Michael O’Leary, chief executive of Ryanair Holdings (RYA), wrote to Sajid Javid, the chancellor, yesterday threatening action if the government did not clarify what support had been given to Flybe Group (FLYB) and whether the duty “holiday” would be extended to other airlines, including Ryanair, easyJet (EZJ) and BA. Mr O’Leary said Ryanair was deeply concerned and shocked by the bailout, which “distorts fair competition between airlines, clearly constitutes illegal state aid, and represents a badly thought-out bailout of a chronically loss-making airline model in the UK”. He told The Times that it was a scam, dubbing it state support for a “bunch of billionaires”, including Sir Richard Branson, the Virgin Atlantic tycoon. Ministers have said Flybe is important to the UK’s regional connectivity and economies. The government has defended the rescue deal and a government spokesman said that ministers had “not given any state aid to Flybe”. The carrier is the UK’s largest regional airline and operates just over half of domestic flights outside of London, carrying eight million passengers last year. It flies between 71 airports across the UK and Europe, including Southampton, Exeter, where it is based, and Aberdeen. The deal has triggered a backlash from the industry with International Consolidated Airlines Group SA (CDI) (IAG) claiming that it constitutes illegal state aid. IAG has filed a complaint to the EU. Willie Walsh, the outgoing chief executive called it a “blatant misuse of public funds”.
One of the world’s biggest law firms advised Lekoil Ltd (DI) (LEK) on a supposed deal with the Qatar Investment Authority that turned out to be fake, The Times has learnt. Norton Rose Fulbright is understood to be the “retained UK legal counsel” that gave the Aim-quoted Nigerian oil explorer advice before it signed the bogus $184 million loan deal. The disclosure that such an established law firm did not spot the apparent fraud may be embarrassing for Norton Rose Fulbright but adds new intrigue to the emerging scandal. Sources say the fake representatives of the QIA conducted a highly sophisticated operation including numerous meetings in the Middle East and their authenticity was not questioned by anyone involved in the deal.
Whitbread (WTB) Boris bounce juddered to a halt yesterday after a warning over rising costs and continuing economic uncertainty sent the Premier Inn operator’s shares tumbling by more than 5%. The 250p fall to £45.87 follows a 20% jump since October on the back of optimism that the British-based budget hotel chain would be a beneficiary of any rise in consumer confidence resulting from a Tory majority in the election. The group was buoyed by the £3.9 billion sale a year ago of the Costa coffee chain to Coca-Cola, enabling it to return £2.5 billion to shareholders, but trading at its budget hotels has proved tough and last year it launched a £220 million three-year cost-saving programme. Alison Brittain, the chief executive, admitted the political and economic environment and the continuation of “sustained industry inflation” meant it remained “difficult to predict business confidence in the short term and its impact on the market”. However, she insisted the company had the financial strength and business model to tap into the “significant structural growth opportunities in the UK and internationally”.
Pearson (PSON) is in danger of losing its place in the FTSE 100 for the first time after it warned that profits will fall again this year and its finance director resigned. The publisher lost up to 14% of its value yesterday after admitting that the downturn at its American higher education arm was gathering pace. Revenues at the division fell 12% last year as sales of textbooks tumbled 30%. The business accounts for a quarter of Pearson’s turnover and has been struggling as students ditch print for cheaper online alternatives. The turmoil at its largest division will reduce adjusted operating profits to between £500 million and £580 million this year, Pearson said in a trading update. Earnings for last year would be £590 million, at the bottom of a forecast range the group cut three months ago.
A surge in festive sales could push Primark to a record £1 billion profit this year as it puts its struggling high street rivals in the shade. The low-cost fashion retailer, owned by Associated British Foods (ABF), said sales rose 3% in the 16 weeks to January 4, boosted by new store openings. Like-for-like sales increased for the first time since 2017 after an overhaul of its business in Germany and an improved performance across Europe. Sales in Britain rose by 4%, helped by its new stores, but like-for-like sales dropped marginally. John Bason, ABF’s finance chief, said he was “pleased with the UK performance because we demonstrated that we outperformed the wider market”. Primark’s like-for-like sales fell by 0.5 per cent but Britain’s clothing, footwear and accessories market was down by between 1 per cent and 2 per cent, according to Kantar figures, meaning that the UK’s biggest retailer continued to gain market share. Primark said that it had a “huge” rise in gift sales, particularly boosted by its Harry Potter licensed products that included a wooden advent calendar based on the Hogwarts Express train.
Hays (HAS) blamed Australian bush fires and French strikes as it warned shareholders to expect a £24 million slide in profits for the six months to December. Shares fell after it said operating profits would be about £100 million for its first half, less than the £105 million expected and down from £124 million reported for 2018. Alistair Cox, chief executive, said: “Growth slowed markedly in December, driven by specific events in key markets: general strikes in France, tragic Australian bushfires and the UK election.” Total fees in the three months to December fell 7%, while the decline was 4% after adjusting for currency movements.
BT Group (BT.A) and other telecoms companies yesterday pressed the government to ease business rates on new broadband networks at a meeting in Downing Street. Philip Jansen, BT’s chief executive, as well as bosses from Virgin Media and smaller providers met Boris Johnson and Baroness Morgan of Cotes to discuss ambitious plans to meet the prime minister’s pledge to provide “gigabit” speed broadband to all premises by 2025. They are understood to have urged ministers to reduce business rates on the building of new broadband infrastructure by extending an exemption “holiday” from five years to 20. The companies hope the government will include the measure in the budget in March. The meeting comes after the regulator last week outlined proposals to increase competition in broadband infrastructure. market.
Shares in Brown (N.) Group (BWNG) lost a quarter of their value yesterday after the owner of the Jacamo fashion brand issued a profit warning, blaming a “highly promotional” retail market and fewer credit customers. The business said its profits would now be between £70 million and £72 million, down from its previous forecasts of £78 million to £84 million. It also warned that profits were unlikely to grow in 2021. The company said it had reacted to “wide sweeping regulatory intervention” across the financial services sector by making changes to the way it managed its debtor book. This brought lower debtor balances and a fall in fees as fewer customers entered into arrears. Last year it made 35% of gross profits from financial services.
Diploma (DPLM) shareholders have revolted against the pay package for the engineering company’s new boss, who earned a full bonus last year despite being in the role for only seven months. As a result ISS, the shareholder advisory group, recommended that investors vote against the remuneration report, which 44.2% of those who voted did at Wednesday’s annual meeting. The other point of contention among shareholders was that Diploma also tweaked its long-term bonus scheme. Before, its chief executive could earn up to 1.75 times their salary in share options which would vest over the next three years if certain targets were met. However, Mr Thomson, 47, has the chance to earn shares worth 2.5 times his salary. ISS acknowledged that the change was made to attract a high-calibre candidate but it raised concerns that new joiners would also want improved bonus schemes, called long-term incentive plans.
Sensyne Health (SENS) closed down 12p at 39½p as the selloff continued. It floated at 175p in August 2018 when it was valued at £225 million. The Aim-quoted biotech company has been hit by governance concerns after it emerged last year that it had paid about £1 million of undisclosed executive bonuses. It has also been exposed to the crisis at Woodford Investment Management, which was a leading shareholder, and suffered turmoil in the boardroom where a number of directors have departed. Sensyne Health uses artificial intelligence algorithms to analyse anonymised patient data to generate intellectual property that can be licensed to pharmaceutical companies for the discovery of medicines. One market source said the fall had been exacerbated by thin trading and the stock being tightly held by Lord Drayson, 59, and his wife, who own a combined 29%.
Tempus – Croda International (CRDA): Hold. Company is resilient but markets are going to be tough probably for at least a year
Tempus – AO World (AO.): Avoid. With profitability at least two years away risks are high
