J
ust because something has
been expected for a long time
doesn’t mean it isn’t still a
shock when it actually
happens. It will be a sobering
moment when we eventually
leave the EU, or when the Prince of
Wales finally becomes king. And in a
similar vein, there will inevitably be a
sense of shock, mingled with some
regret, when Marks & Spencer is
finally kicked out of the FTSE 100
index. We not quite sure when the
other two will happen, although the
first one is scheduled for the end of
October. But M&S leaving the FTSE
looks a done deal for next week.
That will be bad news for the
company, and for shareholders as well,
as index funds drop the company from
their portfolio, and its prestige takes
yet another dent. But it will also have
wider lessons for any major business.
Such as? Move with the times. Keep
focused. And sell out when you can. If
Marks had learned those earlier, it
would be in better shape today.
The FTSE gets reshuffled
frequently, and some companies, a
little like Crystal Palace in the Premier
League, go in and out all the time. But
M&S is something different. Along
with BAT Industries and Tesco, it is
one of the relatively few companies to
have been part of the benchmark
index since its inception. It has been a
bellwether for the state of retailing,
and a champion of British business, for
as long as anyone can remember. Even
a few years ago, the FTSE without it
would have been unthinkable. Not any
more, however.
We will see what happens next
week, but The Share Centre in its
latest review of the reshuffle has it
down as a certainly for demotion,
along with possibly Centrica and
perhaps Kingfisher as well. It is hard to
disagree with that verdict. M&S
survived by a whisker last time, but
the share price has been hammered
again following its latest rights issue.
Its market capitalisation is down to
just £3.6bn.
The shares have fallen from 300p
last November, and more than 550p in
2015, to just 186p now. It would take an
almighty big jump over the rest of this
week to keep it in the index.
So what lessons can other
companies, and investors, learn fromM&S decline was not inevitable
but it may be too late to reverse
Marks & Spencer has gone from being Britain’s retail bellwether to a struggling chain that faces demotion from the FTSE 100AFP/GETTY IMAGESmatthew
lynnT
he tug of war between
profit and purpose is finally
coming to an end. With
both sides now realising
that pulling in the same
direction, rather than
against each other, means there are
only winners.
Ahead of the G7 meeting of world
leaders, Legal & General joined
34 global businesses and the OECD to
back Business for Inclusive Growth – a
ground-breaking public and private
sector collaboration across the G7
nations. This provides an opportunity
to work together to address common
challenges and drive the opportunities
of inclusive growth. “Inclusive
capitalism” has been at the heart of
Legal & General’s strategy for years.
There is no doubt that across the UK
and overseas, there is an immense
amount of work being undertaken to
drive forward social value. However,
many of these projects lack the
financial firepower to make them truly
scalable and have significant domestic
and global impact.
Similarly, there
are businesses
with huge
commercial
resources yet are
only investing in
side projects
focused on
enhancing our
society through
corporate social
responsibility
departments, while their corporate
machinery rumbles on untouched and
unevolved. This binary thinking where
“doing good” and “making money” sit
separately is not in itself a problem –
but it is also not a solution to our
societal challenges. Bringing the two
together so money is made while good
is being done is far more powerful.
As the largest institutional investor
in the UK with over £1.1 trillion of
investments, Legal & General joins
like-minded global businesses in this
new coalition convened by the
Organisation for Economic
Co-operation and Development
(OECD). From shareholder activism to
‘It is far
more
powerful
when money
is made
while good is
being done’
Inclusive
capitalism
can change
the world
Nigel
Wilson
gel
lson
direct investment strategies, Legal &
General has been recognised as
combining growing shareholder value
with driving social progress. Inclusive
capitalism must recognise that every
person wants a better life for
themselves, and for the next generation.
This is our recipe for inclusive
growth: injecting patient capital into
partnerships with expert public bodies
based on sound long-term thinking.
This is what builds the capacity we
need to get out in front of the fourth
industrial revolution and, ultimately, to
create societies better than the ones we
inherited and drive our shareholder
value as we grow our business.
Legal & General has so far invested
£28bn into building UK capacity and
capability. Our investments have
upgraded ports; funded state-of-the-art
trains; regenerated huge urban areas;
created science research hubs; funded
a project to build houses for homeless
people in Croydon; and invested in the
hotel and conference centre at the FA’s
National Football Centre in Burton.
This matters to me personally as well
as professionally as it confirms the
importance of inclusive capitalism and
its role in rebuilding the region in
which I grew up. One of the proudest
days of my career was signing the
£400m deal that saw Legal & General
partner with Newcastle University and
the city’s council to build more of
“Science City”. The North East blazed
the trail that the world followed in the
first industrial revolution and I know
that inclusive growth is the path for the
region to excel in this century.
There is $14 trillion earning negative
nominal returns across the globe – why
should we accept that our money goes
down in value? Inclusive capitalism can
deliver better returns by unlocking this
money and putting it to work building
better societies, tackling the climate
emergency, reducing inequality, closing
the infrastructure gap and fostering a
new intergenerational contract.
The real significance of this approach
is the equal value placed on the
“inclusive” and the “capitalism” – it is
about business acting in a way that is
both economically and socially useful.
This is an area where the UK can take a
global lead. Growing numbers of
British companies are responding to
the challenge from their customers,
and the wider public, to demonstrate
that business is doing its bit to help
tackle some of the big issues society
faces, whether it is inequality or
climate change. And business needs to
show that this is a genuine, meaningful
response to the problems we face – not
a handful of token social initiatives
tacked on to their annual report.
It’s time to look beyond political,
geographic, generational and economic
divides. Capitalism and social progress
aren’t opposing forces. Quite the
opposite. Inclusive capitalism can
change all of our communities for the
better while enhancing our business
performance. All it takes is a longer-
term view, a more inclusive attitude
and for everyone to get on board.Nigel Wilson is chief executive of
Legal & Generalits seemingly terminal decline? Here
are three to start with.
First, move with the times. M&S was
a pioneer of affordable, mainstream
fashion but from the Nineties onwards
it completely lost its way becoming
dowdier and dowdier. Through its
glory years it became ossified and
conservative, with no sales, no other
brands, and no real online presence.
By the time it tried to change it was too
late. Next, don’t confuse the message.
M&S was a genuine innovator in food,
creating a new market for ready meals,
and higher quality ingredients, before
anyone else. But it ended up turning
itself into a weird, hybrid food and
clothes chain, which just looked odd
(it is telling that no company tried to
copy that combination – there are no
sandwiches at Zara).
It should have demerged the food
business 20 years ago and let it
flourish by itself. Finally, sell out when
you can. Sir Philip Green made a series
of offers for M&S at the turn of the
century but was seen off each time.
There have been plenty of rumours of
bids since then and behind the scenes
there were surely approaches. Each
time the company clung on to its
independence. But what was the point
if it couldn’t turn itself around? In
truth, it would have been better for
shareholders, staff and customers to
sell out when it could.
There was nothing inevitable about
the decline of M&S. Lots of industries
change, and plenty of companies
successfully reinvent themselves. But
it surely too late for M&S now – and a
few other major companies should
learn the lessons of that while they
still can.A bond with Brexit
Austria has one. So does Argentina and
Mexico. In total, 14 countries in the
OECD, including Belgium and Ireland,
have tapped the bond market for a
whole century, and now the United
States, the most important bond issuer
in the world, is reported to be “actively
considering” joining them. Here’s an
idea for our Chancellor. It is time theUK joined them – and went one better
by issuing a 200-year Brexit bond.
Not very long ago, the idea of
lending a government money for a 100
years would have been about as
popular as a bank holiday traffic jam
on the M6. After all, you’d be dead long
before you got your money back, and
that was before you took account of
such small matters as wars,
revolutions, and crashes that come
along much more regularly than once
a century. It seemed a bonkers idea.
And yet, as the bond market keeps
going higher, and interest rate lower,
they are all the rage. The few that have
been issued have been soaring in price- Austria’s 100-year bond is up 80pc so
far this year, the kind of performance
usually associated with internet
start-ups, not staid middle European
government debt.
So here is a question the Chancellor
should be asking himself. Shouldn’t
the UK crash the party? There are
three reasons why the answer should
be yes.
First, the money is very, very cheap,
and doesn’t have to be repaid for a
heck of a long time. That cash could be
productively used to rebuild our
infrastructure as we leave the EU.
There are plenty of projects, and the
economy will need a boost as we
depart. Second, if a country such as
Mexico can sell a 100-year bond, the
UK, which is one of the few countries
never to have defaulted, can surely
join them. We may not look exactly
like a stable, developed democracy
right now, but that will surely pass.
Indeed, in a relatively small pool, and
at least until the Americans or German
join in, a British century-gilt could
quickly become the benchmark for the
whole sector.
Finally, it will help the City build its
expertise in a fast-growing market for
ultra-long debt. As the world shifts
towards bonds with huge durations, a
big new market will open up. With
domestic expertise the UK banks can
lead the world in creating and selling
that paper.
In fact, why not go one better? With
100-year bonds becoming practically
mainstream, the UK should push the
boundaries and try 200 years. Sure,
investors will be dead by the time it
matures. But they will after a 100 years
as well, and that doesn’t seem to
bother anyone in the least. And
successfully selling such a long-dated
instrument – lets call it a Brexit bond- would be a great way of
demonstrating the UK has sailed
through its departure from the EU
unscathed, and still commanded
confidence in the financial markets.
‘It ended up turning itself
into a weird, hybrid foodand clothes chain, which
just looked odd’Business comment
Anglo digs out £100m war chest
to fund new mining projects
By Jon YeomansMINE investor Anglo Pacific is on
the hunt for new projects, with a war
chest of £100m to spend amid what it
claims is a shortage of backing for
the industry.
Julian Treger, chief executive, said
the sector was suffering from a
“ constriction of capital” and his firm
stood ready to back projects that are
struggling to get off the ground.
“The cost of capital is going up and
there is a shortage of capital,” he said.
“We’ve got £100m of firepower
and we’re generating quite a lot of
cash – we’d like to deploy this.”
Mr Treger said that the industry
had been hit by waning interest, with
investors distracted by other
opportunities such as Bitcoin and
stocks in cannabis.
Environmental concerns were also
deterring investors who need to
follow ESG (environmental, social
and governance) rules in their funds,he added, while the major miners’
reluctance to fund new projects
signalled a lack of “faith” in the wider
industry.
“Lack of investment is setting the
sector up for a tremendous supply
shock at some stage,” Mr Treger said.“Unlike sexier sectors the mining
sector is a beneficiary of technologi-
cal disruption like electric vehicles.”
London-listed Anglo Pacific does
not operate mines but instead makes
money by financing companies and
taking a cut of their turnover in
return.
This “streaming” model is used by
a number of companies in the
Canadian market but is relativelyunknown in London. Anglo owns
royalties on iron ore, coal and
vanadium mines.
It is targeting investments in base
materials, rare earth elements and
strategic minerals that it believes
could be in strong demand for
industries producing smartphones
and electric cars.
Its biggest investors include
Aberforth, Schroders and Blackrock.
Last week Anglo posted a 64pc
jump in royalty revenue for the first
half of the year thanks to higher
production at some of the mines
where it is invested.
It has a market value of around
£340m, with its shares having risen
30pc this year.
“We had a very strong start to
the year, unlike much of the mining
sector, which is challenged,” Mr
Treger said.
“We are confident about making
further acquisitions in the coming
months.”Ground cleared for
sale of Carb Killa
maker Grenade
By Vinjeru MkandawirePRIVATE equity firm Lion Capital,
which has invested in food and bever-
age brands such as Weetabix and Kettle
Chips, is lining up a sale of sports nutri-
tion company Grenade, as health-con-
scious consumers boost fitness brands.
The ground is being prepared for a
sale this year, City sources said. Gre-
nade was valued at £72m in 2017 and
has grown rapidly since.
Lion Capital acquired a majority
stake just over two years ago from
Grovepoint Capital and Grenade co-
founders Alan and Juliet Barratt.
Grenade was launched in 2010 as a
company selling fat-burning pills but
has since branched out into a range of
sports supplement and sportswear.
The company, which markets the
Carb Killa range of high protein bars
and drinks, has also partnered with
retailers such as Tesco and coffee chain
Costa to grow. It reportedly sells
140,000 protein bars every day.
Grenade posted an 85pc rise in
pre-tax earnings of £7.4m and 48pc
growth in revenues to £39.7m in 2018.
Both Lion Capital and Grenade de-
clined to comment. Grenade reportedly sells 140,000 protein bars every day, including its Carb Killa range‘Unlike sexier sectors
mining is a beneficiary of
technological disruptionlike electric vehicles’
28 ***^ Tuesday 27 August 2019 The Daily Telegraph
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