The Sunday Times November 28, 2021 5
Carzam gears up for
growth with £112m
Online used-car market
Carzam has raised
£112 million from investors as
it looks to take on Cazoo and
Cinch in the battle to woo car
buyers over the internet.
Carzam promises to
deliver used cars nationwide
within 24 hours; buyers get a
14-day window to decide
whether to keep the vehicle,
and a 100-day guarantee. It
was founded a year ago by
Peter Waddell, chief
executive of BMW dealership
Big Motoring World, and
John Bailey, former boss of
Manheim auctions.
The cash injection was led
by an unnamed New York
fund and the proceeds will go
towards “aggressively
buying” used cars to sell
through its website. Carzam
is on track to sell more than
13,500 cars and turn over
£150 million in its first year.
Chief executive Kirk
O’Callaghan said Carzam’s
industry expertise set it apart
from rivals, with its owners
and executives all coming
from the auto sector. “We
know exactly what we need
to do to drive this business
forward... this funding gives
us the firepower.”
Former Paddy Power chiefexecutive Andy McCue has
also joined the board; it is
understood he is in the frame
to take on the chairmanship.
O’Callaghan said the firm
acquired its cars from a
variety of sources, including
auction houses, car-leasing
companies and direct from
consumers. Prices of used
cars have rocketed this year
amid a fall in the production
of new models due to a global
shortage of microchips.
The rise in prices has
coincided with a boom in the
number of websites offering
sales of used cars. Earlier this
year, the UK-based Cazoo
pulled off a $7 billion stock
market float in the US via a
special-purpose acquisition
company (Spac). In a recent
update, Cazoo said it sold
13,074 vehicles in the three
months to September 30.
Constellation Automotive
Group, backed by private
equity giant TDR, launched its
used-cars website Cinch in- It raised £1 billion in
funding earlier this year and
reported it was on track for
45,000 car sales a year.
O’Callaghan said Carzam
looked to acquire, prepare,
sell and deliver a vehicle
within 50 days — a faster
turnaround than promised by
some of its rivals.
Jon YeomansMountain Warehouse
profits fall off a cliff
Two of the high street’s
biggest outdoor clothing
retailers experienced
strikingly different fortunes
as the pandemic raged.
Profits at Mountain
Warehouse collapsed by
more than 80 per cent to
£836,000 on lower sales of
£239.9 million in the 12
months to the end of
February 2021. The London-
based chain of 250-plus UK
stores took out a £15 million
business interruption loan,
furloughed thousands of staff
and permanently closed its
Polish warehouse and three
shops in the Netherlands.
Welsh-born Mark Neale,
53, who began Mountain
Warehouse in 1997 with a
single store in Swindon, was
one of the first major British
retailers to speak publicly of
the damage being done to his
business by Covid. On March
17 last year, Neale, who still
runs the company, warned
that the chain was in a “battle
for survival” and he was
considering cutting 2,000
jobs to cope with a
“catastrophic” drop in sales.
Three days later, the
chancellor, Rishi Sunak,
unveiled the furlough job
retention scheme and a
package of other measures to
help businesses survive.
Rival Regatta, with several
hundred stores, enjoyed astronger performance over a
similar period, growing sales
by 4 per cent to £222.9 million
in the 12 months to the end of
January 2021.
Regatta and Mountain
Warehouse were both classed
by the government as non-
essential retailers and obliged
to close their shops for weeks
on end during the pandemic.
But profits at Manchester-
based Regatta’s parent, Risol,
fell by only 27 per cent to
£8.1 million during the year,
as it was able to compensate
for the closure of its stores by
growing its online sales.
Regatta is owned by Keith
Black, 62, and his family. He
and his father Lionel — who
started out selling army
surplus jackets during the
1970s — founded the business
in 1981. Its successful
weathering of the pandemic
meant the Black family took
home a £6.6 million dividend
in the current financial year.
Despite the weaker year for
Mountain Warehouse, Neale
has already shown himself
adept at bouncing back from
financially challenging times.
His first business was a
shop selling rollerblades,
where one of his customers
was Rolling Stone Sir Mick
Jagger. But three subsequent
start-ups selling educational
toys, gift cards and beauty
treatments all failed, before
he eventually started
Mountain Warehouse.Robert WattsCarzam is on course to sell 13,500 used cars in its first yearnew system is introduced? The same
Whitehall source said the total sum of
public money available for farmers as
subsidies has not been cut — it has just
been shifted into different initiatives. For
example, many farmers have applied for
the Countryside Stewardship scheme
and a range of other funding schemes to
offset the lower income from the BPS, the
official added.
Earlier this month, Defra launched a
£27 million Farming Investment Fund,
which gives grants to buy solar-powered
electric fences and other more eco-
friendly agricultural equipment. A simi-
lar £17.5 million Farming Innovation Pro-
gramme was unveiled in October.
The bureaucratic burden of applying
for extra schemes may discourage many
farmers from doing so, of course.B
ack at Reagarth Farm, Thompson
explained she has been running
workshops to help fellow members
of the Yorkshire Agricultural Soci-
ety understand the transition away
from EU subsidies. “With all this uncer-
tainty, there are big concerns about liveli-
hoods and the impact on mental health —
you can see why the farming charities are
gearing up,” said Thompson, who has
also become heavily involved in the soci-
ety’s Women in Farming group.
“Despite that, I see optimism and
excitement among the young. Many of
them appear energised by the prospect
of becoming custodians of the land.”
There are certainly many farmers,
even those who look set to be worse off
under the new system, who share some
of that optimism.
Peter Hemmings, 58, signed up for the
Elms pilots earlier this year. A dairy
farmer all his working life, he received up
to £12,000 a year under the BPS scheme
and will be given about £1,200 less this
year. “We’ll lose a further 25 per cent of it
next year, too,” said Hemmings, fresh
from milking the 150 Friesian cows he
tends at South Lodge Farm in the War-
wickshire countryside near Rugby.
“We’ll feel it, we’ll definitely feel it.
Times are certainly changing.”
To receive money under the Elms
pilot, he has been asked to cut hedges
only once every other year to encourage
birdlife, and to leave some parts of the
fields uncut to help insects. He will also
plant some of his land with cover crops,
which aim to help regenerate the soil
rather than deliver a product that can be
harvested and sold. Ponds on his farm
will also be fenced off to assist wildlife.
“From what I can see, I don’t think the
new scheme will make up for what I am
losing financially,” he said. “But it’s kin-
der to nature and is, to be honest, a nicer
way to farm — perhaps a bit more like how
my father used to do things.”Jeremy Clarkson, News Review, page 39Nick Train, co-founder of the
fund, described the share
price fall as “frustrating”.
“It is no mystery that not
enough time has elapsed to
make any final judgment
about the wisdom of the
Refinitiv merger,” he said.
He seemed to indicate that
the market was not taking
enough notice of the
£8 billion stake it has given
Lseg in the electronic bond
and derivatives marketplace
Tradeweb. Lseg’s entire stock
market value is £38 billion.
Highlighting Tradeweb’s
importance might be one way
to galvanise the shares, but
what else can Schwimmer do
to turn things round?
Much of it is about
sentiment — and experts
seem supportive. Since the
October update, the main
analysts following the stock
include recommendations for
ten buys, four holds and one
sell. Werner at UBS summed
it up as a “show me” story:
management need to
demonstrate their ability to
meet their targets. He said
Schwimmer could simplify
the business by changing the
currency in which it reports
profits from pounds to
dollars, and by streamlining
divisions to help investors
understand the narrative.
He added that while
Schwimmer and his team had
held two investor days over
the past five months, more
detail would be needed for
analysts to gauge the profit
potential of the business.
Also troubling for investors
is the fact that Blackstone and
Thomson Reuters — the
previous owners of Refinitiv —
own 35 per cent of the shares
which, were they to sell,
could flood the market and
hit the price. The first expiry
of their lock-in period, in
which they are banned from
selling, ends in January.
This month, institutional
investors staged two big share
sales. Werner, though, noted
that others had just started to
ask him if the shares were
worth buying. He is neutral
on the stock.
Schwimmer insisted he
was “making great progress
on the integration — running
ahead of plan in a number of
areas” and “very confident in
delivering clear benefits for
our customers and our
shareholders”.
He has made his views
clear in another way: a week
ago, he bought 5,000 shares
at a cost of about £340,000.
He will be hoping others
follow his lead —and get the
party started again.David Schwimmer was
celebrating. It was the
summer of 2019 and the boss
of the London Stock
Exchange Group had just
clinched the £20 billion
takeover of data firm Refinitiv.
The quiet American — the
antithesis of the brash, fast-
talking banker — had found
his “transformational” deal.
The merger with Refinitiv
would catapult the business
away from its core operations
running London’s stock
market and into the fast-
growing, lucrative business of
providing data to terminals
on traders’ desks across the
world. The City was dazzled:
the shares rose 15 per cent on
the day the deal was declared
— and kept going. By last
February, they had hit a
record high of £99.10, up
from £56 18 months earlier.
And then the party ended.
The shares are down 25 per
cent this year at a time when
the FTSE 100 index has
jumped more than 10 per
cent. It is vying for the title of
worst performing blue chip
stock of 2021.
Questions are now being
asked about how Schwimmer,
52, can win back the
confidence of investors in this
grand old City institution,
now known as “Lseg” in City
circles, whose roots date back
to the 17th century.
Most recently, it has been
at the centre of the debate
about the impact of Brexit on
London, especially as it owns
a majority stake in LCH (the
London Clearing House),
which acts as guarantor to the
big banks and institutions
trading in financial markets.
The clearing house backs
about £860 trillion of interest
rate trading each year.
For now, Brussels is
allowing EU-based banks to
keep funnelling their
business through London.
But this Brexit threat, which
Lseg tries to downplay, has
turned into something of a
sideshow compared to its
tussle with its own investors.
The doubts set in at the
full-year results in March,
when Schwimmer admitted
he would have to spend more
than expected to integrate
Refinitiv, which adds 19,000
staff to Lseg's 5,000. Capital
expenditure, it was revealed,
is expected to be £850 million
this year — 20 per cent more
than the previous two years.
Crucially, there were no
upgrades to targets.
It was “like the flick of a
switch”, said Mike Werner, an
analyst at UBS. “It made
investors who were simply
relying on management
guidance... sceptical about
all of the other guidance and
targets that this management
team had set out.”
To understand the
significance of the shift in
sentiment, it is important to
grasp the history of Lseg.
While it was founded in 1698,
in its current guise it has been
in existence for only 20 years:
it became a public company
on its own market in 2001.
Since then, it has been
linked to deals with a number
of rivals — the likes of Liffe,
London’s derivatives market,Schwimmer in deep at the
London Stock Exchange
The City stalwart is
one of the FTSE’s
worst performers
this year, says Jill
Treanor. Can the
boss turn it round?
33 per cent to 71 per cent, and
reduce the proportion of its
revenue from clearing from a
third to just 13 per cent. The
share from the capital
markets arm, including the
London Stock Exchange,
would fall to 16 per cent.
The move also pitched the
group against Bloomberg.
Analysts at advisory firm
Burton-Taylor calculate that
one in every three dollars
spent on market data goes to
Bloomberg. Refinitiv is next
with a near 20 per cent share.
It is not just about the data.
Traders, particularly those in
fixed-income markets, prize
their Bloomberg terminals for
its messaging system. Over
the years, this has become
the must-use chat tool for the
global financial markets - a
sort of City Whatsapp. At
times it hits headlines for the
wrong reasons, such as
during the Libor-rigging
scandal when setters of the
benchmark interest rate were
exposed as swapping
messages such as “I’m like a
whore’s drawers”.
Refinitiv’s Eikon desktop
facility is said to be less
popular, with one senior City
source quipping that he could
not give it away to his staff.
The transformation to data
provider may be part of the
problem for Lseg investors. Is
it an exchange, to be
compared with the likes of
Euronext or Nasdaq, or a data
provider to be matched with
the likes of Bloomberg or IHS
Markit? “There’s nothing that
looks precisely like it,” said
Philip Middleton, an analyst
at Bank of America. After the
third-quarter results in
October, he published a note
explaining that there were
“some genuinely good points
and only minor
disappointments”. Yet the
shares fell 6 per cent. “We
have fielded a lot of investor
calls when we were asked to
explain this discontent, but
we can’t,” Middleton said.
Fund manger Lindsell
Train, which owns about
4 per cent of Lseg, declined to
comment. But after the
trading update in October,OM of Sweden, and Nasdaq in
New York — and endured
three failed attempts to
merge with Deutsche Börse.
The last of these bids
collapsed in 2017 and is
crucial in explaining how
Schwimmer ended up in the
top job at Lseg.
His predecessor, the
Frenchman Xavier Rolet, had
embarked on a radical
transformation plan. He
masterminded a deal to buy a
majority stake in LCH in 2013
and then led the acquisition
of the US indices business
Russell in 2014. On Rolet’s
watch, Lseg shares rose from
800p to £37.
The foiled Deutsche deal
was the beginning of the end
for him at Lseg. He stayed on
another six months but then
left amid an apparent dispute
about his management style.
This triggered a dramatic
showdown between the Lseg
board and Sir Christopher
Hohn’s hedge fund, The
Children’s Investment Fund,
which had a 5 per cent stake
in the exchange. Hohn
wanted Rolet to stay and even
called a shareholder vote
demanding that chairman
Donald Brydon be ousted.
Hohn lost the ballot and
Brydon stayed to oversee the
recruitment of Schwimmer in
August 2018. He arrived from
Goldman Sachs to find a
business in management
turmoil but with a solid
reputation among investors.
Schwimmer’s motivation
for the Refinitiv deal was
clear: he wanted to lift the
share of Lseg’s revenue from
data and analytics fromWe can’t
explain this
discontent
among
investors
HENRY NICHOLLS/REUTERSFTSE London Stock Exchange0-10
-20-301020%JJJSOFMAMNAPerformance year to date indexed at 0Lseg has slumped against the FTSE 100Source: Eikon/RefinitivThe exchange has pitched itself headfirst into the battle to provide data to market tradersBUSINESS TO BUSINESS
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