SORRELL THROWS DOWN CHALLENGE TO SHAREHOLDERS WITH PLAN
WPP (WPP.L) is bracing itself for a rebellion from some of its London-based shareholders over a controversial reward scheme that could earn its chief executive, Sir Martin Sorrell, 95 million dollars in bonuses over the next five years. The proposed package has prompted a “red top” warning from the Association of British Insurers, not least for the notion that Sorrell can use share options to generate large bonuses. It is believed American investors will broadly endorse the scheme next month, allowing it to go through.
BRIXTON OPENS DOOR TO TAKEOVER BY PROPERTY RIVAL
Brixton (BXTN.L) is in early talks about a possible takeover by Segro (SGRO.L). The heavily indebted property group has not yet refinanced its debt and is seen as highly exposed to the property sector. If a bid were to proceed, there are significant potential synergies between the two property groups and considerable crossover between the shareholders in the two companies, with a paper offer from Segro giving Brixton investors a way of remaining in the sector before a possible upturn in capital values.
CINVEN LOSES ON SPANISH HOSPITALS
Cinven [CINV.UL] faces one of its biggest losses after lenders seized control of USP Hospitales, its Spanish hospitals portfolio. The private equity house lost most of the 175 million euros it invested in the buyout of USP Hospitales after Barclays (BARC.L) and Royal Bank of Scotland (RBS.L) took 90 percent of the struggling hospital group in a debt-for-equity swap. Barcap and RBS now own about two-thirds of the business and in return have cut the group’s debt from 500 million euros to 250 million euros.
HSBC WARNS BRANCH NETWORK IS INEFFICIENT
HSBC (HSBA.L) has admitted at its annual general meeting that running a major network of high street retail branches does not “stack up” economically. Michael Geoghegan, chief executive of HSBC, said: “We have maintained, and continue to maintain, a liquid balance sheet. However, it is worth noting that with interest rates at historic lows, the cost of maintaining this liquidity is high, and the economics of running a major retail network do not stack up when deposit margins have all but vanished.” HSBC’s remuneration report was backed by shareholders, although 8.8 percent voted against the resolution.
BRITISH AIRWAYS PLUMMETS TO 401 MILLION POUND LOSS
On Friday, British Airways (BAY.L)> revealed its biggest losses since it was privatised in 1987. The airline slid to a pre-tax loss of 401 million pounds in the year to March after posting record profits of 922 million pounds last year. Chief executive Willie Walsh blamed the economic climate and predicted it will last another two years at least. Rocketing oil prices added 1 billion pounds to BA’s fuel costs, taking the annual bill to 3 billion pounds. The collapse of the pound against the dollar also knocked 180 million pounds off the bottom line.
MECOM PLANS TO RAISE 141 MILLION POUNDS IN RIGHTS ISSUE
Mecom (MEC.L) has unveiled plans of a deeply discounted 141.5 million pound rights issue to reduce its debts and bolster its beleaguered finances. The newspaper group, which has also agreed to amend its bank facilities, said it had “acted promptly to weather a sharp decline in advertising market conditions by strengthening it balance sheet”. The six-for-one, fully underwritten fund-raising is priced at 1.5 pence per share. Analysts at RBS noted there would be 11 billion shares in issue after the rights issue, putting their forecasts for earnings-per-share at 0.09 pence and pre-tax profits for 2009 at 12.9 million pounds.
MARSTONS SEES TRADING IMPROVING THIS SPRING
Marstons (MARS.L) has posted profits before exceptionals of 27.7 million pounds in the six months to 4 April, down 21 percent on a year ago. Margins were adversely affected by higher raw materials and energy costs and the fact Easter fell in the first half last year. However, the pubs and brewing group, which saw turnover fall 2.8 percent to 308 million pounds, was encouraged by signs of a “modest improvement” in trading since mid-February.
WATCHDOG HAS RIPPED A HOLE IN FIBRE-OPTIC NET, BT COMPLAINS
BT (BT.L) has warned its ability to invest in next-generation super-fast broadband networks could be hindered by the proposed price cap on charges for rival providers using its phone lines. Ofcom outlined the amount BT can charge its rivals, including Sky and TalkTalk, but the increase was smaller than BT had hoped. The regulator refused to allow the cost of servicing BT’s pension deficit in its calculations for the cost of running the Openreach division, which operates the UK’s local phone network.
HSBC CHAIRMAN REJECTS SHAREHOLDERS’ CALLS TO GO
Stephen Green has rejected calls for his resignation as chairman of HSBC (HSBA.L) at the bank’s annual general meeting. Green said: “I’m not resigning – I don’t think that’s appropriate.” Shareholders’ ire focused on HSBC’s exposure to Bernard Madoff and its acquisition of Household, which the bank admitted it should not have bought in hindsight. Green defended the performance of HSBC, saying it had weathered the financial crisis better than its rivals and was not reliant on governmental support following a successful rights issue.
CROMBIE TO BE SENIOR INDEPENDENT ON RBS BOARD
The appointment of Sir Sandy Crombie, the outgoing chief executive of Standard Life (SL.L), as the first of three non-executives at Royal Bank of Scotland (RBS.L) has been approved by UK Financial Investments. Crombie will become senior independent non-executive director and sit on the bank’s nomination committee. Crombie’s appointment will fill one of a number of senior vacancies in the UK’s banking industry, with UKFI, which controls the taxpayers’ stake in RBS, looking for a new chairman for the bank.
Prepared for Reuters by Durrants