Section:GDN 1N PaGe:28 Edition Date:190730 Edition:01 Zone: Sent at 29/7/2019 20:25 cYanmaGentaYellowb
- The Guardian Tuesday 30 July 2019
(^28) Financial
Business view
Richard Partington
N
eil Woodford once
had a reputation
as Britain’s answer
to Warren Buff et ,
with the celebrity
kudos to bring in
more than £10bn of other people’s
money to manage on their behalf.
Stock watchers used to refer to
the “ Woodford eff ect ” of investors
picking a star manager, rather
than a particular asset class or
market. The situation could not be
any more diff erent today with his
Equity Income Fund in crisis.The £3.5bn fund will remain gated
until December to give Woodford
more time to sell stakes. The idea
is to steady the ship and build up
enough cash to repay investors
when the gates fi nally reopen.
But when that day comes, the
fund manager will struggle to
rehabilitate himself, such is the
battering his reputation has taken.
Brand Woodford has gone from
being an asset to a liability.
The board of another Woodford
fund, Patient Capital Trust, revealed
yesterday that it was consideringreplacing him as the manager of
its assets. Imagine Henry Ford was
sacked and someone considered
better at making cars was installed
in his place. This is the City
equivalent.
The damage might not yet be
terminal for Woodford’s City career.
Results have not gone his way and a
period of beating the market would
help. But in an industry based on
trust as much as hard numbers, he
could do much more.
A good start would be heeding the
advice of MPs and regulators and
waiving the management fees he is
still taking. Hundreds of thousands
of trapped customers are forced to
keep paying them. As much as £10m
could be taken by Woodford while
the fund is suspended.
Woodford says he’s sorry for
putting investors through the
wringer, but scrapping his fees
would show he is serious. His
reputation could depend on it.Sports Direct delay
Mike Ashley’s retail empire
managed the unthinkable last
week: coming close to upstagingup and Brexit could make matters
much worse. But Sports Direct is
an unusual case because Ashley
has put himself at the centre of the
storm by buying up fi rms in trouble.
Friday’s farce exposed a business
that has spun out of the control of its
excessively acquisitive owner.Sterling slides
The fi nancial markets are fi nally
waking up. After barely budging as
Boris Johnson took power last week,
sterling fell sharply yesterday as his
government continued to talk up a
no-deal Brexit.
Markets don’t have the best track
record of reading politics. The City
has always assumed some form
of Brexit deal can be reached: it is
the central scenario at the Bank
of England. But this notion looks
increasingly at odds with reality.
Threadneedle Street could change
tack when it publishes its infl ation
report on Thursday. But it probably
won’t, as Johnson’s stated policy is
still to pursue a deal.
Taking Britain over the cliff
would mean another Wile E Coyote
moment for the fi nancial markets.Sorry isn’t good enough.
Woodford needs to show he’s
serious by scrapping fees
Rob DaviesMichael O’Leary has said he cannot
rule out making some of Ryanair’s
17,500 staff redundant if the Boeing 737
Max stays grounded for longer than
expected while investigations con-
tinue into two fatal crashes involving
the aircraft.
Speaking as the budget airline’s
fi rst-quarter profi ts slumped by 24%,
the carrier’s chief executive bemoaned
the impact of delays in the return to
service of the 737 Max, a key compo-
nent of Ryanair’s strategy to arrest the
decline in its fi nancial performance.
Ryanair has 135 of the 737 Max mod-
els on order, with 58 due for delivery
by next summer , but the airline will
not accept them until regulators have
declared the plane safe to fl y. O’Leary
warned Ryanair may not have any
of the planes ready unless Boeing
“gets their shit together” in making
upgrades required by regulators.
The grounding of the global fl eet of
737 Max aircraft has already taken its
toll on Ryanair, forcing the airline to
halve growth targets for next year as
it scrapped 30,000 planned fl ights and
warned it could close bases at airports.
“We would not rule out redun-
dancies and job losses, which will
be inevitable if these Max delays are
as presently envisaged or get worse,”
said O’Leary.
At least one Boeing 737 Max that
was due to be delivered to Ryanair has
had the name “Max” dropped from
the livery , fuelling speculation that the
manufacturer and airlines will seek toRyanair boss
says job cuts
possible if
Boeing 737s
stay grounded
the chaos in British politics, with an
omnishambles update on Friday ,
10 hours later than planned and
packed with grizzly news.
On a bizarre day in the City even
for the maverick Newcastle United
owner, Ashley went on a rant
about “self-interested” advisers,
argued that company bosses should
face drugs tests and suggested he
regretted buying House of Fraser.
An hour after markets closed,
Sports Direct fi nally got around
to saying that problems at the
department store chain were
“terminal” and there was a €674m
(£605m) Belgian tax bill to pay.
Updates usually come out at 7am,
an hour before the opening bell.
The weekend clearly did little to
calm investors: the shares tanked by
a quarter before recovering to end
the day down 6.5%.
“A case study in failed corporate
governance,” one money manager
told the BBC. “Frankly a pathetic
way to run a business,” said another.
Trading conditions might be
tough on the high street. Retailers
are facing a losing battle against
online rivals, consumers are hard-rebrand the troubled plane. O’Leary
issued his warning on jobs as the air-
line reported quarterly profi ts down
by almost a quarter, with its 737 woes
compounded by price wars in several
European markets.
Average fares at Europe’s largest
low-cost carrier will probably fall by
6% over the crucial summer period
compared with last year as airlines
cut prices to stimulate demand, par-
ticularly in Germany and the UK, the
airline said. O’Leary pointed to fi erce
competition driving down prices in
Germany, as well as reduced spend-
ing in the UK as Brexit uncertainty hits
consumer confi dence.
“We are cautious on pricing intothe winter,” said O’Leary. “Brexit and
the risk of a hard Brexit has materially
increased with the new government
in the UK.”
The decline in fares pushed pre tax
profi t down to €262m (£236m) for the
three months to June 30, compared
with €345m in the same period of 2018.
But the company stuck to its annual
profi t target of €750m to €950m as
passengers continued to spend on
onboard extras, which include food,
perfume and scratchcards.
Shares in the airline had fallen by
0.7% by the end of the day, having
almost halved in value in two years
as the Dublin-based airline grapples
with overcapacity, repeated strikesby disgruntled pilots and cabin crew ,
Brexit uncertainty and the 737 delays.
O’Leary lashed out at unions for
threatening new strikes, with action
planned by pilots in the UK and Ire-
land, as well as cabin crew in Portugal.
“It seems to us that even by the
standards of some of these trade
unions, this is chronically ill-timed
and ill-judged,” he said, adding that
it could coincide with the period in
which the company will be announc-
ing cuts related to the Max grounding.‘We are cautious
on pricing into the
winter ... the risk of
a hard Brexit has
increased with the
new UK government’Michael O’Leary
Ryanair chiefyy▲ A 737 Max 8 parked at Boeing’s
Washington factory in the US. Boeing
has said it could halt 737 production
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