Retail investors may be separated from institutional funds to protect individuals better in the wake of the collapse of Neil Woodford’s business, the head of the City regulator has said. The disintegration of the Woodford Equity Income Fund poses questions about whether large and small investors should be mixed, Andrew Bailey said in an interview with The Times. In June Mr Woodford stopped investors from withdrawing money from his formerly hugely popular £3.7 billion fund after Kent county council tried to take out its £263 million of pension investments. Kent was the last in a string of large investors to request redemptions from the fund, which at its peak was worth £10.2 billion. Kent’s request was “the very proximate cause” of the freezing of the fund, Mr Bailey said. “That’s why I raise the question of mixing retail and non-retail. That was a relatively big part of the residual fund. Even if technically you could have liquidated holdings to meet that order, you are not satisfying the collective investment test,” Mr Bailey, 60, chief executive of the Financial Conduct Authority, said.
The number of junior companies listed in London has almost halved over the past 12 years, leading to speculation that the death of the Alternative Investment Market might be around the corner. Aim was set up in 1995 as a venue for smaller companies to raise capital to fund expansion plans. When it began, it was home to only ten companies, before spiralling to a peak of 1,694 in 2007. There was a small rise in 2014, but the numbers have dropped in every year since then. At the end of September there were 882 companies listed on Aim, a fall of 41 this year. Shore Capital, the stockbroker and corporate adviser, whose business relies on selling the idea of an Aim listing to its clients, is set to drop out soon. Not only are there fewer companies on London’s junior market, but there are fewer initial public offerings, too, while the amount of money being raised has also dipped considerably since its pre-crisis glory days.
Barclays (BARC), HSBC Holdings (HSBA), Royal Bank of Scotland Group (RBS) – Banks should be made to pay larger levies to regulators so that they can tackle the “unacceptable” number of IT failures in the financial services sector, MPs have claimed. The Financial Conduct Authority and the Prudential Regulation Authority must use their enforcement powers to crack down on offending banks, the Treasury select committee has concluded after an investigation into a series of IT failures. Regulators also should be allowed to charge higher fees to the organisations they review so that they can hire staff with the expertise and experience required to improve operational resilience in the sector, the committee says in its report. “For too long, financial institutions issue hollow words after their systems have failed, which is of no help to customers left cashless and cut off,” Steve Baker, who led the Treasury committee inquiry, said.
The founding family of Cobham (COB) may demand a judicial review in an attempt to block a takeover of the company. The company is being bought by American private equity fund Advent International in a controversial £4bn deal that has attracted stiff opposition from the Cobham family. Interventions by Lady (Nadine) Cobham, whose late husband, Sir Michael, was the son of founder Sir Alan Cobham and ran the group, helped persuade the government to refer the takeover to the Competition and Markets Authority (CMA). The CMA’s ruling, due on Tuesday, is widely expected to approve the deal in return for promises from Advent not to cut jobs or move Cobham’s air-to-air refuelling technology out of the UK.
Mothercare (MTC) has drafted in restructuring experts to assess options for its troubled UK business, raising concern for the future of 2,500 employees in 79 stores. The listed retailer, run by Mark Newton-Jones, has hired KPMG amid harsh trading conditions on the high street. Mothercare has been trying to sell its UK business — which lost £36.3m before tax last year as like-for-like sales fell by 8.9% — but has so far failed to find a buyer. Newton-Jones wants to convert the UK operation into a franchise, replicating the structure of Mothercare’s profitable international operations and transforming the retailer into a branding and product supplier.
Lloyds Banking Group (LLOY) will unveil its weakest quarterly results for four years this week, with a fresh hit of up to £1.8bn expected from the PPI scandal. The avalanche of mis-selling claims ahead of the August 29 compensation deadline may even be enough to tip the bank into its first quarterly loss since 2015, one City expert suggested. The consensus view among analysts is that Lloyds will turn a modest profit of £163m for the third quarter. The bank said it could be “misleading and unfair” to highlight one analyst’s work. Thursday’s results are set to be the weakest since the final three months of 2015, when the 254-year-old institution racked up a £507m loss. Ian Gordon, an analyst at Investec, said that until now he had been “bullish” on Lloyds and that it had “outperformed” Britain’s other banks so far this year. However, he has downgraded the shares from “buy” to “hold” and expects Lloyds to report a pre-tax loss of £24m for the three months to the end of September, compared with a £1.8bn profit this time last year.
BP (BP.) made a rare venture-capital investment in Palantir, the CIA-funded data analytics group co-founded by billionaire Peter Thiel, The Sunday Times can reveal. The oil giant bought shares in the private company in 2014, not long after it began working with the California-based venture on digitising its operations, marking an unlikely marriage of Big Oil and Big Data. Palantir is arguably the most controversial company in Silicon Valley — after Facebook — for its work with America’s immigration authorities, as well as its contracts with the Pentagon and the CIA. The company’s software brings together mountains of data and provides intelligence to government agencies and corporations. Alex Karp, 52, Palantir’s chief executive, admitted this year that the company was “highly controversial and unpopular” in liberal Silicon Valley. Palantir renewed its contract with America’s immigration authorities this year. Its software is used to track migrants at the border. BP and Palantir kept the partnership under wraps until recently.
Naspers, the South African interloper hoping to gatecrash the merger of Just Eat (JE.) and a Dutch rival has said its bid for the delivery company is a “full and fair price”, despite demands from investors for a higher offer. Bob van Dijk, chief executive of technology conglomerate Naspers, said the 710p-a-share offer by its Dutch division Prosus, which values Just Eat at £4.9bn, reflected the “investment that is needed” in the group. Prosus has sought to muscle in. Just Eat said last week that it had rebuffed previous offers of 670p and 700p a share before its unwanted suitor unveiled the hostile £4.9bn offer. “We believe a cash offer at a 20% premium is better than an all-share offer,” van Dijk said. “It provides certainty to shareholders and shields them from operational execution risk.” Despite his confidence, shareholders in Just Eat have called for a higher offer. Aberdeen Standard Investments, which has a 5.4% stake, insisted last week that neither Prosus’s bid nor the merger with Takeaway was acceptable.
BT Group (BT.A) bosses face scrutiny over their turnaround plans this week as the broadcaster prepares to bid again for its Champions League TV rights. In 2017, the telecoms giant paid £1.2bn for exclusive rights to televise the tournament and the Europa League for three years. Bids need to be submitted to Uefa by November 11 to air the matches between 2021 and 2024. ITV (ITV) and Sky are both expected to try to snatch the rights from BT Sport. Speculation in recent months about a cut to BT’s dividend has increased the pressure on it to bid prudently. BT has also made a bold — and expensive — pledge to accelerate its fibre broadband roll-out. It now aims to reach at least 15m homes by the mid 2020s — up from the 10m premises initially planned.
Shadowfall Capital published its thesis that Kerry Group ‘A’ Shares (KYGA) might be inflating its profits. The activist questioned how they could have more than doubled in the past decade when Kerry’s growth had been propelled by acquiring businesses that, Shadowfall contended, were loss-making or barely profitable. Kerry dismissed the report as “fundamentally inaccurate and misinformed” and its share price has continued marching upwards. Analysts believe the company has the requisite expertise to capitalise on the tectonic shifts in the industry. Analysts at Barclays reckon that the shift to plant-based diets will boost Kerry’s margins over time. The company has spent more than £2bn on deals in the past decade and plans to make bolt-on acquisitions to fill remaining gaps in expertise or products. However, acquisition accounting is notoriously opaque and Kerry often fails to disclose the multiples it pays. That helps keep rivals in the dark, but makes it harder for investors to ascertain whether they are getting the right bang for their buck. Shadowfall’s research may not have meaningfully dimmed investor appetite for Kerry, but it has raised some pertinent questions. With the shares now trading at almost 35 times earnings, investors should rein in their appetite.
Just Eat (JE.) has accepted that its multibillion-pound merger with Takeaway.com is dead in its present form, putting pressure on the Dutch suitor to sweeten the terms of its proposal. The group is at the centre of a bidding war after Naspers gatecrashed the tie-up with Takeaway.com on Tuesday, tabling a 710p-a-share cash offer worth £4.9 billion. The Just Eat board, backed by three of its biggest shareholders, rejected the hostile bid from Prosus, a Naspers subsidiary, saying that its merger with Takeaway.com “provides Just Eat shareholders with greater value creation”. However, The Times understands that Just Eat and its City advisers believe that the deal it agreed with Takeaway.com in July is no longer viable after the sharp fall in the value of the Dutch group’s shares. The all-paper offer, under which Just Eat shareholders would receive 0.09744 new Takeaway.com shares for each Just Eat share they own, was worth 731p a share at the time it was struck, but that had fallen to 594p on Monday.
Contracts with new clients offered evidence that a turnaround programme at WPP (WPP) is bearing fruit as it announced its first growth in underlying quarterly revenues in more than a year. Mark Read, its chief executive, said: “It’s one quarter, we’re not declaring victory at this point — but we are saying that there is an impact beginning to come through of some of the changes that we’ve made.”
Robust results at its investment bank have given Barclays (BARC) a timely boost in its long-running battle with an activist investor. The division’s profits rose by 77% to £882 million in the three months to September 30, on income up 18% to £2.6 billion. Jes Staley, 62, Barclays’ chief executive, said yesterday that fee income at the division had been at a record level in the third quarter and that its performance showed that it could compete with its rivals on Wall Street.
Hastings Group Holdings (HSTG) warned that it could miss forecasts this year and that its annual loss ratio — a measure of claims paid as a proportion of its premium income — might be worse than expected and could exceed 79%. The cost of the parts and labour required to fix cars has increased as vehicles have become more high-tech. Although Hastings expects claims inflation of about 5% over the medium to long term, the figure was between 6% and 7% in the first half of the year and rose again in the third quarter to a range of 7% to 8%. Several injury claims also contributed to the increase and poor weather this winter could lift the pressure still further.
