Azure Global : 10/31/13

Thursday 31 October 2013

Bill Adderley unmasked as Marks & Spencer's biggest private shareholder

Billionaire founder of homeware chain Dunelm built £250m stake in M&S during 18-month period in which shares rose by 40%

Bill Adderley, the billionaire founder of the homeware chain Dunelm, has secretly built a near £250m stake in Marks & Spencer, it has emerged.

The entrepreneur acquired the shares during the past 18 months, a period in which the M&S share price has risen by almost 40%.

The disclosure, triggered by stock market rules that unmask shareholders who own more than 3% of a company, revealed Adderley as M&S's largest private shareholder. He will receive dividends on his stake of more than £8m a year.

An M&S insider said: "We do know him and have met him, being as he has been our largest private shareholder for some time. It was a small purchase [that took Adderley over the 3% disclosure threshold] so this has not come out of the blue."

Adderley founded Dunelm on a Leicester market stall with his wife Jean in 1979 after leaving his job as manager of Woolworths in the city, eventually floating the business on the stock exchange.

The business is now worth about £1.8bn and boasts more than 100 stores making sales of £677m and profits of £108m. It is still majority owned by the Adderley family, who live near Uppingham, Rutland, and are collectively worth £1.1bn, according to the 2013 Sunday Times Rich List. Shares in Dunelm have more than doubled since the financial crisis and risen by about 30% during 2013.

Adderley, who has avoided the public spotlight, was not available to comment but sources close to the family suggested he had merely spotted an investment opportunity and taken it. When asked if he was planning to lead a consortium to bid for control of M&S, the source said: "This would be an extraordinarily clumsy way of going about it."

The news that M&S has attracted such a large private shareholder comes at a propitious time for the retailer, which has struggled to impress the City under the leadership of chief executive Marc Bolland.

The Dutchman is in the final year of a three-year, £2.3bn plan designed to address decades of under-investment. His efforts were insufficient to prevent clothing sales falling for eight straight quarters, although this week it emerged that M&S has stemmed the erosion of its share of the clothing market – albeit while suffering continued declines in its share of the women's clothing market. It is due to report its half-year figures next week.

Efforts to repair flagging clothing sales and pull in younger shoppers have also been knocked by the imminent departure of Gillian Ridley Whittle, development and buying director for womenswear, which was announced last week.

Next week M&S is expected to report a 1.5% fall in underlying sales of general merchandise – a category mainly made up of clothing – for the six months to the end of September. That would be on a par with the 1.6% slide reported in the three months to the end of June. Some analysts have downgraded their sales expectations amid unseasonably warm autumn weather.

The retailer is also launching its Alice in Wonderland-inspired Christmas adverts, featuring actor Helena Bonham Carter and models David Gandy and Rosie Huntington-Whiteley.

M&S shares added 2.09% yesterday to close at 503.5p. Adderley's 48.5m shares are therefore worth £244m.

City analysts have a mixed view on the shares. Of the 23 following the company, 11 rate the shares as a buy, seven as a sell, while five are neutral, according to the financial website Digital Look.

Nick Bubb, an independent retail analyst in London, told Bloomberg: "He's brave to take such a big punt on an M&S recovery."

Recent M&S successes have included its food business - Bolland's area of expertise, having joined from the grocer Morrisons - that has enjoyed 17 consecutive quarters of underlying sales growth and contributes 54% of group sales. Meanwhile, online sales growth is running ahead of the market and solid progress has been made overseas.

Article Source : http://www.guardian.co.uk
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UK discount supermarkets aim Christmas campaigns at middle-class

Lidl runs first-ever nationwide British TV adverts, while Aldi doubles size of Christmas range, including fresh lobster

Britain's two biggest discount stores will be taking their battle to attract middle-class shoppers on to the small screen this Christmas as Lidl launches its first ever national TV advertising campaign on Thursday.

Lidl's ad for its Deluxe range, featuring whole cooked lobster and mini Stollen, will run on several channels including ITV, Channel 4 and Sky. The company is increasing the number of products in its luxury selection by two-thirds in an effort to lift sales by 50% to nearly £64m.

Aldi will launch its festive campaign on Monday having doubled the size of its Christmas range this year to include fresh lobster tails and a fresh version of its three-bird roast, which has been a popular frozen item in recent years.

Lidl originally introduced its Deluxe range as a speciality for Christmas but rapidly expanded it last year when sales nearly doubled to £40.2m compared with £19.5m in 2011. This year Lidl is adding 200 new products to its Deluxe range including Serrano ham and a British fresh bronze turkey. They will sit alongside 300 existing luxury favourites including reindeer and caviar.

Lidl managing director Ronny Gottschlich said: "Our Deluxe products have proven to be our best selling, along with our Comte de Brismand champagne, which speaks volumes for what our customers want. We feel now is the time to fully showcase the quality of these products."

The move comes as Lidl and its fellow German discounter are stealing market share from major supermarkets including Asda, Tesco and Morrisons as shoppers search for a way to save cash.

The retailers now control nearly 7% of the UK grocery market, up from just under 6% a year ago according to data from Kantar Worldpanel.

Aldi, which has been promoting its luxury foods in press and television advertising campaigns for several years, has been outgrowing its closest rival. The retailer, which opens its 500th store on Thursday, increased sales by 31.7% in the 12 weeks to 14 October while Lidl's sales rose by 13.1%, according to Kantar.

Meanwhile, the number of shoppers using Aldi for their main weekly shop has soared 31.7% in the past year, according to the research firm Verdict. It also suggests that the proportion of well-off shoppers visiting Aldi has more than doubled to 4% year on year as nearly a third, 32.3% of the shoppers using Aldi for their main shop this year have switched from shopping at rival grocers in 2012.

Andrew Stevens, food and grocery specialist at Verdict, said: "Aldi has been the biggest winner in terms of switching and shopper number growth in 2013. This has been largely driven by shoppers switching to Aldi from the likes of Tesco and Asda."

The largest proportion of Aldi's new fans came from Tesco, which is not surprising given that it is by far the UK's biggest supermarket. The biggest switch, relative to its share of the market, came from Asda, at 19.7%.

Barclays assisting with investigation into currency market manipulation

Regulators request foreign exchange activity information from Barclays in investigation that could match scale of Libor scandal

Barclays is involved in the new investigation by global regulators into the potential manipulation of the £3tn-a-day currency markets, in a fresh setback for the bank as it attempts to clean up its reputation in the wake of the Libor rigging scandal.

As it published its third quarter financial results, Barclays disclosed that it has received official requests for information about its foreign exchange activities. Barclays is joining a number of other banks – including Royal Bank of Scotland, Deutsche Bank and UBS – in co-operating with the authorities and also shedding light on the nature of the investigation by regulators in the UK, the US and Asia.

RBS said it was already reviewing its processes in the foreign exchange markets.

Barclays also confirmed it is continuing to contest a £50m penalty from the Financial Conduct Authority for behaving recklessly in the way it raised funds from Qatar to avoid a taxpayer bailout in 2008.

The foreign exchange investigations are at an early stage and could be on the scale of the Libor scandal. Barclays was the first bank to be fined for rigging the key interest-rate benchmark, in June 2012, and was handed a fine of £290m. That led to the departure of its chief executive,Bob Diamond, and the promotion of Antony Jenkins, who has since embarked on a strategy to restore the reputation of the bank through his so-called transform programme.

Jenkins used the results to outline a vision for more technology at the bank – which, it is suggested, could lead to 40,000 job cuts – and said that he was embarking on a new review of the bank's 75 business lines to gauge the riskiness of the operations.

Last month the bank was forced to tap shareholders for £6bn to bolster its financial strength. Jenkins said the new finance director Tushar Morzaria, who joined a fortnight ago, would reassess each business line to assess how much capital they are using.

He refused to elaborate on the bank's legal disclosure that regulators are investigating foreign exchange trading "including possible attempts to manipulate certain benchmark currency exchange rates or engage in other activities that would benefit their trading positions".

The bank said: "The investigations appear to involve multiple market participants in various countries. Barclays has received enquiries from certain of these authorities related to their particular investigations, is reviewing its foreign exchange trading covering a several-year period through August 2013 and is co-operating with the relevant authorities in their investigations."

The investigations emerged after reports of allegations that traders at major banks were putting in client orders before a 60-second window when benchmarks run by WM/Reuters – and used by fund managers to value their investments – are set.

Jenkins said his new team – as well as a new finance director, he has a new retail head and new bosses of the investment bank – needed to "push harder" in the final quarter of the year and into 2014.

After being forced into the cash call by the Bank of England, Jenkins said the bank was continuing to "reassess the balance sheet for further leverage reduction opportunities consistent with preserving our strong franchises, supporting lending to the UK economy".

When he took the helm he had originally assessed 75 business lines in terms of reputation risks and said he would withdraw from some businesses. The investment bank – the traditional powerhouse of the business and once known as Barclays Capital – took a hit to income as a result and also suffered a fall in its fixed-income trading. Third quarter profits in the investment bank fell 53% to £463m, although the bank did not disclose any reduction caused by shutting down the controversial tax planning department known as structured capital markets.

Overall, in the third quarter, profits fell to £1.4bn from £1.9bn as losses in continental Europe widened. In the first nine months of the year Barclays's profits rose to £2.8bn from £962m, although this included the cost of buying back its own debt. The shares rose 3.5% to 274p in early trading.

Barclays is in discussions with its shareholders about ways to avoid an EU cap on bonuses being introduced by the EU at the start of next year by introducing a new allowance for its highest paid staff. It said the closely-watched compensation to income ratio at its investment bank – measuring what proportion of its income it was paying out to its staff – had risen to 41% from 40% and remains above its target of 35%.

Madame Tussauds owner prepares for multibillion pound flotation

Merlin Entertainments, owned by Lego family trust and Blackstone and CVC, expects to raise £800m in share offer

The owner of Madame Tussauds waxworks and the Legoland theme parks has launched the latest in a new wave of London flotations, in a move that will value the stakes of its private equity backers at billions of pounds.

Merlin Entertainments, which is 98% owned by the Lego family trust Kirkbi and the buyout firms Blackstone and CVC, said it plans to raise up to £800m via the share offer that will value it at up to £3.34bn.

The move is the latest in what is being seen as a revival in the London flotations market, coming after the privatisation of Royal Mail where investors have immediately made large profits. London has seen 61 flotations so far this year, according to the analyst firm Dealogic, raising a total of £8.7bn from floats that have included estate agent Foxtons and the insurer Esure. For the whole of last year, London flotations raised £3.5bn via 46 issues.

Merlin, which also owns Alton Towers, the London Eye, and Warwick Castle, is perhaps best known in the UK as the owner of the waxworks museum on Marylebone road in central London, which traces its UK roots back more than 200 years. Madame Tussaud brought her exhibition on tour to Britain in 1802, and established The Baker Street Bazaar in 1835, while the attraction moved to its current site in 1884. It claims to have received 500 million visitors since its creation.

Despite the waxworks being widely known, Merlin's other brands are its biggest money earners. In total the company runs 99 attractions across 22 countries, taking £1bn in revenue last year from 54 million visitors and making £98m of profit. Of those venues, six of Europe's top 20 most visited theme parks are run by Merlin, according to analysts Aecom, three of which – Alton Towers in Staffordshire, Legoland in Windsor and Thorpe Park in Chertsey – are based in Britain.

Now the holding company is set to go public, valuing the 36% stake currently held by Kirkbi at about £1.2bn, Blackstone's 34% at £1.1bn and CVC's 28% at £900m, although the firms will be cashing in £600m worth of shares. Merlin was last valued in 2010 when CVC acquired its stake, and the whole business was worth £2.25bn.

Senior management and around 2,000 employees, who will end up owning about 8% of the firm are also preparing for windfalls, particularly chief executive Nick Varney, and finance director Andrew Carr who completed a private-equity backed management buyout of the company in 1999 to create Merlin. Since then the group has acquired the Tussauds Group, which also included Chessington World of Adventures and Thorpe Park, plus the Italian theme park Gardaland.

"Our destiny was always to be a public company," said Varney as he recalled a previous aborted effort to float his management buyout, plus a series of different private equity owners, including Apax and Hermes, before settling on the current shareholders. "Being bought every three years can be disruptive. Now is the time for long-term share ownership".

It is also the time to re-jig its corporate structure that means the company is based in Luxembourg. The exact tax that the company pays in the UK, therefore, is tricky to find, although the company seems to have realised that such arrangements have the potential of upsetting its customers. It plans to domicile the company in the UK after the float, when it is understood that its effective tax rate will move towards 28%.

A spokesman said: "Merlin Entertainments pays the correct level of tax in the countries, or jurisdictions, in which we operate, in relation to our capital structure".

On the flip side, however, there are those who argue Merlin has been a huge contributor to the UK economy. A spokesman for VisitBritain, the national tourism agency, said: "Merlin attractions have brought more than a million pounds in revenue so far this year to VisitBritain's shop and around 14% of our sales have come from the top-selling Merlin products. Our sales figures suggest that Merlin's attractions continue to attract overseas visitors, with numbers showing no signs of abating."

Of the remaining flotation proceeds, around £200m will be used to reduce the group's debt, the company said, while the company also has unveiled expansion plans.

Next year Merlin will open a huge Madame Tussauds near Tiananmen Square in Beijing, while in the US there are plans for a Madame Tussauds and a "dungeon" for San Francisco, a Sealife Centre in Charlotte, North Carolina and a small indoor Legoland discovery centre in Boston.

Merlin plans to float up to 30% of its shares, with up to 15% targeted at members of the public. The group is also trying to tempt customers into buying the shares, by offering members of the public spending at least £1,000 on the shares a 30% discount for one year on theme park annual passes.

The discount has been dismissed as a gimmick by analysts – Merlin is currently offering the public a 25% discount on its website – but Varney insisted it was "a pretty good deal".

"We think that is a nice thing to offer to people who want to invest at a retail level," he said. "But the real reason to invest is to own a part of the company that owns Legoland, the London Eye and Madame Tussauds, which has got an expanding international footprint and a very strong growth trajectory."

Royal Mail workers call off one-day strike after talks progress

Union and management say new agreement will include an improved pay offer and separate pensions agreement

A strike planned by Royal Mail workers in the aftermath of the company's recent privatisation has been called off after unions and management said talks were progressing.

The Communication Workers Union (CWU) had given notice of a one-day strike by its 115,000 members in the postal service next Monday over issues including pay, pensions and the legal protections offered to employees.

However, in a joint statement issued on Wednesday afternoon, Royal Mail and the CWU said they had made progress in talks and committed to finalising an agreement in the next two weeks.

Workers had voted 4-1 in favour of industrial action in a ballot earlier this month, despite the company offering all staff a £300 bonus if they committed not to strike. Royal Mail had made an initial offer of an 8.6% pay rise over three years but an improved offer will now be made.

The new agreement will include legal protections for employees that extend beyond the current three years and a separate pensions agreement. According to the nine-point draft agreement, both parties also commit to "an agenda for growth underpinned by a culture of consensual change, timely decision making and industrial stability supported by alternative dispute resolution processes".

With controversial changes to the 500-year-old service being implemented, there was also a commitment to a "joint company/CWU charter shaping the ongoing values and principles of the Royal Mail Group".

Royal Mail agreed to extend the legal validity of the CWU's strike ballot until 20 November, giving the union the opportunity to still enact a strike if agreement is not finalised. But both parties pledged to "clear diaries to ensure all our efforts are focused on reaching an agreement by 13 November".

While Royal Mail staff will not be walking out, the 4,000 members of the CWU who work in the 372 crown post offices are still due to strike on Monday, in a separate dispute over pay, branch closures and job cuts.