Financial Times UK - 02.08.2019

Friday2 August 2019 ★ 13

© The Financial Times Limited 2019 Week 31

Companies / Sectors / People

PETER CAMPBELL MOTOR INDUSTRY CORRESPONDENT

The chief executive ofBMWhas urged Boris Johnson to “listen to the economy” on Brexit in a “personal mes- sage” to the new prime minister.

Harald Krügersaid Mr Johnson should seek a “compromise that is acceptable to everyone,” warning that a “hard Brexit is not in the interests of the country” and “both sides will lose” if the UK leaves without a deal. His warnings come a day after figures showedthat carmakers had spent £330m preparing for Brexit, and after the boss of Vauxhall ownerPSAwarned that the company would divert work to Europe in the case of a no-deal scenario.

BMW, which owns the Mini and Rolls- Royce brands, is one of the UK’s largest automotive investors and exporters, with four British plants. The Mini is the second-most-exported car from the UK, and the company imports more BMW models into Britain than to any other European country. Mr Krüger said: “Listen to the economy and listen to the people. You need to have a dialogue, I hope you can come to a compromise that is acceptable to everyone.” While the company shut its UK plants during April to try to avoid disruption following the original Brexit date, the business will not be able to repeat this later in the year, in part as Mini ramps up production of its new electric model. This will leave it exposed to delays in

importing parts into the UK in the days immediately following Brexit because its plants, which rely on a steady flow of components, will be running as usual. “It’s important that companies remain highly flexible, we are prepared for all scenarios,” he said. The company is facing challenges from slowing sales and rising costs from the US-China trade war, which pushed profits for the second quarter down a third. Pre-tax profit fell from €2.9bn to €2.1bn, although revenues rose 3 per cent. Its operating margin was 8 per cent, down from 11.5 per cent a year ear- lier. It was Mr Krüger’s final set of results before he is replaced on August 15. Brexit newspages 2& Philip Stephenspage 11

BMW boss pleads with Johnson to find

a Brexit compromise acceptable to all

Companies AJ Bell............................................................ AMS................................................................ 24 Abiomed....................................................... 24 Alipay............................................................... Allianz............................................................ Alpha Natural Resources................... Altice............................................................... Amazon.....................................................11, American Electric Power.................... Anbang.......................................................... Ant Financial............................................... Apollo Global Management.............. Apple......................................................9,11, ArcelorMittal.............................................. Arch Coal...................................................... Audi................................................................... Axa................................................................... BG Group................................................13, BMW................................................................ 13 BNP Paribas................................................ BP..................................................................... BUX.................................................................. Barclays....................................................12, Blackjewel.................................................... Blackstone.................................................... 13 Bloomberg................................................... BlueMountain............................................ 23 Bouygues...................................................... Brevan Howard........................................ 23 British American Tobacco................. 24 Budgens..........................................................

Canada Pension Plan............................ 13 CF Industries............................................. 24 CVC Capital Partners............................ Calpers........................................................... Capita............................................................. 24 Capital One................................................. Casio Computer Company................. Caxton Associates.................................. 23 Centrica......................................................... Chevron......................................................... Citadel............................................................ 23 Cloud Peak Energy................................ Clovis Oncology....................................... 24 Coffee Day Enterprises........................ Continental.................................................... Contura Energy........................................ Convex........................................................... Credit Suisse.............................................. Daimler............................................................ Debenhams................................................. Deliveroo...................................................... Deutsche Bank....................................12, Deutsche Börse........................................ Domino’s Pizza......................................... DoorDash..................................................... Drexel Burnham Lambert.................. Eisenmann..................................................... Element Capital....................................... 23 Enagás........................................................... Eni.................................................................... ExxonMobil................................................. Facebook....................................................9,

Facewatch...................................................... Fitbit............................................................... 24 Freetrade...................................................... Generali......................................................... Glanbia.......................................................... 24 Global Infrastructure Partners........ Google............................................................. GrubHub....................................................... HBOS............................................................... HRnetGroup............................................... 24 Halfords........................................................ 24 Hargreaves Lansdown......................... House of Fraser....................................... Hugo Boss.................................................. 24 ING.............................................................14, Iliad................................................................... Infineon......................................................... 24 Interactive Investor................................ Intercontinental Exchange................. 13 Johnson & Johnson................................. Just Eat......................................................... Kellogg.......................................................... 24 Kier................................................................... Lam Research........................................... 24 Lego................................................................. 13 Libra................................................................. Lloyds Bank................................................ London Stock Exchange.....13,15,17, Marks and Spencer.................................. Mastercard.................................................... Merck .............................................................. Merlin Entertainments.......................... 13

Monzo............................................................. NEC.................................................................... Naspers......................................................... Naturgy......................................................... Netflix............................................................... Orange........................................................... PSA................................................................... 13 PayPal............................................................ Paytm.............................................................. Peabody Energy...................................... Qualcomm................................................... 24 Rappi............................................................... Refinitiv.........................................13,15,17, Revolut........................................................... Rio Tinto....................................................... Robinhood.................................................... Royal Dutch Shell........................13,14, Sainsbury’s.................................................... Schaeffler....................................................... Siemens....................................................12, Société Générale...................................... SoftBank....................................................... Sotheby’s...................................................... Sovereign Capital...................................... Sports Direct.............................................. Staffline........................................................ 24 Standard Chartered............................... Starling Bank.............................................. Takeaway.com........................................... Temasek........................................................ Tesco................................................................. Therium......................................................... Thomson Reuters...............................13,

Total................................................................ Trueface.......................................................... Tudor.............................................................. 23 UBS.................................................................. Uber Eats..................................................... UniCredit....................................................... Visa................................................................... WeChat........................................................... WhatsApp..................................................... XL..................................................................... Yoti..................................................................... Zalando......................................................... 24 Sectors Automobiles................................................. Banks..............................................12,14,17, Construction............................................... Energy.................................................14,16, Financial Services.................................... Financials................11,12,14,15,16,17,23, Food & Beverage.................................... 24 Healthcare................................................... 24 Industrials............................................6,11, Insurance.................................................14, Media................................................................ Mining............................................................ Oil & Gas.....................................13,14,16, Personal & Household Goods........ 24 Pharmaceuticals......................................... Retail...................................................17,24, Retail & Consumer.................................. Support Services...............................17, Technology..................9,12,14,15,17,23,

Tobacco........................................................ 24 Travel & Leisure.................................14, People Ashley, Mike................................................ Beurden, Ben van................................... Black, Leon.................................................. Bramson, Edward..................................... Buberl, Thomas........................................ Catlin, Stephen......................................... Conn, Iain..................................................... Drahi, Patrick.............................................. Edmonds, Noel.......................................... Gould, Tim................................................... Griffin, Ken.................................................. 23 Hamers, Ralph....................................14, Horta-Osório, António.......................... Jacques, Jean-Sébastien...............16, Kaeser, Joe.................................................. Kellow, Glenn............................................. Kesterton, Simon..................................... Krüger, Harald........................................... 13 Robert, Don................................................. Schwimmer, David........................13,15, Siddhartha, VG.......................................... Soros, George............................................ 23 Sprecher, Jeff............................................. 13 Staley, Jes...............................................12, Tudor Jones, Paul................................... 23 Warren, David............................................ Winters, Bill................................................. Wootton, Chris...........................................

WallflowersEurope’s banks fear they will

miss out on Draghi’s QE party— ANALYSIS, PAGE 23

Food fightHungry investors fuel battle

to dominate deliveries— INSIDE TECH, PAGE 14

for more than a decade with multiple management teams... Over many, many years we were not able to find a way we could create value.” He did not comment on any potential LSE bid. The all-share deal will turn Refinitiv’s owners, which include US private equity groupBlackstoneand Canada’sThom- son Reuters, into the LSE’s biggest shareholders. Together, they will own 37 per cent of shares and control just under 30 per cent of its voting rights. LSE shares rose 6.5 per cent yesterday. Additional reporting by Richard Henderson in New York Tests await LSEpage 15 Lombard & City Insiderpage 17

right ownership of currency trading platform FXall. The combined group will have annual revenues of more than £6bn if the LSE can navigate a long antitrust process, which is expected to involve regulators in probing whether its cumulative data offerings would give it pricing power over customers. The LSE must also avoid any potential counter-offers for Refinitiv or its own business.Intercontinental Exchange,a US rival that has previously explored acquiring the LSE, said it had looked at parts of Refinitiv.Jeff Sprecher, ICE chief executive, said yesterday: “We’ve had conversations around those assets

and capital markets,” saidDavid Schwimmer, an American who took over the LSE after leaving Goldman Sachs last year. By acquiring Refinitiv, which is best known for its Eikon desktop terminals, the LSE completes a multiyear effort to become less dependent on transaction- based revenues and will pick up data assets that will further reduce its reli- ance on its UK and European business. The LSE said it would pay for the pur- chase by issuing $14.5bn in new shares and would take on $12.5bn of existing debt. It will also gain Refinitiv’s majority stake in the listed and fast-growing bond trading platform Tradeweb and out-

ARASH MASSOUDI

TheLondon Stock ExchangeGroup has agreed to buy data providerRefinitivfor $27bn, sealing a deal that will turn it into a global markets and information pow- erhouse to rival Michael Bloomberg’s financial data empire. The chief executive of the LSE said he was confident the business would meet the high expectations set by investors, which havesent shares in the company up 24 per cent since last weekend. “We have a lot of confidence in our ability to generate the targeted growth rates of this business... and in the importance of data in financial markets

LSE clinches $27bn Refinitiv deal

3 Combined data group to have £6bn in revenues 3 Regulators likely to probe pricing power

The success of the second Lego movie failed to lift visitor numbers and revenues at the theme parks that showcase the plastic building blocks. Merlin Entertainments, Europe’s largest theme park operator, said there was “limited momentum” fromThe Lego Movie 2after its release this year. The group reported a 0.7 per cent decline in revenues at Legoland parks in the first half of the year in contrast to the 19 per cent boost after the first movie in 2014. However, overall revenues at its attractionsincreased 6.5 per cent to £763m due to a 3 per cent growth in visitor numbers to 30.8m. Pre-tax profit rose 3.5 per cent to £253m. Merlin is set to be taken privatethis year after a deal with its largest shareholder, the family office of the Danish billionaire owners of Lego, along with Blackstoneand theCanada Pension PlanInvestment Board. Merlin aims to expand its footprint away from Europe and into the US and Asia with new Legoland and Peppa Pig theme parks as it tries to cushion itself from any downturn in visitor numbers in the UK and the continent. It said it had opened two pilots of Peppa Pig parks in the US and that discussions for development of Legoland parks in China were “ongoing”.Alice Hancock

Not so awesome

Lego sequel fails to

inspire park visits

Thomson Reuters and

Blackstone will hold

a combined 37% stake

in the LSE

Warner Bros/Kobal/Shutterstock

David

Sheppard

Tail

Risk

Royal Dutch Shellcould be crowned “Gassius Clay” in its position as the undisputed heavyweight champion of liq- uefied natural gas supplies among the energy majors. So the group’s surprisingly bad second-quarter results, which sent its shares down more than 5 per centyesterday, should not be that surprising,given the LNG market has become punch-drunk since the start of the year. Prices for spot cargoes of the fuel in Asia, the core market for LNG, have fallen to less than half those of a year ago, as the market struggles to absorb a glut of new supplies in the US and Australia. Demand has also been relatively tepid after a mild winter crimped heating needs, while traders haveeyeda slowdown in industrial output. Cargoes in Asia are changing hands for less than $4 per million British thermal units, according to Reuters, a level that barely covers the cost of chilling and shipping the supercooled fuel halfway around the world. Now it would be easy and fun to beat up on the analysts covering Shell for missing the glaringly obvious. So we will. While the results were dis- appointing across the board, LNG was the standout miss. The integrated gas business, where LNG is housed along- side Shell’s whizzy gas-to- liquids operations, saw earnings slump 25 per cent. The majority of analysts had forecast it would broadly match 2018’s results. Turns out substantially lower gas prices were not that good for the bottom line of one of the biggest gas suppliers and traders. Mark that in your models for next time. But does this mean Shell’s punt on the fuel, including the multibillion-dollar deal to buy heavily LNG-focusedBG Groupfour years ago, is already out for the count? Proba- bly not. The LNG market is a long-term game and, while it is suffering from oversupply, that is unlikely to continue. Gas demand globally rose almost 5 per cent last year, according to the International Energy Agency, more than double the pace of growth for oil demand. LNG demand, in particular, is expected to remain strong, with many developing Asian countries lacking domestic resources or easy import routes. As pressure builds to reduce the use of coal for environmental reasons, LNG is likely to be one of the main beneficiaries. Supplies will keep growing over the next few years but with the long-term future of oil demand in doubt, the pivot towards LNG by energy majors and trading houses makes sense. The price difference for LNG from various regions is expected to narrow as the market becomes more global, trading more like oil. But if demand growth keeps up, prices should eventually firm. The LNG market might be struggling now but, given the wider longer-term trends, it would be brave to bet it can- not come off the ropes.

[email protected]

The LNG market

is suffering from

oversupply at the moment but

that is unlikely to continue

Miners in the Powder River Basin of Montana and Wyoming had hoped to survive the shift to renewable energy. But with coal firing less than a quarter of US electricity generation, against almost 40 per cent five years ago, the region is in relentless decline. AnalysisiPAGE 16

Shift to renewables stems flow of Powder River coal

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Financial Times UK - 02.08.2019

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