Thomas Cook Group (TCG) chances of survival are in the balance as it struggles to meet a demand from Royal Bank of Scotland and its other banks for an extra £200 million of funding. The travel company risks going bust if it cannot secure the funds, which would force the government to launch the biggest peacetime repatriation of British citizens at an estimated cost of £600 million. It is understood Thomas Cook has held talks with ministers about contingency measures. A collapse would hit an estimated 150,000 UK holidaymakers as well as more than 500,000 customers in overseas source markets, mostly Germany and Scandinavia. One airline captain suggested that preparations were already being made for repatriations: “The jungle drums are beating about lots of unusual handling requests for early morning arrivals on October 1 at Gatwick.”
Microsoft has nominated Emma Walmsley, the chief executive of GlaxoSmithKline (GSK), to its board of directors. In an announcement last night, the Seattle-based software giant described Ms Walmsley, 50, as a “valuable addition to the board,” while also reporting the planned departure of two of its longest serving board members. Ms Walmsley became Glaxo’s first female chief executive in 2016, when she took over from Sir Andrew Witty, who had run the company for eight years. Prior to that she was head of Glaxo’s consumer healthcare division, one of the world’s largest consumer health companies which was established in 2015 after Glaxo’s $20 billion asset swap with Novartis.
Selling its competitors’ clothes online has helped Next (NXT) to report another boost in profits. The fashion retailer yesterday posted a 4% increase in pre-tax profits to £327.4 million for the six months to the end of July while total sales rose by 2.7% to £2 billion. Shares in Next had risen 45% this year as it weathered the high street slump better than its struggling rivals by negotiating shorter, cheaper leases with landlords and capitalising on the boom of online shopping. Lord Wolfson of Aspley Guise, chief executive, said that the “explosion” of internet shopping meant that “in every corner of the country [consumers] can now access a choice of goods, breadth of sizes and selection of brands that no single high street could ever contain”.
Nearly half of Ryanair Holdings (RYA) investors have rejected a pay deal for Michael O’Leary that could hand him €99 million. Shareholders voted in unprecedented numbers against Ryanair’s remuneration report at the company’s annual meeting near Dublin yesterday. They were concerned that the targets for Mr O’Leary to win the payoff are not stretching enough. Just 50.5% of votes at the meeting were in favour. Having lost his billionaire status because of Ryanair’s falling share price — his fortune, much of it tied up in Irish racehorses, is reckoned to have shrunk to about €770 million — it was announced this year that Mr O’Leary, 58, had signed a new five-year contract.
Staff at wealth manager Smith & Williamson will share more than £200 million after it was bought by larger rival Tilney for £625 million. The deal will trigger six-figure payouts for some of its staff. S&W’s shareholders will pocket about half of the proceeds in cash, and get stock in the enlarged company. About 1,200 current and retired employees own 70 per cent, putting them in line for share of more than £200 million. AGF, a Canadian mutual fund provider, owns 30% of S&W. The takeover will create an asset management and advisory group with £45 billion of funds and an enterprise value of £1.8 billion. It will unite two of the oldest names in wealth management.
The outgoing chief executive of Saga (SAGA) has said it is too early to consider a break-up of the travel-to-insurance group amid pressure from a US activist investor. Lance Batchelor announced plans in June to step down next year a few months after Saga halved its dividend, warned on profits and revamped its struggling insurance business. The upheaval was followed by a shareholder revolt over executive pay at its annual meeting that month and the emergence in July of Elliott Capital Advisors, the activist shareholder, with a 5.1% position, triggering speculation Saga would come under pressure to break itself up. In its first-half results yesterday, Mr Batchelor, 55, updated investors on the revival, saying the board was “open-minded about the optimal structure of Saga” and there had been “constructive conversations” with Elliott. “We are not religiously wedded to one particular structure. What we want do is create shareholder value.”
A review by the City watchdog that found “limited evidence” that new European rules on investment research had harmed the coverage of smaller companies has been greeted with incredulity by stockbrokers. The Financial Conduct Authority said yesterday that it had examined the impact of the introduction in January 2018 of the Markets in Financial Instruments Directive (Mifid) II regulations and that it had found that most asset managers “can still access the research they need”. “We found no evidence of a material reduction in research coverage, including for listed small and medium enterprises (SMEs),” the regulator said. But the findings were questioned by veterans at stockbroking firms that produce research whose results are sold to fund managers. One head of research at a broking firm said the FCA’s survey results were “bullshit”.
JD Sports Fashion (JD.) takeover of smaller rival Footasylum (FOOT) could lead to higher prices and less choice for shoppers, the UK’s competition watchdog has said. Unless JD Sports can address these concerns, the Competition and Markets Authority said it would carry out an in-depth investigation into the £90 million deal. Shares in the retailer fell 20½p to 692p. Colin Raftery, senior director at the CMA, said: “JD Sports and Footasylum have been competing strongly across the UK, with a sports fashion offering that few other retailers are able to match.” Mr Raftery added: “JD Sports is already by far the largest player in the growing sports fashion sector so any deal that results in it buying up one of its closest competitors could clearly give cause for concern.”
Royal Mail (RMG) has been found guilty of price-fixing in the parcels market in what the regulator Ofcom described as a serious breach of competition law. The company’s Parcelforce division co-operated with a Nottinghamshire-based business trading as Despatch Bay to share out customers and agree not to undercut each other. Ofcom said Royal Mail had acted illegally. Most of the collusion occurred after it was sold off by the Conservative-led government and floated on the stock market in 2013. The company was caught price-fixing before. In 2016 Royal Mail’s European operation GLS was fined €40 million for collusion across the industry in France. In 2018, GLS was found to have been part of a similar cartel in Spain.
Kier Group (KIE) stumbled to a £245 million pre-tax loss as the struggling construction company counted the cost of restructuring its bloated middle management and contracts that went wrong. The company’s annual results yesterday included a £56 million bill from a restructuring that will lead to 1,200 job cuts as well as a £44 million charge because of problems building the new Broadmoor hospital in Berkshire and a £27 million hit from terminating a contract to empty the bins in Cheshire. Kier has been billed as the construction business most likely to follow rivals Carillion and Interserve into financial difficulty. Its borrowings in the year to June 30 averaged £422 million, up by 12% for a company whose market value is now only £215 million.
Volatile stock markets have boosted trading at IG Group Holdings (IGG) as it shows signs of recovering from a clampdown on betting on financial markets. IG reported revenue of £129.1 million in the three months to the end of August, its first quarter, which was flat compared with the same period last year when it was partly affected by a month of stricter European regulation. The company said it had benefited from an increase in the number of active clients and from more client trading activity as a result of the “favourable market conditions” in August. Stock markets were choppy last month, buffeted by an escalation in US-China trade tensions and the bond markets indicating a risk of recession.
The world’s largest spirits maker hailed a positive start to the year yesterday, although it cautioned that it would “not be immune from significant changes to global trade policy”. Diageo (DGE) said it expected organic net sales growth for the year “toward the mid-point” of the target range of 4% to 6%, with operating profit growing by about 6%.
The market warmed to Centrica (CNA) after it was described by analysts as “the value wild card” among UK utilities stocks. Analysts at Jefferies are fans of the turnaround plan and believe Centrica is worth a punt. “We see Centrica’s new strategy delivering stable earnings and a more resilient dividend and balance sheet,” they said in a research note to clients. “Clearly, there are execution risks relating to cost-cutting measures and disposals, but with the stock trading at a 50 per cent discount to the utility sector (at historical lows of 8x forward price-to-earnings) and offering a 6.7 per cent cash yield, we see the risk-reward as attractive.”
International Consolidated Airlines Group SA (CDI) (IAG) continued its recent ascent as Morgan Stanley threw its support behind the airlines group, for which it has an “overweight” rating — a “buy” in old money. The chin-strokers highlighted a host of risks for the company, including Brexit, its well-documented IT issues, and the need to invest heavily if it wants to maintain market share in its premium — and most profitable — cabins. There is also the strike action, which Morgan Stanley believes could cost it up to £130 million this year. So why are the analysts still bullish? “While we acknowledge there are risks to the investment story, these are more than priced in and we think IAG’s premium returns are not appreciated by investors.”
BT Group (BT.A) shares rallyied 3½p to 177¼p. The rise came amid signs of progress on government and industry attempts to lay the ground to hit the government’s target of universal full-fibre broadband across Britain by 2025. Nicky Morgan hosted her first meeting yesterday as the new culture secretary with the bosses of the telecoms infrastructure providers including Openreach, BT’s networks arm, and Talktalk. Charles Taylor, which among other things helps insurers handle complex claims, surged after agreeing to be taken private in a £261 million deal. The company received a 315p-a-share offer from the private equity house Lovell Minnick, which its board urged shareholders to accept. Investors seem to be banking on a better offer coming forward.
Hargreaves Lansdown (HL.) has scrapped the exit fee it charges customers moving to another provider and called on rivals to do the same as it tries to get back on the front foot after being tarnished by the Neil Woodford fund controversy. As part of an overhaul in which it dropped nine charges, the stockbroker and investment manager abandoned its practice of hitting departees with a fee of £25 plus VAT plus £25 for each fund or share they held. It means the FTSE 100 group will levy just two fees, one for managing investments and another for dealing shares. Its move follows a lead set by Interactive Investor and Fidelity and puts pressure on rivals to do the same. Customers will save £3 million in charges.
Tempus – AJ Bell (AJB): Buy. High-quality growth business that should generate plentiful rewards for investors over time
Tempus – Vivo Energy (VVO): Hold. Exposed to growth and uncertainty of African markets
