the times | Wednesday January 19 2022 2GM 37Business
asset, particularly in the context where
GSK is a very attractive option in the
consumer health space, but it’s not the
only option”.
Shares in Unilever, which had fallen
by 7 per cent on Monday, slid a further
145½p, or 4 per cent, to £35.16½ yester-
day, meaning a £10.8 billion loss in
market value since the weekend.
GlaxoSmithKline hopes to list its
consumer business, which could attract
competition concerns. It is courting the
sovereign wealth funds of Qatar and
Singapore as cornerstone investors. Its
shares, which rose 4.1 per cent on
Monday, fell 6½p, or 0.4 per cent, to
£17.01¼ yesterday.
Shareholders and analysts have
criticised Jope’s proposed takeover. A
spokesman for Royal London Asset
Management, a top-30 shareholder in
both Unilever and GSK, said that they
backed the Glaxo board in rejecting
Unilever’s bid, which “was a less
attractive outcome” than a spin-off.
GSK is one of Britain’s two big drugs
companies. It has come under pressure
from activist investors including Elliott
Management to sell its consumer busi-
ness. Elliott has declined to comment
on Unilever’s approach.Former KPMG auditor fined
and banned for misconduct
Tom HowardA former senior auditor at KPMG has
been fined £150,000 and barred for
three years after admitting to mis-
leading the accounting watchdog.
Stuart Smith led the firm’s 2014 audit
of Regenersis, a London-listed provider
of outsourcing services to the IT sector.
When the Financial Reporting Council
inspected the audit as part of a sample
review, Smith, who has since left
KPMG, misled them by denying that a
colleague, Peter Meehan, had sat in on
Regenersis’s audit committee meetings.
Meehan had been KPMG’s audit
engagement partner for Regenersis
before Smith. To comply with regula-
tions on how long an auditor can sign
off the same company’s books, he relin-
quished that position and became a
non-audit relationship partner for
Regenersis. In his new role, he should
not have attended any audit meetings,
according to ethical standards. Smithadmitted to being “reckless” and the
FRC described his misconduct as “very
serious”. However, it accepted that he
“was not dishonest”.
In addition to the fine, which typi-
cally would be paid by the company,
Smith was also banned from the
Institute of Chartered Accountants for
England and Wales for three years.
“This misconduct is a violation of our
processes and clearly against our
values,” Jon Holt, chief executive of
KPMG, said. “It is unacceptable, we do
not tolerate or condone it in any way
and I am very sorry that it occurred.”
Before settling, Smith was due to be
one of six former KPMG auditors
appearing at an industry tribunal that
began last week. The tribunal is hearing
that the five other KPMG staff, who
include Meehan, misled the FRC in its
inspections of audits of Regenersis and
Carillion, the outsourcer that collapsed
in 2018 with £7 billion of liabilities. They
deny the claims.Shorts won’t cover
up Hut’s problem
A
s years go, 2021 was not
the best for the famous
starfish impersonator
Matt Moulding. The Hut
Group boss saw most of
his shed fall down. Who did he
blame for that? Well, not himself,
obviously. No, he blamed his shorts.
It was a central theme of
November’s chinwag with GQ,
where Moulding declared the
ecommerce outfit — home to
beauty and nutrition brands — the
victim of a “pretty aggressive short
attack”. His big claim? That this is
the sort of caper people get up to
nowadays rather than “rob banks”.
He’s carried the short-selling
trope into the new year, partly due
to one of THG’s eight float banks —
Numis. It ’fessed up to the Financial
Conduct Authority that a staffer had
sent a memo to clients wrongly
suggesting that the Hut had a few
“irregularities in accounting”. As
luck would have it, the regulator
then asked Moulding for his views: a
top opportunity for a fresh moan
about his pesky shorts. And not
least the ones he blames for ruining
October’s capital markets day when
his big speech produced an instant
35 per cent share price dive to 285p.
Shorts, then, are a bit of an
obsession for the man who, for now,
quintuples up as Hut chairman,
chief executive, landlord, 22 per cent
owner and topless ambassador for
its Myprotein body-building shakes.
Still, as much as Moulding may hate
the public markets that priced up his
shed at 500p in September 2020,
surely he’s spotted one thing by
now: the way to beat the shorts is to
deliver forecast-busting figures.
The fourth-quarter trading update
was his latest chance. So what did
he come up with? A big enough miss
to take another 10 per cent off the
shares, now down to a fresh low of
167¾p. The chief culprit? The
“adjusted ebitda margin”, sadly not
adjusted enough to beat 7.4 per cent
to 7.7 per cent for the full year —
below the 7.9 per cent the market
expected. Blame “adverse foreign
currency” moves and the soaraway
price of whey powder for that.
Yet, as Liberum analysts point out,
that was far from the only miss. And
this lot are the opposite of shorts.
Their share price target is a heroic
700p, just trimmed from 750p. But
even they couldn’t help noticing that
2022’s sales guidance of “22 to 25
per cent” was also “below
expectations of 30 per cent-plus”. Or
that Ingenuity Commerce, the tech
platform apparently offering
ecommerce nirvana, had sales of
£45.4 million last year — below the
£50 million consensus. The upshot?
A 17 per cent cut to their 2022 ebitda
estimates. Imagine their target price
if the Hut hit forecasts.
True, Moulding deserves credit
for building a business starring a
48.5 per cent rise in beauty sales last
year to £1.12 billion, with nutrition
up 17.3 per cent to £660 million —
even if acquisitions chipped in 16 per
cent of the growth. But with the
group now valued at £2 billion, even
SoftBank can’t be daft enough to
exercise its $1.6 billion option to buy
a fifth of Ingenuity. And how will
the shares go up if Moulding keeps
missing market forecasts? He does
make his Hut quite easy to short.On top of his game
S
o this is what the metaverse
looks like: a cross between Call
of Duty, World of Warcraft and
Candy Crush. It’s the vision of
Microsoft boss Satya Nadella, who’s
brought along $68.7 billion of ammo
to buy the games’ owner Activision
Blizzard for $95 per share in cash. As
Nadella puts it, today’s gamers total
three billion people, happily
shooting each other to bits in the
most “dynamic and exciting” part of
the entertainment market. So, what
better than gaming to provide the
“building blocks for the metaverse”
— home to 3D virtual worlds?
Microsoft’s biggest ever buy will
turn the XBox maker into the
globe’s No 3 gaming outfit by sales
behind China’s Tencent and Japan’s
Sony. And analysts expect it to clear
competition regulators — even if
Activision shares, up a quarter to
about $82, traded well below the bid
price. Shares in Microsoft, which
has $131 billion in cash, fell slightly.
It’s an acquisition that highlights a
couple of things, too. First, Nadella’s
refocus on the consumer after 2016’s
$26 billion takeover of LinkedIn and
his successes on the business front,
notably through the expansion of
the cloud computing wing. Second,
as Mirabaud’s Neil Campling noted,
that he’s taken the “content is king”
approach to driving Microsoft’s
subscription model. Armed with
what Campling calls “wow” content,
Microsoft can now lure new gamers
with a “monthly bundle of
hardware, software and services”.
Yet it also shows something else:
Nadella’s eye for a deal. Activision
shares topped $103 last February —
before it was hit by lawsuits and
complaints from women employees,
alleging sexual harassment and
assault. On Monday it said it had
fired or pushed out three dozen
workers. Chief executive Bobby
Kotick came under pressure to quit,
though Microsoft says he’ll be
staying on after the deal. Whatever,
the scandal gave Nadella the ideal
chance to strike. At least he’ll know
that changing Activision’s culture
cannot be left to the metaverse.Fink gets it right
L
efties look away now. A bloke
in charge of $10 trillion of
assets has come up with a
definition of capitalism (report, page
38). And guess what? It champions
environmental “sustainability”,
bosses that “show humility and stay
grounded”, plus “more flexibility and
more meaningful work” for the
employees.
Who is this closet red? Larry Fink,
the BlackRock boss, whose annual
“Dear CEO” letter seeks to take the
politics out of “stakeholder
capitalism”. He says it’s “not a social
or ideological agenda” and neither is
it “woke”. It’s simply capitalism,
“driven by mutually beneficial
relationships” between bosses,
workers, customers, suppliers and
the communities they serve. He’s
spot on, too. Companies that get it
right are far more likely to succeed.[email protected]business commentary Alistair Osborne
ruling the metaverse
by Facebook by Microsoft by AmazonBeats
by Apple by Google by Facebook by AmazonBeeatseats$19bn
$16bn$1.6bn $1bn
$3bn
$13.7bn
$970m
the bill is totted up for its ambitious
takeovers, such as its (ultimately ill-
fated) pursuit of a chunk of TikTok,
the social media app, which had a
mooted valuation of up to
$30 billion.
Microsoft’s cash mountain is vast,
but it is not the largest. Apple’s
hoard of cash, cash equivalents and
securities was in excess of
$190 billion when it last updated
shareholders in the autumn. That of
Alphabet — the parent company of
Google — stood at $142 billion.
At a time of great transformation,when many in the digital sector are
chasing what they believe to be
game-changing possibilities in the
metaverse, or simply seeking to
capitalise on the gaming boom, Big
Tech has the financial might to
chase big deals.
It is not all they need, of course.
Their financial might is one of the
myriad reasons why they face
mounting political scrutiny.
Whether they can obtain sufficient
regulatory support to get their
blockbuster takeovers across the
line remains unclear.providing that it wins the support of
regulators and investors.
Microsoft has agreed to pay for
both Nuance and Activision in cash.
It can afford to do this, easily.
Indeed, should the opportunity
arise, it could afford to do it again.
On the company’s balance sheet, its
cash pile — total cash, cash
equivalents and short-term
investments — stood at
$130.6 billion at the end of
September.
This goes some way to explain
why the group does not balk when