U K CO M PA N I E S
TransferWise
Small business boostTransferWisecemented its position
asone of the few profitable fintech
unicorns, after rising demand from
small businesses helped the cross-
border payments company lift
earnings in the last financial year.
The UK group, which was briefly
Europe’s most valuable privately
owned fintech company last year,
saw pre-tax profits climb 29 per
cent to £10.1m in the 12 months to
March 31, according to its latest
annual report. Revenues rose 53 per
cent to £179.1m.
Taavet HinrikusandKristo
Kaarmannfounded TransferWise in
20 11, initially aimed at providing
cheap cross-border money
transfers to consumers. However,
the company has since expanded to
offer transfers for small businesses
and sealed partnerships with banks
such asMonzoand France’sBPCE.
Nicholas MegawSeibu Holdings
London hotel openedThe president ofSeibu Holdings,
the largest hotel operator in Japan,
is targeting London as a gateway
into the European market despite
uncertainty around Brexit.Takashi Goto, above, said that
Britain’s capital was “a very
attractive city to invest in” and that
regardless of the impact of the
Brexit outcome London’s position
as an international hub was “solid”.
Seibu, which also runs transport
and infrastructure operations in
Japan, opened its first hotel in
Europe in London yesterday. The
Prince Akatoki is in the luxury
hotel-heavy area around Marble
Arch.
“There are two objectives in
terms of the Prince opening in
London. One is to capture demand
in terms of luxury market here in
London and the other is to get
people to visit Japan,” Mr Goto said.
Japan is looking to increase the
number of international tourists
ahead of the Tokyo Olympics next
year. Prime Minister Shinzo Abe has
set targets of 40m visitors by 2020
and 60m by 2030.Alice HancockJCB
Rise in dividendJCBhas paid a bumper £75m
dividend after the diggers and
dumper trucks company controlled
by the Bamford family achieved
record financial results.
The pay-out for 2018 by the UK-
based manufacturer was shown in
filings to Companies House by the
group’s main holding entity JCB
Service and compares with a £60m
dividend in 2017.
JCB Service is owned by a Dutch
parent company which is ultimately
controlled by “Bamford family
interests”.
The dividend comes after JCB
earlier this month reported
revenues above £4bn for 2018 on
the back of buoyant demand for
heavy-duty machinery. However,
the company has warned of a
slowdown in the construction
equipment sector spanning several
emerging markets.Michael PoolerBriefs
Marks and Spencer’s website offers
“shoe solutions”, “lingerie solutions”,
and “firm control body solutions”. But
not “food solutions”. Probably because
food solutions are, well, just food — and
M&S still hasn’t worked out how to sell
it online (despite its three-cheese pizza
providing Amazon-style “Customers
also bought.. .” cross-selling
opportunities for the firm control body
range). That is set to change, however.
Yesterday, online grocery group
Ocado reported first results from its
food delivery joint venture with M&S,
and said the retailer’s full menu would
be on the web by September 2020. For
investors, though, the question is:
whose problems will this really solve?
At first glance, Ocado’s numbers
suggested its warehouse robots were a
ready-made solution to shifting M&S
ready meals. Ocado Retail, now
structured as a 50:50 JV, reported an
11.4 per cent rise in revenue in the
quarter to September 1, despite a fire at
its Andover warehouse in February.
Analysts noted customer loyalty and
faster growth than the 7.5 per cent
managed by discounters Aldi and Lidl.
But they also knew this said nothing
about M&S sales, given the JV only
completed on August 5 and still sells
food from rival Waitrose. That loyalty
will be tested in the coming year when
4,000 food offerings are switched to
M&S alternatives, and Waitrose’s own
£1bn online operation — delayed by a
false start with Ocado imitator TPD —
starts to compete hard. Can sales and
margins withstand such competition?
M&S’s shares suggested scepticism.
Having fallen 25 per cent in a year and
out of the FTSE 100 index amid online
competition, they fell another 1 per
cent on this news of the online solution.
M&S investors clearly think a £600m
rights issue and dividend cut is too
much to pay for a JV that will generate
only £10.6m in free cash flow by 2024,
on Goldman Sachs estimates.
Ocado, by contrast, does not need a
solution to selling groceries. Probablybecause it sees its future as selling
solutions to grocers: its main division is
now called Ocado Solutions. This is
where its intellectual property and
90 per cent of its market value reside,
on Jefferies analysts estimates. Can
sales of solutions grow even faster?
Ocado’s shares express optimism.
Having risen 47 per cent in a year on a
string of tech licensing deals, they trade
on an enterprise value to earnings
multiple of 473 times for 2019, falling
to 102 times for 2020. But for this
multiple to become vaguely realistic,
Ocado needs to sell many more robotic
warehouses overseas. In the US,
supermarket Kroger has signed up for
20, but identified only four sites so far,
amid a US delivery price war in which
Walmart is undercutting Amazon.
Those Jefferies analysts reckon Ocado
needs to sell another 30 warehouses to
justify its valuation — a tall order given
the “population densities and mix of
margin” in the US. Even in the “ideal
population distribution and
topography of England”, the Ocado-
M&S JV has a market share of just 1.
per cent. M&S’s problems may be far
from solved, but nor are Ocado’s. Yet.Delayed Connection
French Connection’s name resonates
with anyone over 50,writes Kate
Burgess. The first French Connection
was a drug-smuggling route from
Turkey via France made famous by the
1970s film starring Gene Hackman.
French Connection, the clothing chain
set up in the same decade, was also
once the archetype of edgy chic. Lately,
though, it has been as appealing as that
other 1970s icon Turkish Delight. As
Comedian David Baddiel tweeted: “Just
had a Fry’s Turkish Delight for the first
time in 30 years. And immediately
realised why.”
The retailer has promised much but
delivered less. For five years, analysts
have expected it to break even and pay
a dividend. But the chances of either
receded yesterday. Revenues fell 12 per
cent in the half year to July. Pre-tax
losses were £5.3m. Cash fell a fifth to
£10m. The shares dipped 8 per cent,
reducing the market value to £37m.
Last year, the group, which is chaired
by septuagenarianStephen Markswho
also holds 42 per cent, announced a
strategic review, including a possiblesale, which it hoped to conclude in the
first half. In June, it pushed that
deadline to September. Yesterday, it
suggested by the year end. At this rate,
the retailer risks going the way of the
first French Connection: being shut
down before it clinches a deal.Sir Jim: Welsh Defender
Ineos bossJim Ratcliffespecialises in
shipping half-finished products to post-
industrial towns. He brought liquefied
natural gas to Grangemouth. Now he’s
bringing car parts to Bridgend. If there
were such as thing as pre-fab coal, he
could probably regenerate Newcastle.
But it is costly. Sir Jim had to invest
£1.6bn in LNG tankers. He is now
investing £600m in his “successor” to
the Land Rover Defender. If the car is
to make a profit, he may need to ask
more than its mooted £50,000 price
tag. Or import some half-finished gilets
and black labradors to provide
accessories for prospective buyers.[email protected]
French Connection: kate.burgess@:ft.comMarks and Spencer is still in the soup despite Ocado solution
Matthew
Vincent
Ocado’s retail sales returned to double-
digit growth in the third quarter as the
UK online supermarket recovered from
a warehouse fire and shrugged off
malaise in the sector.
In the first trading update for Ocado
Retail, the group’s newly formed joint
venture with Marks and Spencer, it
posted a rise of 11.4 per cent in
groceries revenue to £386m for the 13
weeks to the beginning of September.
That compared with 9.7 per cent
growth in the first half, when the fire at
its flagship automated warehouse in
Andover hit sales by about 2 per cent.
Melanie Smith, chief executive of
Ocado Retail, said it showed Ocado’sresilience after the fire and “the
momentum the business now has”.
Ocado is the fastest-growing
retailer in a sluggish UK grocery
market. Figures released yesterday
by Kantar showed sales in the sector
rising by 0.5 per cent.
Simon Bowler, an analyst at
Numis, said Ocado “continues to
significantly outperform its peers”.
Xavier Le Mené at Bank of America
Merrill Lynch described the results
as “robust... evidencing the
recovery, as expected, of the retail
business after the fire”.
Myles McCormick
See LombardBright outlook
Ocado delivers
double-digit
sales growth
N I C H O L A S M E G AW
Lloyds Banking GroupandSchroders’
joint wealth management business is to
launch a price war against rivals such as
St James’s Place, charging new clients
less than half what they pay its rival.
The aggressive pricing strategy at the
venture,Schroders Personal Wealth,
comes as it seeks to become a big partici-
pant in the financial advice market and
meet ambitious growth targets.
Itwill put pressure on FTSE 100 rival
SJP, the country’s largest wealth man-
ager, which has been under fire over its
high fees and staff sales incentives such
as luxury cruises.
The industry is notorious for using
opaque fee structures that make direct
comparisons difficult. However, inter-
nal SPW research seen by the Financial
Times shows it expects customers to
pay about 3.65 per cent of their invest-
ment in their first year, compared with
7.95 per cent with SJP and 4.7 per cent
with FTSE 250 groupBrewin Dolphin.
Total fees in later years will be roughly
1.9 per cent per year, compared with
2.95 per cent for a comparable service
from SJP and 2.7 per cent at Brewin Dol-
phin, according to the research.
“Our pricing is transparent and com-
petitive,” SPW told the FT. “We know
from experience and numerous studies
have shown that professional financial
advice generates value. We can play an
important role in helping more people
plan for the future and manage their
finances with a professional service.”
SPW opened this year to a limited
number of existing Lloyds customers
but will launch to the public in early
November, according to a recent staff
presentation.James Rainbow, chief
executive, told staff the business had
pushed back its original launch date of
October 31 to avoid clashing with the
UK’s scheduled departure from the EU.
Financial planning and wealth man-
agement has become a key part of
Lloyds’ efforts to boost profitability, as
its core retail bank battles against a
weak economic outlook and competi-
tive pressures. Schroders is hoping to
bring in more profitable wealth man-
agement customers to offset outflows in
its broader asset management business.
The FT reported this year that Lloyds
had set a goal of increasing assets under
management from £13bn to £25bn
within five years. However, the rollout
has been hampered by problems with
SPW’s IT and payments systems.Nick
Allen, chief operating officer, told staff
this month that there had been “lots of
incidents”, but said the company was
making progress in fixing them.
Shares in specialist financial advisers
such as SJP have rocketed since regula-
tory changes in 2012 led most big banks
to rein in their activities in the sector.Financials
Lloyds wealth
unit tie-up with
Schroders kicks
off price war
New clients to be charged
half what they pay rival in
aggressive strategic push
GettyAL I C E H A N C O C K
Thomas Cook, the UK tour operator,
has filed for Chapter 15 bankruptcy
protection in the US to safeguard itself
againstlegalactionbyUSdebtholders.
The company is trying to secure a
£900m rescue deal to keep it from going
under before it hits its cash-low winter
period. Yesterday’s filing gives UK law
primacy over the company’s bonds held
in the US, which should allow it to pro-
ceed with its planned restructuring.
On Monday, Thomas Cook delayed
until next week two crucial hearings in
the UK at which creditors will vote on
the restructuring, pushing it close to its
planned finalisation of the deal in Octo-
ber by which time it will need funds in
order to buy hotel capacity for next
year’s holiday season.
Shares in the 178-year-old tour opera-
tor have fallen more than 80 per cent
since it announced the sale of its airline
in February. They closed at 4.5p yester-
day. The airline is no longer for sale due
to the restructuring process.
Thomas Cook declined to comment
on the filing.
The rescue deal will see £450m of
capital put forward by Thomas Cook’s
largest shareholder, the Chinese con-
glomerate Fosun, in return for control of
75 per cent of the group’s tour operator
business and up to 25 per cent of its air-
line. Debtholders and lending banks
would inject another £450m for 75 per
cent of the airline and up to 25 per cent
of the tour operator.
Fosun, which also owns Club Med and
Wolverhampton Wanderers, the Pre-
mier League football club, currentlyowns 18 per cent of Thomas Cook.
In addition to the £900m of new capi-
tal, Thomas Cook’s lending banks, led
byRBSandLloyds, want an additional
£200m standby facility put in place
should the company need emergency
funding.
The deal needs support from 75 per
cent of debtholders to succeed. Before
the US filing, hedge funds that own
credit default swaps, a type of insurance
against the company becoming insol-
vent, were threatening to block it.
The US bankruptcy filing should trig-
ger payouts on the CDS but they are not
guaranteed. A decision on the payouts
will be made by a panel known as the
determinations committee. If the com-
mittee does not allow the payouts the
hedge funds may try to block the deal.
Additional reporting by Robert SmithTravel & leisure
Thomas Cook files for US bankruptcy protection
N I C H O L A S M E G AW
R E TA I L BA N K I N G C O R R E S P O N D E N TThe financial watchdog is investigating
senior managers atMetro Bankover
their roles in the misreporting scandal
that forced it into an emergency share
issue this year and prompted a more
than80percentdropinitsshareprice.The Financial Conduct Authority first
began investigating Metro Bank in Feb-
ruary, a month after it revealed that it
had miscategorised the risk-weightings
for large numbers of its loans. The mis-
take meant it did not have enough capi-
tal to protect against potential losses.
In August, the FCA said it had
extended its investigation to include
“certain senior members of manage-
ment”, and to cover the period from
June 1 2017 until February 26 this year,when it reported its full-year results and
announced plans for the share issue.
The widened scope of the investiga-
tion was revealed in a bond prospectus
yesterday. Metro is preparing to issue
new loss-absorbing debt known as
MREL as part of regulatory require-
ments affecting all major banks.
Metro is separately being investigated
by the Bank of England’s Prudential
Regulation Authority, and the prospec-
tus provided further details on the areas
being probed by the two regulators.
Metro said the regulators were
examining its regulatory reporting, its
systems, controls and governance to
ensure compliance with reporting obli-
gations, and the timing and content of
its market updates. In addition to its
comments on the misstated risk
weightings, the investigations are alsoconsidering its comments on how long
it would take to move to a new type of
risk-rating process that would lower its
capital requirements.
The prospectus warned investors that
Metro may “incur significant expense”
in connection with the investigations,
and said they could lead to “a public cen-
sure, financial penalties or compensa-
tion payments, a variation or suspen-
sion of Metro Bank’s regulatory permis-
sions and possible criminal and/or civil
liability for Metro Bank.”
Metro Bank said: “As you would
expect we are in regular dialogue with
the FCA and the extended scope is part
of the ongoing investigation that we
announced on 26 February 2019. We
welcome the progress being made and
look forward to this investigation reach-
ing its conclusion.”Financials
FCA widens Metro Bank misreporting probe
1 8 A FINANCIAL TIMES W e d n e s d a y 1 8 S e p t e m b e r 2 0 1 9
SEPTEMBER 18 2019 Section:Companies Time: 17/9/2019 - 19:40 User: jon.wright Page Name: CONEWS5, Part,Page,Edition: LON, 22, 1