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ALEX BRUMMER: Government throws a lifeline to Rolls-Royce

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alex brummer government throws a lifeline to rolls royce

Rolls-Royce shares have collapsed from a peak of ten pounds two years ago, when order books for the Trent 1000 engine were overflowing and global air travel expanding exponentially, to just above one pound.

The value destruction is among the most pernicious commercial impacts of coronavirus.

Instead of guiding Rolls-Royce ever higher, chief executive Warren East has found himself deep into financial engineering amid a torrent of departing cash, which has threatened a repeat of the existential crisis of 1971 when the aerospace innovator was saved from extinction by Ted Heath’s Tories.

Nosedive: Rolls-Royce shares have collapsed from a peak of ten pounds two years ago to just above one pound

Nosedive: Rolls-Royce shares have collapsed from a peak of ten pounds two years ago to just above one pound

This time around it is Chancellor Rishi Sunak, and the much disparaged Business department, which is to the rescue. 

The best thing which could happen and boost Rolls-Royce cash flows would be a re-opening of transatlantic and global travel since the group is among the biggest beneficiaries of air miles.

Second best is financial support which will see it through to 2022 or so without collapse. Sunak has been adamant that Covid self-help is best. 

And with its painful deeply discounted and underwritten rights issue of £2billion, Rolls has been able to unlock government support in the shape of £1billion of government loan guarantees, in addition to £2billion of export credits already in place.

The capital reconstruction will allow it to tap into commercial bond markets. As helpful is the unseen hand of R&D support. 

Among work gaining an extra government push is ‘ultrafan’ research on greener turbines. There is recognition that with nuclear policy in disarray, Rolls-Royce’s neglected small modular reactor design might have a real role to play. 

At a time when Rolls is axing 9,000 jobs, pressure on employment has been relieved by the transfer of engineers from civilian to government supported defence work.

The best that Rolls-Royce can offer investors is that it could be generating cash in the second half of 2021 and moving back towards full throttle in 2022. 

East has assured investors that he will see through the rebuild. If prospects were to veer off course again they will be unforgiving.

Saving G4S

The debate about future ownership and control of G4S looks to have come down to price. Big investors including Schroders in Britain have decided that the 190p a share or £3billion being offered by smaller Canadian upstart Garda World, with the support of BC Partners, is not enough.

Garda World’s boss Stephan Cretier has embarked on a hostile campaign to disparage G4S for a series of scandals, and arrogantly is promising to ‘educate’ shareholders as if they were schoolchildren who don’t understand their investment. 

Long-term shareholders, having lived through the worst of times and forced management changes, might want to enjoy the upside rather than hand it over to outsiders.

Yes, G4S has made huge mistakes and there are outstanding legal challenges. There also are serious questions about how fat-cat chairman John Connolly, who was savaged a quarter-of-century ago over his role in the Barlow Clowes collapse, is in post at G4S after eight scandal-splattered years. 

Investors and other stakeholders, including 570,000 employees, should not fall for the Garda World spin. 

G4S, for all its faults, stands at the core of Britain’s global services economy at a moment when we need such firms. It carries out important government work, including running prisons.

The most important obstacle to this deal is the ultimate buyer, BC Capital Partners. 

The interest of private equity is to make quickie returns for its executives and investors by loading up companies with debt and stripping out costs, including jobs. 

In the age of Covid and Brexit, passing command and control to interlopers should not be an option. The G4S board needs to strengthen controls and find a credible new chairman without delay, or it will be eaten alive.

Vaccine velocity

The European Medicines Agency is enthused about the prospect of the Astrazeneca/Oxford Jenner Covid vaccine and has taken the unusual step of initiating rolling reviews of the global trials with the aim of speeding up approvals.

Contrast this with the US’s Food & Drugs Administration, which is demanding that Oxford scientists provide data on previous vaccine trials before approving resumption of experimental use in America.

This looks a clear win for EU enterprise over US foot-dragging.

This post first appeared on dailymail.co.uk

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Torsus unveils the most extreme school bus on the planet

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torsus unveils the most extreme school bus on the planet

This is the Torsus Praetorian bus, and it guarantees to get your children to the classroom even if it’s in the middle of a rainforest, war zone or any other inhospitable environment.

The extreme vehicle has been created to take on the most challenging of school runs, although promises to deliver your kids there in supreme comfort.

Kitted out with long-travel suspension, huge steel wheels, chunky off-road tyres and a chassis that can withstand blows from the harshest of terrains, it can take up to 35 children to the most remote schools on the planet.

Laughing in the face of the school run: This is the new Torsus Praetorian School Bus, which is designed for the most extreme locations

Laughing in the face of the school run: This is the new Torsus Praetorian School Bus, which is designed for the most extreme locations 

We’ve already seen the Torsus Terrastorm van that can be converted for multiple uses, including a nomad ambulance and a go-anywhere delivery van.

However, the school bus is the most bonkers version of its other model – the Praetorian – we’ve seen yet. 

It starts life as a MAN truck using a 6.9-litre diesel engine that produces with 286bhp and 1,150Nm of torque.

That’s enough grunt to haul the 13-tonne bruiser up a 65 per cent incline. 

The maker has jacked the ride height to monster-truck levels, increasing its capability to  clear obstacles, while the four-wheel drive and off-road Michelin tyres add to its capability in challenging conditions.

It also has a wading depth of 900mm and double glass windows that won’t shatter if the bus driver collides with a rock.  

The maker has jacked the ride height to monster-truck levels

Four-wheel drive and off-road Michelin tyres add to its capability in challenging conditions

Torsus has jacked the ride height to monster-truck levels. Four-wheel drive and off-road Michelin tyres add to its capability in challenging conditions

The bus can carry up to 35 school kids at a time through some of the most inhospitable environments

The bus can carry up to 35 school kids at a time through some of the most inhospitable environments 

Other special features include bespoke original seats styled around mathematics and science designs and a digital sign to notify parents that this is the correct bus to get their children to school – not that it doesn’t stand out enough already.

The seats are covered with a polymer protective coating and equipped with a seat belt suitable for all ages, while optional extras for the seats include a foldable armrest and hip support bar on the aisle side – just in case the route gets particularly crashy. 

The interior is packed out with noise insulation – just in case the kids need to revise for an exam – and it has an easy-clean floor, given that plenty of muddle shoes are likely to be trampled through the cabin. 

Torsus even offers a full quota of optional extras on request, including a TV and DVD player to keep the kids entertained in the journey home is a long one. 

The seats have a mathematics and science design but also seatbelts designed for school children of all sizes and ages

The seats have a mathematics and science design but also seatbelts designed for school children of all sizes and ages

The entry-level bus starts at €166,000 (around £150,000) and is one of a varying number of conversions of the Praetorian bus

The entry-level bus starts at €166,000 (around £150,000) and is one of a varying number of conversions of the Praetorian bus

Torsus even offers a full quota of optional extras on request, including a TV and DVD player to keep the kids entertained in the journey home is a long one

Torsus even offers a full quota of optional extras on request, including a TV and DVD player to keep the kids entertained in the journey home is a long one

Vakhtang Dzhukashvili, CEO of Torsus, said a school bus conversion ‘was one of the first ideas’ he had when imagining a range of durable off-roaders.

‘The Praetorian is a safe and solid vehicle that we know can keep its occupants protected in even the most testing of conditions. 

‘Wherever in the world customers might need a school bus solution for safely and efficiently driving on testing terrain, the Praetorian School Bus is an option that will deliver every time.’

The Praetorian is available in more than 20 different conversions, all at varying costs.

This includes an ambulance, safari vehicle, riot wagon or even a ski bus. 

The entry-level bus starts at €166,000 (around £150,000) while the most expensive variant – the kitted out ‘Expedition’ – starts from €368,000 (£332,000). 

SAVE MONEY ON MOTORING

This post first appeared on dailymail.co.uk

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Nick Train makes rare new holding in credit scoring company Experian

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nick train makes rare new holding in credit scoring company
Nick Train manages the £1.8billion Finsbury Growth & Income investment trust

Nick Train manages the £1.8billion Finsbury Growth & Income investment trust

Fund manager Nick Train has added credit scoring company Experian to his UK portfolios, including the top-rated £1.8billion Finsbury Growth & Income trust. 

In the trust’s latest report Train, who is considered one of the UK’s leading investment managers, said he’d been building the position across his boutique firm Lindsell Train’s UK accounts over the summer.

This includes the popular trust as well as his £6.3billion open-ended Lindsell Train UK Equity fund. 

While this is the third new position he has taken over the past year, this number of new holdings is ‘unusually high’ for Train, who is widely known for his long-term, ‘sit-and-wait’ approach.  

The manager said there are two types of businesses he likes to own.

The first is UK companies with luxury, premium or aspirational brands, such as long-term holding high-end fashion brand Burberry and drinks company Fever-Tree – the latter of which was another new purchase made this year.

The second category, which Experian sits in, is ‘substantive UK companies with credible and globally-competitive assets in technology, data and analytics’.  

Train said he should have owned Experian years ago and credits colleague Madeline Wright, ‘who has persistently and correctly championed the investment case for the company’ for finally convincing him to add it.

He said: ‘The rationale for owning Experian is consistent with one of Lindsell Train’s key investment themes: we are always trying to get more exposure to world class technology companies, especially those which own rich, unique and valuable data. 

‘Since Experian’s inception in 1968 it has been building such a cache of unique consumer credit data, which is absolutely critical for the decision making processes of its credit granting customers.’

Wright said the team has followed the company for a number of years but in 2017 embarked on a more in-depth review. 

This included meeting senior staff several times, as well competitors TransUnion and Equifax, to better understand the wider credit bureau industry.

The team said Experian has a strong business model and operates on a 'give to get' basis

The team said Experian has a strong business model and operates on a ‘give to get’ basis

Minimal competition 

Wright said all three companies have strong business models and operate an attractive ‘give to get’ basis, in which customers supply them with raw credit history data for free, the bureau aggregates it, applies analytics and tools, and sells it back to the customers as a credit report. 

She added: ‘Renewal rates are around 90 per cent and competition is minimal because each company’s dataset varies and therefore most banks use reports from all three. 

‘The cost per report is low at just one or two dollars, so there is little incentive for either the existing three to engage in price wars, or for a fourth player to enter. 

‘This is especially true because it would take more than 10 years for a new entrant to amass sufficient data to effectively compete, and tough regulation in all geographies adds a further barrier to entry.’

The biggest risk Experian could conceive is instead from suffering a security breach, something which happened to Equifax in 2017, which saw data for nearly 150 million Americans and 15 million Britons stolen.

Wright said: ‘Clearly this was a very large, very serious breach, but while the event did have serious repercussions including the departure of the chief executive and numerous lawsuits, it didn’t affect Equifax’s business in the longer term. We think this “test case” indicates the resilience of credit bureau business.’

Long-term growth 

Most importantly, the team feels Experian will benefit from its shift from simply selling data to selling data enhanced by software decision tools. 

Train said: ‘This means Experian is investing heavily into developing proprietary algorithms and data management tools, which increase the utility of the underlying data and increase the “stickiness” of its customer relationships. 

‘Currently 55 per cent of sales come from what the company calls “data”, ie. large databases of credit history from which reports are generated. 

‘But the “decisioning” segment, ie. advanced analytics and tools sitting on top of Experian’s datasets, is now 25 per cent of revenues and growing fast.

‘We expect this shift to decision tools to drive Experian’s growth over the next decade.’  

Over five years, Nick Train's Finsbury Growth & Income trust and Lindsell Train UK Equity Income fund have returned almost 60 per cent, significantly outperforming the FTSE All Share

Over five years, Nick Train’s Finsbury Growth & Income trust and Lindsell Train UK Equity Income fund have returned almost 60 per cent, significantly outperforming the FTSE All Share

UK opportunities 

Train said the increase in new holdings has been a result of a long period of disappointing absolute and relative returns from the UK stock market and therefore opportunity as many appear to have given up on it.

‘I don’t exaggerate when I say give up,’ he added. ‘Have you seen the industry data showing monthly outflows from across all open-ended UK equity funds? They are substantial and sobering.’

In September, the net asset value for Finsbury Growth & Income was up 2.2 per cent on a total return basis and the share price was up 1 per cent, while the index was down 1.7 per cent.

This post first appeared on dailymail.co.uk

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Airline regulator slammed after botching customer complaints review

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airline regulator slammed after botching customer complaints review

The Civil Aviation Authority has been forced to extend its review of how airlines deal with customer complaints after critics slammed the body for failing to tell consumer bodies its plans. 

In July, the CAA published a consultation paper proposing how to improve the current Alternative Dispute Resolution system – a scheme used to ensure passengers are able to resolve any disputes without needing to take airlines to court.

Ordinarily, a consultation of this sort would be made public and all interested parties invited to respond formally to the plans, allowing them to challenge proposals they consider damaging. 

But on this occasion, the CAA failed to notify airlines and airports of the proposed changes along with consumer champions, individuals and organisations, something it blamed on an ‘IT error’.  

The CAA has launched an investigation into the current Alternative Dispute Resolution system

The CAA has launched an investigation into the current Alternative Dispute Resolution system

A statement on its website reads: ‘We were recently made aware that, due to an IT error, a small number of interested parties had not received an email alert about this consultation going live and therefore had not responded when the consultation closed.

‘Given the importance of this matter, the Civil Aviation Authority will be reopening the consultation for a six week period from Friday 9 October 2020 in order to allow for further responses to be considered as we continue to improve the ADR service for consumers.’

Helen Dewdney, the Complaining Cow and consumer champion, flagged the issue to the CAA earlier this month and warned its approach was ‘flawed and blinkered’.

‘It’s almost as if they don’t want to hear the changes and recommendations from the people who are best qualified to suggest improvements, the passengers themselves,’ she said.

The Ombudsman Association, a professional association for ombudsman schemes, was also left of the list of parties notified by the CAA.

Donal Galligan, the association’s chief executive, said: ‘There are numerous examples from various sectors that what works best for both consumers and driving improvements in an industry is a single mandatory ombudsman. 

‘It is time that the UK government mirrored their own approach in rail, energy, and new homes, and drive the establishment of a single mandatory aviation ombudsman.’

This isn’t what the CAA is proposing.  

Instead, it wants to include a new process for ‘complex and novel’ customer complaints and disputes and a post-decision review process that could give airlines an opportunity to influence how future cases are handled. 

Consumer body Which? has now raised concerns that the proposed changes would do little to address the weaknesses of the existing system. 

Among these, it highlighted that the current scheme involves unreasonably long waits for passengers as they go through a long and convoluted dispute process, which puts too many people off complaining at all. 

Along with the OA, Which? is also calling for the government to introduce a new aviation ombudsman scheme that all airlines operating in the UK must be made to join.

This would improve the passenger complaints process and should form part of the government’s upcoming aviation recovery plan, it said. 

Currently, it is not even mandatory for airlines to be members of an ADR scheme. 

There is currently only one Ombudsman in the travel sector which is the Rail Ombudsman

There is currently only one Ombudsman in the travel sector which is the Rail Ombudsman

Rory Boland, editor of Which? Travel, said: ‘Throughout the coronavirus crisis, passengers have seen their consumer rights ripped up by some airlines that have consistently flouted the law – but they have found there is nowhere to turn for support.

‘This situation has only served to highlight that the current complaints system is broken, and tinkering around the edges will not be enough to reform it and make it work for passengers. 

‘The government must ensure that passengers’ needs are front and centre in its aviation recovery plan, starting with the introduction of a mandatory, single ombudsman scheme for airlines, as a first step to restoring trust in the sector.’

The airline industry has seen public backlash in recent months after many airlines refused to refund flights cancelled because of the pandemic.

Thousands of holidaymakers were left waiting months and months to get a refund for their cancelled trips whilst others were told to make do with vouchers.

Criticism was also levelled against the CAA for not doing enough to hold airlines to account despite a new chairman, Stephen Hillier, starting on 1 August 2020.   

This is Money contacted the CAA for comment which said it received a number of responses to the original consultation, including from key stakeholders such as Which?. 

Following the initial closing of the consultation, it said it was made aware that, due to an IT error, a small number of stakeholders had not received an email alert about this consultation going live and therefore had not responded before the consultation closed.

Therefore, in order to enable stakeholders to respond to this important matter, it reopened the consultation for a six week period from Friday 9 October 2020, and is now contacting organisations and individuals directly to invite their responses, which will be considered as it ‘continues to improve the ADR service for consumers’.

Ryanair tops CAA refund complaints

Ryanair is the most complained about airline by far, according to separate figures recently released by the CAA.

More than half of all the 1,280 complaints received by the CAA regarding refunds due to Covid-19 related cancellations were about Ryanair. 

The airline body received 642 complaints about Ryanair with the second most complained about airline, Air Transat, not even close, with a total of only 120 complaints. 

The CAA has collated the information on 74 airlines, recording how many passengers have complained about cancellation refunds during the Covid-19 pandemic period. 

It found that Ryanair was one of the airlines that was not processing refund requests sufficiently quickly. It said the airline had a sizeable backlog of refund requests and that refunds were taking 10 weeks or longer. 

In response, on 3 July, Ryanair published a set of commitments on its website about timescales for processing cash refunds. 

The budget airline confirmed that 90 per cent of its backlog would be cleared by the end of July with all refund claims made in April to be processed by 15 July and most of the claims made in May by the end of July.   

This post first appeared on dailymail.co.uk

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