Daily Mail - 28.08.2019

Page 61

City Editor: Alex Brummer http://www.thisismoney.co.uk Business Editor: Ruth Sunderland

City Finance

£468million

fine for drug maker

Johnson & Johnson over

US opioid addiction crisis

by Tom Witherow

MARKS & Spencer has only a

week to save its place in the

FTSe 100.

The high Street stalwart’s lan-

guishing share price has left it fac-

ing relegation from the top flight

of blue-chip firms.

The retailer is one of only a handful

of names that has been in the index

since it was launched in 1984.

City watchers said its relegation

after 35 years at top table would be an

‘historic’ moment and a potent sym-

bol of the diminished importance of

the British high Street.

M&S is not the only household nam-

ing fighting for its future in the FTSe

100. Others facing the drop next week
     include British Gas owner Centrica,
     Direct Line, and B&Q owner King-
     fisher. Sainsbury’s, Morrisons and ITV
     have also drifted and their positions
     could be threatened in the future.
     Stock market reshuffles take place
     every three months and the next will
     be based on share prices at the close
     of business on Tuesday, September 3.
     M&S has a market value of less than
     £3.7bn, putting it at the bottom of the
     FTSe 100 and well behind a number
     of companies in the FTSe 250 includ-
     ing gold and silver miner Polymetal,
     which is worth more than £5bn.
     It means that without a remarkable
     change of fortunes over the next five
     days of trading, M&S will lose its cher-
     ished status.
     The high-profile demotion would
     strike a major setback for M&S chair-
     man Archie Norman and chief execu-
     tive Steve Rowe in their bid to restore
     the company to its former glory.
     The pair are overseeing the latest in
     a series of turnaround plans.
     They have recruited TV presenter
     holly Willoughby (pictured) to revamp
     its tired fashion lines.
     And it this year struck a deal
     with Ocado to give M&S an
     online food delivery service for
     the first time. But with sales and
     profits still under pressure, inves-
     tors appear unconvinced and
     M&S shares are near their lowest
     level for nearly 20 years.
     M&S narrowly avoided relega-
     tion in June, but its stock has
     fallen further since. It has now
     lost two-thirds of its value since


101. If a company drops out of
     the FTSe 100 they can suffer a
     ‘double whammy’ as funds
     invested only in blue-chip stocks
     automatically sell their shares.
     Russ Mould, investment direc-
     tor at AJ Bell, said: ‘Further
     changes look likely at the reshuf-
     fle and it could all come down to
     what happens on the final day.
     ‘Marks & Spencer’s modest

stock market valuation means it

looks doomed, and it will really

catch the eye if it slips through

the trap-door.

‘Archie Norman and Steve Rowe

continue to insist the company is

changing quickly and that all of

the right pieces are in place to

halt and then reverse the steady

erosion of profits.’

helal Miah, investment research

analyst at The Share Centre,

said: ‘Its relegation will be highly

symbolic of the troubles on the

UK high Street.’ The companies

on the index are reviewed every

quarter by FTSe Russell, which

operates the FTSe indices.

To prevent a yo-yo effect,

firms are only automatically

relegated when their ranking

falls below 110 and promoted

when they become the 90th big-

gest company.

If a firm on the up wins auto-

matic promotion, the worst-

placed company in the FTSe 100

will drop down.

With Polymetal soaring 3.7pc

yesterday to a £5.4bn valuation, it

looks almost certain to win auto-

matic promotion, which would

send M&S down. Also eyeing

promotion are hikma Pharma-

ceuticals, valued at £4.9bn, and

engineer Meggitt, worth £4.8bn.

Deloitte pay

fuels anger

on ‘rewards

for failure’

SCANDAL-hit accountant Deloitte

has been accused of handing

out ‘rewards for failure’ after top

staff received their biggest pay

day in a decade.

Profits to be shared among the

firm’s partners increased to £617m

for the year to May 31, up from

£584m in 2018. It means the aver-

age payout to the 669 partners

will rise to £882,000. They received

£832,000 each last year.

Deloitte is the first of the Big Four

firms, which also include PwC,

KPMG and EY, to report its 2019

results. Rival PwC last year paid

partners £712,000, EY paid £693,000

and KPMG paid £601,000.

Prem Sikka, a professor of

accounting who has advised the

Labour party, said the bonanza

showed the need for reform.

He pointed to Deloitte’s involve-

ment in the Carillion, 1MDB, Serco,

Mitie and SIG scandals, and said:

‘In a decent society, firms rou-

tinely delivering duff audits should

go out of business and their part-

ners should receive mega law-

suits. These rewards for failure

won’t help the UK to build a sus-

tainable economy, and send out a

very negative message.’

It comes amid growing scrutiny

of the Big Four. Deloitte was fined

£4.2m last month by the Financial

Reporting Council for missing a

scandal at outsourcer Serco.

It was fined £409,000 for failing

to uncover a massive scandal at

Malaysia’s sovereign wealth fund

1MDB and worked for Carillion in

the run-up to its collapse a year

ago but failed to flag up problems.

The industry is lobbying against

tough reforms and firms have

been culling clients seen as risky.

Stephen Griggs, a managing

partner at Deloitte, said: ‘We have

been consistent in our support for

change in the market and are pos-

itive about many of the proposals.

However, we do not agree with

proposals that would see any form

of separation of the audit business

from the rest of the firm.’

by Matt Oliver

£171bn US tobacco merger

Daily Mail, Wednesday, August 28, 2019

Pence

ITV

Morrisons

Sainsbury’s

Kingfisher

Direct Line

Centrica

M&S

£4.6bn

£4.4bn

£4.3bn

£4.1bn

£4bn

£3.9bn

£3.7bn

Company Value

(^600) FACING THE DROP?
500
400
300
200
100
2015 2016 2017 2018 2019
Burford hit by fresh assault
After 35 years at
the top, firm has
just one week to
save cherished
blue-chip status
UK high St eet ’ The co pa ies
M&S
faces
axe from
FTSE 100
TOBACCO giants Philip Morris Interna-
tional and Altria are in talks to reunite in a
blockbuster £171bn deal.
It comes as both seek to get ahead in the
rapidly expanding vaping market to offset
dwindling sales of traditional cigarettes.
The tie-up would reunite the suppliers of
Marlboro cigarettes. Altria took over Marl-
boro sales in the US after its separation
from Philip Morris in 2008. It has stayed a
largely US-focused company since, with
Philip Morris focusing on overseas sales.
Customers in the West have ditched smok-
ing for e-cigarettes and heated tobacco
and Altria last year agreed to buy a 35pc
stake in Juul Labs, one of the world’s big-
gest vaping companies, for £10.5bn.
The companies confirmed the talks but
stressed that they are at an early stage.
Any deal would need to get a green light
from each company’s board, shareholders
and regulators.
Confirmation of the talks came after Wells
Fargo analyst Bonnie herzog said on Mon-
day that Philip Morris would be an ideal
partner for Juul’s international expansion.
US regulators are taking on e-cigarettes,
removing some products from the market
and blaming them for encouraging teens to
start vaping with wacky flavours.
Jefferies analyst Ryan Tomkins said:
‘While this merger makes sense and will
create a more valuable company when com-
bined, we do think it is strange timing given
possible risk to Juul in the US with regards
to regulatory action.’
Philip Morris’s annual turnover is around
£24bn a year, while Altria makes £16bn.
HEDGE fund Muddy Waters has continued
its pursuit of Burford Capital, criticising
the legal finance firm for ‘outrageously
misleading’ investors.
The two businesses first locked horns
almost three weeks ago as Muddy Waters,
which is short-selling Burford’s shares
meaning that it profits when they fall,
slammed the firm’s accounting practices
and called it ‘arguably insolvent’.
In its latest attack, Muddy Waters tar-
geted Burford’s defence of the returns it
booked from Napo, a US pharma firm.
Burford makes money by lending cash to
companies like Napo to pursue legal
cases, in return for a cut of winnings. In
2011, Napo received funding from Burford
to pay for its lawsuit against rival Salix.
Muddy Waters noted that in 2013, the firm
categorised its investment in Napo’s liti-
gation as a win with a significant return.
This should have been a loss, the hedge
fund argued, since Salix won the case.
But Burford said the ‘entitlement’ came
from another case involving Napo.
However, in a new 12-page barrage,
Muddy Waters said it believes that Bur-
ford also lost this case.
Shares in the company are down 45pc
since claims from the original Muddy
Waters dossier began to circulate, and
analysts are divided over whether to
believe Muddy Waters or back Burford.
Burford declined to comment.