Jim Armitage: FirstGroup's board has missed the bus. All change please

Jim Armitage: FirstGroup's board has missed the bus. All change please

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It’s easy for City veterans to get misty-eyed over FirstGroup. A star in Margaret Thatcher’s privatisation firmament, it was among the first companies to take over council bus routes, before leading the pack on winning rail franchises. 

But the Department for Transport’s move to load unbearable long-term risks onto rail franchise operators, coupled with reduced local authority spending on buses, has hurt everyone in the sector. 

First has not dealt with the challenge well. While better firms screwed down overheads and pulled out of UK trains, First has been flatfooted. It now has lower bus margins than some peers and still throws good money after bad in rail.

Rich though its history may be, its future looks poor. 

Coast Capital invested a few years back, first trying in vain to advise the board, and now pushing to change it. Its advice makes sense: First should clean up and sell its £3.5 billion US school bus operations over the next nine months, paying down debt and plugging the pension deficit. It should stop bidding for rail contracts and focus on turning around its core UK bus business.

First’s board has come up with an alternative. Sell the UK bus business, possibly in bits, sell Greyhound in the US but retain the remaining school bus operations there, making them the company’s core focus — despite First having no US bus experts on the board. It is continuing bidding for rail franchises.

It’s a plan, but too late and too woolly; the product of a board that watched as National Express beat its share price by 40% since 2017.

Many shareholders voted to kick out directors today. They were right to do so. This once great business deserves better.

Source Article from https://www.standard.co.uk/business/jim-armitage-firstgroup-s-board-has-missed-the-bus-all-change-please-a4175531.html

June 25, 2019 |

Woodford urged by watchdog to hand over fees he has taken from investors

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NEIL Woodford should hand back the £1.4 million in fees he has taken from investors since shutting his flagship fund three weeks ago, the City watchdog’s chief Andrew Bailey said today.

Bailey, chief executive of the Financial Conduct Authority, said Woodford should make “a gesture” to those trapped in his Equity Income Fund.

“As a sign to his investors it would be a good thing to do,” he told a Treasury committee probing the now-notorious affair. 

Woodford gets £100,000 in fees each day, and may need the cash as he sells down investments to pay investors demanding money back.

In what was widely seen as an audition to be the next Governor of the Bank of England, Bailey insisted the regulator had been on top of the situation.

The once-£10 billion Woodford Equity Income fund was suspended, locking many thousands of customers out of their savings.

It had fallen in value to less than £4 billion amid growing concerns about unlisted holdings in the fund that were hard to sell. 

That left Woodford selling shares in big stocks to pay for redemptions, increasing the portion of illiquid stocks in a fund regarded by customers as a low-risk vehicle.

Nicky Morgan MP, the chair, suggested the FCA was slow to act. She said: “The market could see how many days it would take to liquidate the fund. Is that not a marker for the FCA?”

Bailey, pictured, said the FCA was aware the fund was losing money consistently. 

He said: “We were alert to the fact that this was a fund that was shrinking. Until right near the end, before the suspension, the outflow looked manageable.”

The Woodford fund, managed by the famed stockpicker, was one of the most popular among small investors.

Bailey was also challenged over the FCA’s handling of London Capital & Finance, a scandal that saw £267 million of funds placed in high-risk schemes. 

Morgan said the FCA seemed slow to move, asking: “Doesn’t anyone at the FCA actually read the newspapers? If you are monitoring on a daily basis, how is it not clear that some red flags are sent?”

Bailey insisted that the FCA has been on the ball and that in some cases, funds aren’t obliged to alert the watchdog to moves they have made for up to a year. 

But Morgan said: “Doesn’t the regulator have the requirement to be more proactive?”

Source Article from https://www.standard.co.uk/business/woodford-urged-by-watchdog-to-hand-over-fees-he-has-taken-from-investors-a4175386.html

June 25, 2019 |

Anthony Hilton: Barring ailing firms from the index would boost investors

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Sir John Kingman, one-time senior Treasury mandarin until losing out as permanent secretary to Tom Scholar a few years ago, is now ensconced as chairman of Legal & General. 

One of his sidelines, courtesy of the Government, was to undertake an independent review of the Financial Reporting Council, to see whether that body was fit for purpose. 

The FRC has been roundly criticised in the recent past for the scandals of Carillion and BHS among others.

Some thought it was trying to do too much and could not cope; alternatively perhaps it was trying to do too little or lacked the necessary resources. Whichever, Kingman would get to the bottom of it.

His report duly arrived this year, and it did not disappoint. None of the principals have said Kingman’s report was the reason for their discomfiture but Stephen Haddrill, the chief executive, decided it was time for him to resign, which he is in the process of doing. 

Sir Win Bischoff, the chairman, has not offered to resign, or not publicly at any rate, but he will no doubt be off too as soon as there is a ready replacement. Even if Kingman’s report wasn’t the main thing, it meant it was the right time for them to go. But then what happens? Government seems only fixated with Brexit and its aftermath, and it seems likely it will not have much time for the FRC. The report may simply gather dust.

The FRC also looked this spring at the Stewardship Code, the document which talks about shareholder engagement  with companies, to see whether it could be made more effective.

The Institute of Business Ethics thinks it could, but it would require one of Kingman’s recommendations to make it happen. 

Recommendations 47 to 50 of Kingman would give the FRC powers to intervene in troubled companies. This would include the right to commission and publish independent reports, to review dividend policy and to require the replacement of the auditor. 

Some might say shareholders should do this themselves, but they have consistently over the years failed to do so effectively. For example some institutional investors were perfectly aware of the difficulties facing Carillion, the outsourcer which went bust. Accordingly active investors such as Aberdeen Standard sold out of Carillion.

But passive investors, including the likes of Legal & General, were also perfectly aware of the problems and actively engaged but could not use the power precisely because of the growing prevalence of passive investment, where investors are locked in and cannot sell even if they wanted to. 

The more pension fund money goes into passive funds, the more beneficiaries are at risk through this inability to sell out. And it is already around 30%.

This is a major problem but Peter Montagnon of the Institute of Business Ethics has a solution. It believes an effective sanction against companies that persistently and wilfully display poor governance should be that they should be excluded from the index. 

Then everybody, including passive funds, would be free to sell. 

The index providers would be told that it was no longer safe to compel passive funds to hold the company.

Montagnon has been in and around corporate governance for years at the Association of British Insurers, the Financial Reporting Council and now the IBE, so he knows what the problems are.

Of course, exclusion from the index would lead at once to a serious loss of value for the companies, but the point is that the sanction would be a deterrent. 

Boards would know as soon as the FRC appeared that there would be real trouble if they did not respond and this would be a huge incentive on them to right wrongs, especially if the initial intervention by the FRC, or its successor was on a confidential basis. 

The problem of having to hold shares, whether or not they want to, is a growing issue for trackers as they capture an ever-larger share of equity. The IBE’s comments are one way of addressing this. They deserve to be listened to.

All this, however, depends on implementation of the Kingman proposals. 

Meanwhile, investors who are largely focused on passive funds should be clear that, though they cannot sell, they will use their rights to vote against director re-election.

Source Article from https://www.standard.co.uk/business/anthony-hilton-barring-ailing-firms-from-the-index-would-boost-investors-a4175366.html

June 25, 2019 |

Bitcoin price inflates again as buyers wade in to head it surging past $11,000

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CRYPTOCURRENCIES were back in the spotlight today after a surge of buying in Asia sent bitcoin and rivals soaring.

Bitcoin hit its highest since March 2018, surging past $11,000 per digital coin. It is up more than 170% this year.

Around $30 billion (£23.5 billion) was added to the value of cryptocurrencies over the past two days, with buyers in India flagged as particularly busy.

Analysts say Facebook’s recent move to launch its own cryptocurrency project, dubbed Libra, has given renewed credibility to an industry that looked as if it had lost its way.

Last year Bitcoin crashed from a high of $20,000 to just above $3000.

Other cryptocurrencies, Ethereum, XRP and Litecoin, also rocketed over the weekend, before easing slightly this morning.

Craig Erlam of trading firm Oanda said: “The publicity that the [Libra] launch has once again brought to the space combined with the legitimacy it offers has understandably excited the community and we’ve seen before that you don’t get a normal response when this happens. Whether it actually endorses something like Bitcoin or not is perhaps not that important right now, particularly to those that have never lost the faith.”

Some think the latest rally could be even more shortlived than previous surges. Neil Wilson of Markets.com said: “Bitcoin is sparkling again but beware… breakdown’s coming up round the bend. Investors are ignoring what happened the last time we saw parabolic rises like this. Is it different this time? No, but people have short memories. 

“Facebook’s Libra white paper may have stoked renewed interest in cryptos at a time when the buzz had already returned.”

In recent times big-name bankers, initially sceptical of bitcoin, have started exploring ways to make money from the trend. JPMorgan, led by Jamie Dimon, is in favour of blockchain, the technology that makes bitcoin trading possible, but has been critical of the currency itself.

Goldman Sachs has been working on a derivative of bitcoin for clients who want to trade it.

Source Article from https://www.standard.co.uk/business/bitcoin-bubble-inflates-again-as-buyers-wade-in-to-head-it-surging-past-11000-a4174616.html

June 24, 2019 |

MySale put up for sale as Sir Philip Green backed online store falters

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MYSALE, the online retailer backed by Sir Philip Green, put itself on the block today as it admitted to “challenging” trading conditions, especially in its home market of Australia.

A strategic review aimed at “maximising value for its stakeholders” will “consider all types of corporate activity”, said a statement.

That could include raising capital, selling part or all of the business or delisting the shares from AIM.

The shares, at 72p a year ago, plummeted more than 40% today, down 2.9p at 3.8p. That values the firm at less than £6 million. It listed in 2014 at 226p a share, making it worth £340 million.

Backers hoped MySale could replicate the runaway success of boohoo.com. Instead it has been buffeted by changes to Australian tax regulation.

Sports Direct founder Mike Ashley also had an interest in MySale, but ditched his near 5% stake recently after a disagreement with Green, according to reports. Green is thought to still hold 22% of the business.

MySale was open about the extent of its difficulties. The statement said: “The group continues to operate within its existing banking facilities… However, given the market challenges that the group continues to face and the reduction in financial performance, it is possible that additional funding may be required in the short term to support the restructuring and cost reduction initiatives being undertaken.”

Source Article from https://www.standard.co.uk/business/mysale-put-up-for-sale-as-sir-philip-green-backed-online-store-falters-a4174626.html

June 24, 2019 |

Former Barclays chief executive John Varley acquitted in fraud case

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Former Barclays chief executive John Varley was today sensationally acquitted of fraud charges over the bank’s controversial fundraising from Qatari investors in 2008.

Varley, left, one of the highest profile City figures of his generation, had been charged by the Serious Fraud Office with conspiracy to commit fraud by false representation. The SFO claimed he had plotted to pay Qatar secret fees in return for its rescue funding at the height of the financial crisis.

However, judges at the Court of Appeal today ruled there was insufficient evidence to proceed.

There will be retrials in the cases against three other former Barclays executives — Roger Jenkins, then chairman of investment management in the Middle East, ex-wealth management head Tom Kalaris and corporate finance chief Richard Boath.

Judge Robert Jay threw out the case against Varley in April but the Court of Appeal only upheld his ruling today.

Source Article from https://www.standard.co.uk/business/former-barclays-chief-executive-john-varley-acquitted-in-fraud-case-a4173061.html

June 21, 2019 |

Jim Armitage: Justice delayed this long is like justice denied for victims

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One question victims of the HBOS Reading scandal will be asking after today’s scathing report from the Financial Conduct Authority: why did it take so long?

It is well over two years since those who perpetrated these crimes on the small businesses they milked and destroyed were sent to jail. It is well over a decade since their crimes were first reported in the press.

Yet only today do we get a fine on their former employer. Only today are they barred from finance. How they must be quaking in their prison-issue boots.

In fairness to the FCA, it did have to leave matters to Thames Valley police while the criminal inquiry was going on. But given so much of that evidence became available when sentences were handed down in February 2017, it is inexplicable it could take all these years for today’s conclusions to be drawn and fines levied.

Along the way, we’ve seen whistleblower Sally Masterton claiming her complaints to the FCA were ignored, allegations of further wrongdoing at branches beyond Reading and ongoing claims of Lloyds’ failings in providing redress.

Today’s work from the FCA fails to deal with any of that. In fact, the behaviour of Lloyds after merging with the collapsed HBOS in January 2009 is almost entirely absent, having been excluded from the terms of the investigation.

It’s possible more will follow from the FCA. Lloyds has a judge, Dame Linda Dobbs, looking into the handling of its Reading inheritance. One presumes any wrongdoing will be probed by the regulator.

But for scores of business owners ruined by Bank of Scotland all those years ago, it will all seem like too little, too late.

Source Article from https://www.standard.co.uk/business/jim-armitage-justice-delayed-this-long-is-like-justice-denied-for-victims-a4173066.html

June 21, 2019 |

Deal-maker Sir Martin Sorrell snaps up BizTech as S4 Capital goes global

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Sir Martin Sorrell unveiled another deal today as his new S4 Capital expands globally. The former WPP chief executive bought BizTech, an Australian marketing firm with annual revenues of A$15 million (£8 million) and a staff of 90.

BizTech will merge with MediaMonks, which S4 bought last year in a £266 million deal. Sorrell said the move will help take S4 further into Asia and fits the “holy trinity” ethos of his new firm being “faster, better, cheaper” than rivals.

S4 will pay for BizTech with a 50-50 split of cash and equity, but it didn’t put a price on the deal.

Sorrell said BizTech was the “perfect partner” to accelerate the business in Australia. BizTech, founded in 2008, also has offices in Toronto, Moscow and Astana, Kazakhstan.

Source Article from https://www.standard.co.uk/business/dealmaker-sir-martin-sorrell-snaps-up-biztech-as-s4-capital-goes-global-a4173041.html

June 21, 2019 |

Macquarie makes £266m swoop for building safety checks company

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Macquarie, the £300 billion investor dubbed the Vampire kangaroo, snapped up a UK building safety firm set up by twins on Thursday for £266 million. The shares rose 140%. 

Premier Technical, founded by brothers Paul and Roger Teasdale, has accepted Macquarie’s 210.1p-per-share bid, a 142% premium to the firm’s floundering share price.

Premier, based in West Yorkshire, offers building safety checks like fire alarm drills and sprinkler checks.

It has 20,000 customers and looks after around 180,000 UK buildings, including The Shard and Marks & Spencer stores.

Fire safety regulations have become increasingly in focus due to the Grenfell disaster in 2017 and the Notre Dame fire.

Macquarie, which has faced criticism for sucking dividends out of Thames Water, said Premier was well placed to take advantage of increasing building safety regulations.

Premier, founded in 2007, has clinched 15 takeovers since listing on the junior market four years ago. 

Source Article from https://www.standard.co.uk/business/macquarie-makes-266m-swoop-for-building-safety-checks-company-a4172261.html

June 20, 2019 |

Activist attack spurs exodus at Woodford-backed start-up

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A tech start-up backed by Neil Woodford accelerated a boardroom clear-out today after coming under attack from activist Crystal Amber.

Allied Minds, which helps embryonic tech ideas become companies, has replaced chairman Peter Dolan with board member Jeff Rohr and top non-executive director Kevin Sharer with Harry Rein. 

Dolan said: “Allied Minds is at an inflection point, with a new leadership team and strategy.” The move comes days before an annual meeting to vote on their re-election. 

“We think this is a reaction to counting the votes for re-election of those directors at the AGM which takes place a week tomorrow,” said Crystal Amber chief Richard Bernstein. “We think they were going to be voted out, so this avoids that embarrassment.”

Crystal has proposed taking over Allied and selling off its assets to return money for shareholders.

The reshuffle is the latest shake-up at Allied after chief Jill Smith was replaced by co-chief executives Joseph Pignato and Mike Turner and a bonus scheme was scrapped. 

Woodford’s fund owns about 23% of Allied and also 17% of Crystal Amber.

Crystal Amber is targeting another boardroom shake-up at broker Cenkos. Crystal wants Cenkos to find a new CEO after the proposed candidate, Jim Durkin, faced a hold-up in regulatory approval.

Source Article from https://www.standard.co.uk/business/activist-attack-spurs-exodus-at-woodfordbacked-startup-a4172251.html

June 20, 2019 |
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