Tuesday4 February 2020 ★ FINANCIAL TIMES 17
UK COMPANIES
Alison Cooper, chief executive of
tobacco group Imperial Brands, is
quitting her office ven before here
replacement — Stefan Bomhard — sets
the date for swapping cars for cigars
and leaving the top job at Inchcape.
It is moot whether Ms Cooper ran out
of puff after a decade, or disappointed
shareholders ran out of patience.
Imps’ shares, having peaked at £
in 2016, are back to where they were
when the cigar-smoking Ms Cooper
started. Now it is for Mr Bomhard to
succeed where she failed and carve out
a future for the baccy business and flog
its cigar division amid a dealmaking
slowdown.
Disappointingly, headhunter data
does not suggest change at the top
leads to better performance
immediately. Bankers reckon it takes
two years before investors can expect a
boost to their returns. PwC analysts say
successors to long-running chief
executives often underperform and
find themselves out on their ears.
Mr Bomhard won’t be the only
newbie put in charge of a FTSE 100
group this year.Tesco’s new chief,Ken
Murphy, will replaceDave Lewis ni
October.BP, J Sainsbury, RBS, HSBC
andPearson ave replaced top execsh
recently or announced plans to do so.
The revolving door is spinning
worldwide, too. Outplacement firm
Challenger, Gray & Christmas said
1,640 CEOs in the US left their posts
last year — a decade high. PwC believes
close to one-fifth of global company
bosses moved jobs in 2018, about the
highest it has recorded since 2000.
At the same time, average tenure at
the top has fallen fromeight years in
2000 to 4.6 years. Intriguingly, CEO
turnover has coincided with spikes in
deal volumes,both hitting peaks
simultaneously in 2000 and 2007,
according to brokers AJ Bell and
Dealogic, though the link between
deals and management shake-ups has
been loosening more recently.
Mr Lewis says bluntly he needs torecharge his batteries after five “all-
consuming” yearsreversing Tesco’s
decline.Mike Coupe’s departure from
Sainsbury’s seemed inevitable after the
UK’s trustbusting authorities derailed
his hopes of buying Asda and doubts
emerged about his acquisition of Argos.
Regulators and shareholders are
increasingly less indulgent of CEOs’
“urge to merge”.
Without dealmaking to raise animal
spirits in the boardroom, running a big
business in straitened times is grinding.
And it won’t get easier in years to
come. Takeover activity might not
spark turnover at the top in the way it
has in the past, but plenty of chief
executives will, like Ms Cooper, run out
of puff.Ofgem’s green dilemma
Ofgem has been criticised for not doing
enough to help Britain reach its new
legal goal ofnet-zero carbon emissions
by 2050. So new boss Jonathan
Brearley is pledging to get with the
programme. On his first day in office,
he has published the UK regulator’snew nine-point decarbonisation action
plan.
Writing a document full of virtuous
green statements is, of course, the easy
part. What decarbonisation means in
practice is spending lots of consumers’
hard-earned money. Such as asking
ScottishPower’s customers to fork out
£42m on strengthening the
distribution network in Scotland and
northern England to support new
electric vehicle charging points.
The utility’s bossKeith Anderson
accused Ofgem of a “colossal
disconnect” last year when it refused to
let him stick that investment on
customer bills, on the grounds that
there was insufficient certainty that the
demand was there to justify it. Now,
presumably, theregulator ould bew
more accommodating.
If it were just the odd £42m between
friends, maybe fair enough. But the
UK’s Committee on Climate Change
estimates we’ll have to invest £20bn a
year in 2019 money by 2050 in the
electricity network to achieve net zero
— twice the £10bn we were spending
between 2013 and 2017. That includes
strengthening infrastructure to dealwith electric vehicles and switching
from gas to electric heating (assuming
technology does not permit another
solution, say hydrogen fired boilers).
It would be lovely if the cost of low-
carbon technologies slumped, or there
were vast efficiency savings, making
this investment-fest self financing. In
reality that can’t be relied upon.
Average UK incomes are about
£24,000. Consumers below this level
have no savings. They may not be able
to pay the extra charges. Meanwhile, a
glance at the Conservative manifesto
reminds us the new government has
pledged not only to keep the existing
power price cap, but to bring down
prices for poorer consumers.
Mr Brearley says he’s alive to the
issue and will consider how to allocate
the charges between rich and less rich,
drivers and non-drivers, etc. He’ll need
plenty of fancy footwork to avoid a
political kicking and also make a
difference. Expect utilities to quote
freely from this document in the next
price review.Ofgem: [email protected]
[email protected]Imps’ Alison Cooper won’t be the only FTSE 100 boss to run out of puff
Frasers, the retail conglomerate
controlled byMike Ashley, has bought
a stake in upmarket handbag maker
Mulberry, marking a possible return to
his policy of buying small “strategic”
interests in suppliers.
In a regulatory statement yesterday,
the company, until recently known as
Sports Direct, said it had acquired a
12.5 per cent economic interest in
Mulberry, which it described as “a
global luxury brand with a rich British
heritage”.
“A key strategic priority for Frasers is
the elevation of our retail proposition
and building stronger relationships
with premium third-party brands,” itadded. “We look forward to working
more closely with Mulberry for the
benefit of shareholders of both
companies.”
The shares have been acquired
from Tybourne, a Hong Kong-based
fund management group that last
year also sold its near-5 per cent
stake in online fashion retailer Asos.
The Singapore-based Ong family
acquired a majority stake in
Mulberry after a refinancing in 2011
and remain the biggest shareholders
with 56 per cent and a seat on the
board. Privately heldBanque
Havilland wns another 24 per cent.o
Jonathan EleyIn the bag
Ashley buys
a slice of
Mulberry pie
A L I C E H A N C O C K
Imperial Brands ash named a new chief
executive from the car industry as it
seeks o keep up with rivals in the grow-t
ing market for e-cigarettes.
Stefan Bomhard will join Imperial,
whose brands includeWinston nda
Davidoff, from car dealershipInchcape,
where he has been chief executive for
five years. His start date is yet to be
announced, although a source close to
the company said they expected it to be
“closer to six months than 12”.
Investors hope that Mr Bomhard will
boost the tobacco company’s hare prices
as it has struggled to keep pace with
rivalsin cigarette-alternative products.
Shares in the company — previously
known as Imperial Tobacco — are down
22 per cent in the past year, compared
with a rise of 25 per cent for rivalBritish
American Tobacco, and are almost half
the value of their 2016 peak.
“The company has clearly struggled
in terms of share price and the experi-
ence has been very poor,” said one major
fund manager, who added that Mr Bom-
hard’s experience of developing emerg-
ing markets and rolling out extra serv-
ices ould be a boon to Imperial.w
“It’s nice to see someone come in from
outside the tobacco industry,” he added.
Imperial was slow to launch a heated
tobacco product and in September
halved ts full-year revenue growth fore-i
casts from 4 per cent to 2 per cent, citing
a backlash against e-cigarettes in the US
sparked by a spate of respiratory prob-
lems among teenagers connected to
vaping. While many of these were later
linked to a chemical found incannabis
vaping evices, experts have said theyd
cannot rule outother chemicals.
Revenues from tobacco and e-ciga-
rettes for the year ending in September
were £7.7bn, up 2.2 per cent on the pre-
vious year.
Shareholders have been pushing for
changes at the top of Imperial, leading
the board to announce in October that
Alison Cooper, who had run the FTSE
100 company for nine years, would step
down “once a suitable successor was
found”.
Along with the announcement of Mr
Bomhard’s appointmentyesterday,
Imperial said that Ms Cooper would step
down with immediate effect, leaving
two divisional directors, Dominic Brisby
and Joerg Biebernick, to act as joint
interim chief executives.
Erik Bloomquist, a global tobacco
analyst at Haitong Securities, said it was
likely that Imperial wanted to “clear
space” for the new incumbent and that
along with developing new products, Mr
Bomhard would also have to address the
balance sheet and dividend policy.
In July, Imperial dropped its 10 per
cent annual dividend target in order to
invest further in e-cigarettes.
“Part of why the stock is down so
much over the past four to five years is
that growth has become harder to find
and the prospects for Imperial have
dimmed, so the onus has been the divi-
dend yield. Now that is less certain, why
do you [as an investor] own it?” Mr
Bloomquist said.
See LombardTobacco
Imperial Brands
lures chief from
car industry
Inchcape’s Bomhard to
replace Cooper as group
lags behind in e-cigarettes
Daniel Leal-Olivas/AFP/GettyN AT H A L I E T H O M A S —E D I N B U R G H
Drax, the FTSE 250 power company,
said it will “assess options” for the
remaining coal units at its vast power
station in North Yorkshire, which was
once the biggest polluter in western
Europe.
Any subsequent decision to shut the
coal units at the Drax plant in Selby
would be a significant moment in the
phasing out of coal from Britain’s power
system, which was once dominated by
the fossil fuel.
Drax said esterday that it would looky
at options for the last two coal units at
the site “alongside discussions with
National Grid, Ofgem and the UKgov-
ernment”.
The Selby plant is the biggest power
plant in Britain and once ran exclusively
on coal. However, four out of its six gen-
erating units have already been con-
verted to burn wood pellets to produce
electricity.
By the end of this year, Britain will
only have three remaining coal power
stations — including the Selby plant — as
thegovernment seeks to phase out the
highly polluting fossil fuel by 2025 at the
latest.
There have been a string of announce-
ments from other power companies in
the past 18 months about the closure of
some of their final coal assets, including
Fiddlers Ferry in Cheshire, whichSSE
said in November would close by March
31 this year.
Drax’s coal units still have contracts
under a government scheme that
ensures there is sufficient generating
capacity on standby during periods ofhigh demand — typically during the
winter — that run until the end of Sep-
tember 2022.
A spokeswoman for Drax said despite
its announcement that it was assessing
options for the coal units, “no decision
about the future operation of our coal
units has been taken”.
Will Gardiner, chief executive of
Drax, has previouslytold the FT hat thet
likelihood of the coal units running
“past 2023 is extremely low”.
Coal power has been pushed out of
Britain’s electricity system due to a
number of factors, including the rise of
renewables such as wind and solar and
the introduction in 2013 of a carbon
price support levy which made it less
economic than other forms of power
generation, including natural gas.
See LombardEnergy
Drax to ‘assess options’ for coal units at Selby
K AT E B E I O L E YBurford Capital, the litigation funder
that was last year held up over its
accounting practices, projected lower
gains from cases compared with a year
earlier but blamed the timing of its
release.The group, which was attacked by short-
sellerMuddy Waters ast year over itsl
accounting, forecast $20m-$30m less in
net realised gains —mainly proceeds
from concluded cases — and about
$50m-$70m less in net unrealised gains
— current cases that have been marked
up in value. It claimed that if its trading
update, publishedyesterday, had been
released a month later, results would
have been better.
“We are entirely unconcerned about
that and, as January 2020 has proved,circumstances can change quickly in
our business,” Burford said in its update.
“We can’t control when courts rule or
matters resolve — and in many
instances we make more money from
delay because of the pricing structure of
our legal finance assets.”
Shares in the group closed up 3.7 per
cent in London yesterday.
The company admitted net income
and profit were hit last year but said it
had notched up a number of “litigation
successes” and case milestones in Janu-
ary that could generate more than
$150m profit across the group and more
than $100m balance sheet profit from a
single month.
Burford, which used to count stock-
picker Neil Woodford among its largest
shareholders, funds litigation in return
for a slice of the proceeds of a case, andcame under fire from Muddy Waters for
the way in which it “aggressively
marked” the value of certain cases on its
books that were not yet concluded.
Burford said it had been a “quiet
instead of a problematic year”, with the
lowest level of losses, and claimed it
expected to post less than $6m in real-
ised losses on cases finished during the
year compared with $21m a year earlier.
It called litigation “inherently idio-
syncratic” and said “we can neither pre-
dict nor control the timing of the gener-
ation of litigation returns.
Litigation finance businesses can
experience lumpy returns, due to the
unpredictable timing of cases, and Bur-
ford said it had experienced “timing
issues” in the first half of the year, when
it was waiting for $173m owed to it from
settlements.Financial services
Burford warns of hit to profits in ‘quiet’ 2019
Kate
Burgess
A RT H U R B E E S L E Y— D U B L I NRyanair as warned of further disrup-h
tion from delayed deliveries ofBoeing
737 Max jets, saying itwould not
receiveits order in time for the peak
summer season, pushing back its cus-
tomer growth targets by up to two
years.Regulators grounded the Max aftertwo
fatal crashes andBoeing is still strug-
gling to win approval for its return to
service. The Max is seen as a game-
changer for airlines as it carries 4 per
cent more passengers and uses 16 per
cent less fuel.
Ryanair has repeatedly extended its
Max delivery timetable. At its quarterly
resultsyesterday, it said it would not
receive the first planes until September
or October and that itwould not start to
benefit from cost savings until late in- In a previous update, the airline
said it expected to receive only 10 planes
for the summer of 2020, down from an
earlier figure of 20.
The Dublin-based airline has also
extended by “at least one or two years”
— until 2025 or 2026 — its target to carry
200m passengers, prompting analysts
to observe that it will e harder for Rya-b
nair to achieve its target for €2bn in
annual operating profits. “Moving that
goalpost makes that €2bn even harder
to achieve if at all,” said Daniel Roeska,
senior analyst at Bernstein Research.
Mr Roeska added that Ryanair chang-
ing its growth targets could benefit the
rest of the industry. “If Ryanair isn’t
growing that quickly, that means less
capacity in the market and everybody
can [charge higher] fares.”
The latest Max delays were expected
and could be “a blessing in disguise” for
the airline, Mr Roeska said. “If Ryanair
was receiving the planes right now,
capacity growth would be higher and
fares would be lower.”
Micheal O’Leary, chief executive,said
the elivery schedule hadd een delayedb
by 12 months and oeingB xpectede
approval to resume flights in June. “We
had hoped to have 55 aircraft in the fleet
for the summer of 2020. We’ll have
none,” he said.
“What that means for us is obviously
much slower growth in 2021. We expect
very modest growth through the sum-
mer of 2020.”
Mr O’Leary also said he expected no
long-term impact from coronavirus,
saying Ryanair’s experience with Sars
and with avian flu was that they were
“mildly good” for European short haul
travel. “More people were likely to holi-
day in Europe rather than travelling
long haul to Asia... and we think that
will play out again. But we should be
wary on the short-term impact.”
Ryanair shares rose 6 per cent in Lon-
don after the results were published.
The group hadupgraded its full-year
forecast n January — predicting pre-taxi
profits of between €950m and €1.05bn,
compared with an earlier range of
€800m to €900m. Net profit in the
three months to December was €88m,
against a €66m loss in the same period
one yearearlier.
On UK-EU trade after Brexit, Mr
O’Leary said the mood music was nega-
tive but dismissed “tough talk” from
London. “The British are talking tough
about non-alignment and all the rest of
it, in which case that will be a negative
certainly for the airline industry.”
See LexAirlines
Max jet delays
hit Ryanair’s
customer
growth target
‘We had hoped to have 55
[737 Max] aircraft in the
fleet for the summer of- We’ll have none’
FEBRUARY 4 2020 Section:Companies Time: 3/2/2020- 19:24 User:sanjay.gohil Page Name:CONEWS4, Part,Page,Edition:LON, 17, 1