalty for missing its performance targets for the number of recruits in 37 out of 38 months. The company’s shares fell 6p to 108½p.
Superdry (SDRY) directors, who were criticised by analysts at Liberum this week for not demonstrating confidence in their own strategy by buying shares, retaliated by splashing out on a combined total of almost 100,000 shares. Euan Sutherland, chief executive, was the biggest spender, buying 19,856 shares for £74,000. The shares have been under pressure from a campaign by the company’s founder and former director Julian Dunkerton to see the casual clothing retailer reverse its strategy to reduce the size of its product range. The retailer’s shares were boosted by 3¾p to 405p.
Crispin Odey, founder of the hedge fund Odey Asset Management, once again kept everyone guessing as to his thoughts on the future of as he upped his stake once again to 4.4 per cent. The hedge fund tycoon has previously defended the Sports Direct chief executive Mike Ashley against critics, calling him a “natural winner”. Sports Direct edged up ½p to 235¾p.
SThree (STHR), a company that provides specialist recruitment services for the science, technology, engineering and mathematics industries, gained almost 4% after management upped its profit guidance for the year. Adjusted profit before tax will be “slightly ahead of the top end” of consensus, the company said, citing strong growth in continental Europe, with gross profits up 20%. Its shares advanced 10p to 270p
Sainsbury (J) (SBRY) and Asda have been given more time to respond to the competition inquiry into the £12 billion merger between the two grocers. The retailers were forced to resort to legal action after the Competition and Markets Authority refused a request for an 11-day extension. They had asked for the extension so that they could “respond to a large amount of material recently provided to us”. Sainsbury’s and Asda, which is owned by Walmart in the United States, announced a plan to join forces in April to create a group with 330,000 staff and £51 billion of revenues. The CMA launched an in-depth investigation, warning that the merger could pose a substantial risk to competition in 463 areas across the country.
