Property bosses rage against Sadiq Khan's London rent cap plan

Property bosses rage against Sadiq Khan's London rent cap plan

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Mayor Sadiq Khan on Friday called for rent controls to be imposed on London landlords to protect tenants, but his plans triggered fury from property bosses who warned investors would be driven away from building new homes.

The industry reacted with shock to Khan calling on the Government for extra powers to cap rents in London. The demand came in a series of proposals including ending “no-fault” evictions. He said: “It is high time for private renting in London to be transformed.”

Khan also floated temporary exemptions from rent controls for build-to-rent homes and tax incentives to encourage investment.

But the industry said the moves would reverse a growing trend of investors coming into the sector to build high-quality rental flats in response to surging demand as many Londoners can’t afford to buy homes.

Angus Dodd, boss of developer Quintain which is building thousands of rental homes in Wembley, said: “There is a lot in the statement. Any measures that restrict the supply of new housing, which would in turn restrict affordable housing provision, can’t be good.”

Alex Greaves, head of of residential investment at M&G Real Estate  — backer of several rent projects — pointed out the move “could deter future institutional investment into the sector”. He added: “It will also make renting much more expensive because of the lack of supply coming through from institutions.”

John Dickie at business lobby group London First said: “The answer to London’s housing crisis lies in redoubling efforts to build more homes, not making it harder.”

Adam Challis, head of residential research at JLL, warned: “This will send shivers down the spine of the housing industry and buy to let investors. Rent controls have a long history of driving down the quality of rental homes as landlords can no longer afford to invest in their upkeep.”

Khan would need parliamentary support to gain new powers, unlikely under the current administration. Conservative mayoral hopeful Shaun Bailey attacked the plans. “Implementing them would take a bad London housing situation and make it worse. It would drive landlords out of the market and lower the standards of the flats left on offer. This reality is why economist Assar Lindbeck called rent controls ‘the most effective technique presently known to destroy a city — except for bombing’.”

The British Property Federation’s director of real estate policy Ian Fletcher warned: “The build-to-rent sector is now delivering 20% of all new homes in London, with 74,500 build-to-rent homes either completed or planned. If long-term, sustainable investment into new rental housing is deterred, this would take London further away from resolving the underlying housing issue of our time — a lack of supply.”

Source Article from https://www.standard.co.uk/business/property-bosses-rage-against-sadiq-khans-london-rent-cap-plan-a4193766.html

July 19, 2019 |

Market report: City switches on to ITV amid hopes for Netflix rival BritBox

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Investors switched on to broadcaster ITV today after it unveiled details of its new TV subscription service with the BBC.

Called BritBox, the joint venture will allow subscribers to watch original series, programmes from the archives and box sets for £5.99 per month, the same price as the most basic Netflix subscription. 

ITV, led by Carolyn McCall, owns 90% of the project and analysts expect it to be a decent revenue driver for the broadcaster over the next three years. 

Analysts at Liberum have crunched the numbers, pencilling in £28 million revenue for 2019, £51 million for 2020 and £80 million in 2021. 

Brokers also said it was a good test to see if a UK audience will pay for a British-focused TV subscription service. 

One said: “ITV needs to move away from its reliance on advertising. Let’s see if it can diversify its revenue stream. Can consumers take on more than one subscription service and can it compete with Netflix?”

The service will be launched before the end of the year and ITV shares were up 1.2p to 110p. 

Just Eat was also on the rise as brokers again suggested the takeaway deliveries firm is ripe for takeover given its poor share price performance over the past year. The business trades on a cheap valuation, which many believe could tempt a suitor to snap up a market leader in food deliveries in the 12 of the 13 countries in which it operates. The shares rose 10p to 626p. 

The FTSE 100 gained 43.62 points to 7537.71. But there were some fallers, notably media giant WPP after rival Publicis cut its full-year revenue forecasts. 

WPP and Publicis are being squeezed by competition from Facebook and Google as well as tightening ad budgets by major clients. WPP has been undergoing a revamp under chief executive Mark Read and its shares fell 3%, or 30.8p, to 907p.

On the FTSE 250, Aston Martin was the biggest riser after its top investor confirmed its offer to buy another 3% stake in the luxury carmaker, whose shares have slumped since listing last October. 

Strategic European Investment Group, part of the Italian private equity group Investindustrial, already owns 31% of Aston Martin and has offered to pay 1000p a share for the extra stake. 

Aston Martin rose 28.6p to 991p, giving it a much-needed lift as the shares have lost more than a fifth in value this year.

Source Article from https://www.standard.co.uk/business/market-report-city-switches-on-to-itv-amid-hopes-for-netflix-rival-britbox-a4194171.html

July 19, 2019 |

Borrowing under Chancellor Philip Hammond surges as deficit doubles

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CHANCELLOR Philip Hammond today oversaw a huge surge in borrowing days before his spell at 11 Downing Street comes to an end. 

The Office for National Statistics said the UK deficit more than doubled to £7.2 billion last month in the worst June for the public coffers for four years. 

The figures come as Hammond prepares to unveil billions more in public sector pay rises next week a year after the Government finally threw off austerity with a £27 billion a year settlement for the NHS. But it also underlines the lack of wriggle room for the next PM despite huge spending commitments by both candidates in the Tory leadership contest.

A 1.5% or £800 million rise in tax receipts to £58.7 billion was dwarfed by a £4.3 billion or 7.2% rise in spending to £64.8 billion. Number crunchers highlighted a £1.2 billion increase in spending and a £400 million rise in EU contributions, though the biggest single factor was an extra £2.1 billion in debt interest payments due to the rise in the Retail Prices Index inflation benchmark used to price index-linked debt.

Borrowing for the three months of the financial year so far stands at £17.9 billion, £4.5 billion more than in the same period last year. Howard Archer, senior adviser to the EY Item Club, said June tax revenues were “pretty lacklustre, which ties in with evidence that the economy is currently struggling”.

Source Article from https://www.standard.co.uk/business/borrowing-under-chancellor-philip-hammond-surges-as-deficit-doubles-a4194161.html

July 19, 2019 |

Stonegate swoops to buy UK's biggest pubs firm Ei in £3bn deal

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The UK’s biggest pubs company on Thursday fell into the hands of private equity after an audacious £3 billion takeover by a smaller rival.

Stonegate, the owner of bar chains Slug & Lettuce and Walkabout, will buy Ei, the 4000-strong pub group formerly known as Enterprise Inns, after a 285p a share offer was recommended by the Ei board.

Stonegate — owned by private equity firm TDR — made a  270p approach in May but today’s deal represents a 38.5% premium.

The deal, including debt, values Ei at nearly £3 billion. The tie-up would bring together Stonegate’s 765 pubs with Ei’s vast empire.

Simon Longbottom, Stonegate’s chief executive, will lead the group.

Ei’s boss Simon Townsend said: “This will create scale and efficiencies, see the new owners invest into the business, and allow the group to compete better in what is a highly competitive market place that is facing well documented challenges.” Firms are grappling with weaker consumer confidence and rising costs due to pressures from the minimum wage and business rates.

The deal is due to complete early next year subject to approval from the competition watchdog and investors.

The City cheered the deal, sending shares in Ei up 79p, or 38%, to 284.7p.

Peel Hunt analyst Douglas Jack reckons Ei’s profit growth and debt reduction strategy would have taken until 2022 to get the shares up to 285p. He said: “The combined estate should provide a substantial pool of pubs to either convert (from leased to managed) or sell. This could trigger a lot of follow-on corporate activity in the sector.”

The talks come four years after Ei embarked on a new strategy to reduce its debt pile, currently £1.7 billion, by shifting its estate away from the “beer-tie” model. That involves publicans renting a site and buying beer solely from a landlord in return for lower rent. It now manages a number of sites itself, which is Stonegate’s model.

Stonegate was founded in 2010 via the purchase of 333 pubs from Mitchells & Butlers. It has grown via acquisitions including cocktail bar chain Be At One, which it bought last year shortly after a failed swoop for Revolution Bars. Parent TDR Capital last month also bought We Buy Any Car owner BCA Marketplace for £1.9 billion.

Nomura, Goldman Sachs and Barclays are advising Stonegate, and Ei is working with Deutsche Bank and Rothschild.

Source Article from https://www.standard.co.uk/business/stonegate-swoops-to-buy-uk-s-biggest-pubs-firm-ei-in-3bn-deal-a4192866.html

July 18, 2019 |

Comment: Ei sale feels like the debt-driven pubs punchbowl is filling again.

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There’s a problem with hair of the dog; getting back on the sauce only sets you up for a bigger headache the next day.  

If anyone knows this, it should be the pubs trade, but do they? 

Back in the Noughties, landlords massively expanded their estates, buying up pubs at a drunk-dizzy pace. The idea was to use cheap debt to fund the purchases and service the loans with cashflow from rent and beer sales.

Then, along came the credit crunch, and the debts became unsustainable. The hangover struck, forcing a painful process of selling thousands of pubs to pay the loans. 

Now, the wheel is turning again, as a private equity firm spends £3 billion adding the giant formerly known as Enterprise Inns to its existing Stonegate estate. 

We’re told TDR is investing a hunk of equity in the takeover and that the enlarged group’s debt-to-equity ratio will be similar to Ei’s, but at 6.5 times, that is still one-times higher than Stonegate’s current leverage, and massively increases the size of the business. It’s not 2006 yet, but TDR’s increased thirst for risk is troubling.

For Ei shareholders, none of this matters. They should accept the offer, raise a glass, and leave the bar before the trouble starts.

OFWAT’S CRACKED PLAN FOR THAMES

It’s one of those times of year when leaks spring up in the street. The summer heat causes a surge in demand for water and the added volume opens cracks in the pipes. 

The Victorian system is too old to hack it, and London’s expanding population and climate change are only making matters worse.

Yet just as we need upgrades and improvements, Ofwat orders Thames Water to spend £1.6 billion less than its already-shrunken £10.9 billion investment plan. Madness.

Source Article from https://www.standard.co.uk/business/business-news/comment-enterprise-inns-sale-sees-debt-return-to-the-pub-trade-a4193001.html

July 18, 2019 |

Comment: Ofwat is crazy to hammer down Thames's investment

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It’s one of those times of year when leaks spring up in the street. The summer heat causes a surge in demand for water and the added volume opens cracks in the pipes.

The Victorian system is too old to hack it, and London’s expanding population and climate change are only making matters worse.

Yet just as we need upgrades and improvements, Ofwat orders Thames Water to spend £1.6 billion less than its already-shrunken £10.9 billion investment plan. Madness.

But what can chairman and acting CEO Ian Marchant do about it? If , as appears likely, Ofwat has still refused to bend by January,  he can take the ruling to the Competition and Markets Authority, but the risks are high.

Over the years, five or six power or water networks have tried it, in some cases winning, in others losing and getting an even worse result.

These days, the CMA is run by Andrew Tyrie, who has the former politician’s eye for vote-grabbingly zealous anti-business decisions  – witness the killing of the Sainsbury’s-Asda deal, its proposals to hogtie corporate audits in red tape and the bizarre investigation into Amazon’s minority stake in Deliveroo.

Given that relentlessly pro-headline grabbing bias, one has to assume that if Thames appealed against Ofwat to the new-look CMA, it would be ejected quicker than floodwater through an open sluice.

Marchant will have to suck up what the regulator throws at him. For consumers, that might not be such a good thing. London needs to get its network fixed, and that will cost money.

Cut-price, sticking plaster measures of the type Ofwat is budgeting for won’t do the job.

Source Article from https://www.standard.co.uk/business/business-news/comment-ofwat-is-crazy-to-hammer-down-thamess-investment-a4193036.html

July 18, 2019 |

Watches of Switzerland targets City big-spenders as it sees profits soar

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Newly floated Watches of Switzerland on Wednesday set its sights on big-spending City workers in expansion plans as it toasted soaring sales in maiden results.

Boss Brian Duffy said the UK’s biggest Rolexes seller has agreed a deal with landlord British Land to next year open a large new store at the Broadgate redevelopment in the Square Mile. 

A branch will also open at Battersea Power Station.

Duffy said these mark the first investment commitments in the UK since Watches floated in May at 270p per share. 

The firm saw sales jump 22.5% to £773.5 million in the year to April. UK same-store sales climbed 10%. Duffy said the most expensive goods sold were watches that each cost “hundreds of thousands of pounds”.

Pre-tax profits nearly trebled to £20.1 million and current trading is “encouraging”. The shares rose 8.93p to 298.93p. 

It wasn’t such a good day for Swiss watches maker Swatch, which said first-half profits fell 11%. The firm had to take action against “grey-market dealers” selling its goods in locations or at prices Swatch has not agreed to. 

Stopping deliveries to those partners will hit revenues, it warned.

 

Source Article from https://www.standard.co.uk/business/watches-of-switzerland-targets-city-bigspenders-as-it-sees-profits-soar-a4192001.html

July 17, 2019 |

Questions over the Neil Woodford stock valued at £393m despite huge losses and no revenues

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It’s been 45 days since Neil Woodford pulled up the drawbridge on his flagship Equity Income fund, blocking thousands of people from their savings. 

As the weeks drag on and investors wait to access their cash, the scandal has unearthed troubling questions about Woodford’s whale-like investments in hard-to-sell start-ups.

Stocks like Industrial Heat and Bene-volentAI, which have both been scrutinised for their esoteric operations, have prompted questions over the fallen fund star’s judgment in backing embryonic technology. 

Now another significant Woodford stock, Proton Partners, is under the microscope due to its eye-popping valuation of £393 million despite making significant losses and having almost no revenues.

Proton is a private hospital company based in Wales, rolling out a string of newly built healthcare centres across the UK to treat cancer patients with an emerging technology called “proton beam therapy”. The technology, backed by the NHS, is an alternative to traditional radiotherapy but healthcare investors who have spoken to the Standard have privately questioned whether Proton’s current valuation is justified.

Proton is important because of its role in the Woodford Patient Capital Trust, a second vehicle launched by Woodford with £800 million of cash from armchair savers in 2015 to invest in “great inventions and great science”. Proton is currently the trust’s second biggest stock, worth 8%, and the third-best performer of Woodford’s stock picks since the trust launched, according to fund documents. 

Its valuation is key to the overall value of the trust, which thousands of savers rely on, but some say its current valuation appears too high. “In order to justify that valuation, you have to assume the revenue ramps up every year going into the future and profitability is going up,” said one healthcare investor who wanted to stay anonymous. 

Proton last year reported revenues of £1.5 million with losses of £18.3 million. Start-ups normally make a loss — especially those spending money to build hospitals — but Proton operates in a sector with a patchy history of financial performance. Firms which tried something similar, such as Spire Healthcare and Circle Health, have struggled to attract private sector patients in a system dominated by the NHS.

Another UK healthcare investor said: “It’s difficult to get these service businesses, particularly private ones, up and running. They are difficult to scale up. It doesn’t mean Proton can’t but it feels that the valuation is quite full.”

Proton says it is “very comfortable” with its valuation.

The company, which operates under the Rutherford Cancer Centre brand, said the price-tag takes into account three treatment centres it recently opened and a “significant amount” of intellectual property it owns. “The business has gone through an initial phase of construction but is now increasing revenues with a growing number of people being treated at our centres,” it said. 

But if the cynics are right, what does this mean for Woodford and investors in Patient Capital, both of whom declined to comment for this piece? There is a greater risk Proton’s price tag could be slashed, which would dent the value of the trust. Investors in PCT were promised returns of 10% a year when it launched, not deflating value.

Patient’s biggest company, BenevolentAI, which uses artificial intelligence to help develop drugs, was last week reported to be raising fresh funds at a far lower valuation than its current $2 billion. Such a move would also hit the value of the Patient trust. Immunocore, a cancer treatment start-up, also saw its valuation in the trust halved following a writedown by valuers Link Asset Services. 

Could Proton be next? Patient’s board, led by Susan Searle, recently defended the valuation of firms like Proton, saying their underlying “commercialisation” potential should be taken into account. But the trust’s valuer Link values Proton on its Woodford-led fundraising rounds, instead of a market value approach which takes into account the valuation of other companies or the outcome of future investments, according to the annual accounts. 

This means whenever Woodford or other shareholders put money in at a higher price, Proton’s valuation rises. For example, Woodford’s stake in Proton was valued at £34.5 million when he first invested in 2015, the annual report said. Yet a subsequent round in 2018 effectively doubled the value to £64.5 million.

Since then, Proton has listed on the Nex Exchange market for even more money, nearly doubling the value of Patient’s stake again to £118 million, the Standard calculates. Link only reveals valuations every six or 12 months so investors are waiting to see what price tag it puts on Proton after the IPO. Sources say it is unlikely Link will use Proton’s current share price, which would further swell the value of PCT’s stake, because the stock has only traded once. 

Link — which refused to comment — could use the price on a £25 million fund-raising round last month from Woodford, done at a lower valuation than previously, or opt for the market value approach and take into account how much cash Proton can attract in future.

But with Woodford on the verge of mass redemptions, the prospect of Proton getting more cash from the fund guru is uncertain, potentially spelling another valuation hit.

Woodford Patient Capital Trust investors will have to be patient — but for all the wrong reasons.

Source Article from https://www.standard.co.uk/business/questions-over-the-neil-woodford-stock-valued-at-393m-despite-huge-losses-and-no-revenues-a4192111.html

July 17, 2019 |

Market report: Trouble piles up for Johnson Matthey in Europe's car crash

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Chemicals company Johnson Matthey today joined the list of household names like BMW and Volvo swallowed up by Europe’s car crisis. 

Johnson’s clean air unit — which makes catalytic converters for cars and trucks and accounts for 60% of the group’s overall profits — will make less profit for the year than initially expected. 

The firm blamed China’s slow implementation of global emissions rules, while analysts said the update was no surprise given the rapid slowdown in car sales across Europe. 

The company also said divisional head John Walker would retire after 35 years with the company and would be replaced by Joan Braca, currently president of Tate & Lyle’s food and beverage division. Johnson was the biggest blue- chip faller, losing 117p at 3270p or 4%. 

Overall the FTSE 100 lost 20.06 points at 7557.14,  dragged lower by oil producers Shell and BP which lost 14p at 2579p and 10p at 534p respectively. Overnight oil prices slid after President Trump and US Secretary of State Mike Pompeo struck a softer tone on Iran. 

Precious metal miner Fresnillo was another steep faller after it cut its annual production targets, citing construction delays at its gold mine in Mexico. Its stock fell 16p at 904p. 

But it wasn’t all doom and gloom and exporters like British American Tobacco and Diageo were benefiting from the pound’s slide to a two-year low. BATS added 20p at 2971p and Diageo was up 12p at 3431p. 

Currency traders are worried about a new hardline approach to Brexit from the Conservative leadership contenders seeking to woo party members. 

Both Boris Johnson and Jeremy Hunt have said they could take Britain out of the European Union without a deal at the end of October, potentially sparking chaos and hammering growth. One broker said: “It is increasingly looking like there is going to be something far scarier than ghouls and ghosts on Halloween.”

Luxury clothes maker Burberry was rising for a second straight session after analysts scrambled to upgrade the stock again on the back of robust first-quarter sales yesterday. Its stock was up 73p at 2350p.

Further down the market shares in Emmerson were on the rise after Stagecoach founder Ann Gloag upped her stake in the potash miner to more than 3%. 

Gloag is one of Scotland’s richest women and first invested in Emmerson back in June last year when it was re-admitted to the London stock exchange. 

Shares were up 0.1p at 3.8p.

Source Article from https://www.standard.co.uk/business/market-report-trouble-piles-up-for-johnson-matthey-in-europe-s-car-crash-a4192096.html

July 17, 2019 |

Franco Manca's owner boosts sales and cheers tenants getting edge in property negotiations

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The owner of the Real Greek and Franco Manca restaurant chains on Tuesday said tenants now have the upper hand in negotiations with landlords thanks to carnage on the High Street.

Fulham Shore’s chairman David Page predicted building owners would offer more rent cuts as they try to fill space left vacant as retailers close sites as consumer confidence falls and costs rise.

Page said property agents — who typically align with landlords’ interests — “should realise the boot is now firmly on the other foot”.

His firm is looking to open up to 10 more branches in the year to March 2020.

Fulham Shore revenues rose 17% to £64 million in the year to March 2019. It made a pretax profit of £1.4 million, compared with a £100,000 loss last time.

Matt Butlin at housebroker Allenby Capital said: “In a period when the vast majority of news flow from the casual dining sector has been negative, today’s results from Fulham Shore provided a much needed injection of positivity.”

 

Source Article from https://www.standard.co.uk/business/franco-mancas-owner-boosts-sales-and-cheers-tenants-getting-edge-in-property-negotiations-a4191131.html

July 16, 2019 |
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