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Upmarket stores struggling to survive pandemic

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upmarket stores struggling to survive pandemic

For many visitors to the UK, shops such as Selfridges, Harrods and the Queen’s grocer Fortnum & Mason are a quintessential part of Britain. 

But due to the pandemic the tourists who sustain the high end retail sector are gone, forcing bosses to make drastic decisions to protect their businesses. 

The feted return of workers to offices yesterday – the first Monday in August – also failed to materialise, and some companies will not bring staff back until next year. 

Tradition: For many visitors to the UK, shops such as Selfridges and Harrods are a quintessential part of Britain

Tradition: For many visitors to the UK, shops such as Selfridges and Harrods are a quintessential part of Britain

Tradition: For many visitors to the UK, shops such as Selfridges and Harrods are a quintessential part of Britain

Haunting images showed the streets of business centres in once bustling cities such as Manchester, Bristol and London lying empty, leading business leaders to fear they will become ghost towns. 

In the last fortnight the dire situation has hit high-end shops. They continue to face huge rent bills and, from yesterday, contribute to the cost of any staff who remain on furlough, even as shopper numbers remain woefully low. 

Many bosses are not waiting for consumers to return and have taken drastic action. 

Burberry led the way announcing 500 job cuts as part of a £55m cost saving drive. It said sales in the three months to the end of June were ‘severely impacted’ by the drop in demand for luxury and as tourist numbers were likely to remain ‘negligible’. 

Selfridges cut 450 jobs across its four department stores in Manchester, London and Birmingham, saying in a statement it was ‘the toughest decision we have ever had to take’. Harrods is preparing to axe 670 staff, or one in seven of its 4,800 employees, due to the ‘ongoing impacts’ of the pandemic. Chief executive Michael Ward said social distancing was having ‘a huge impact on our ability to trade’, while ‘the devastation in international travel has meant we have lost key customers’. 

Jobs in parts of the store that remain closed, such as beauty services and cafes, are thought to be most at risk. 

Fortnum & Mason is cutting around 50 hospitality jobs at King’s Cross St Pancras station, and The Gallery restaurant in Mayfair, with bosses citing ‘evolving consumer habits’, while Harvey Nichols is also believed to have suffered a collapse in sales. Yesterday the Mail reported that Thomas Pink, owned by luxury group Louis Vuitton, was closing its flagship store in Jermyn Street. 

The move puts the future of its two remaining UK stores – both at Heathrow airport– in doubt. 

The timing of the job losses shows that the ending of lockdown, almost seven weeks ago, was not the silver bullet to recovery. Retailers are being forced to contend with the aftermath. 

Buttoned up: Shirt maker Thomas Pink is closing its flagship store

Buttoned up: Shirt maker Thomas Pink is closing its flagship store

Buttoned up: Shirt maker Thomas Pink is closing its flagship store

Shoppers are still avoiding the High Street for all but essential items due to fear of the virus, and travel restrictions mean there are almost no tourists, with airline experts predicting depressed passenger numbers until at least 2023.

Footfall is down 38 per cent year-on-year across all UK retail destinations, but this masks a much higher drop in the city centre areas where high-end shops are located. After a walk around some of central London’s top shopping destinations, you could easily believe that the number of visitors is down 80 per cent or more in some tourist hotspots. 

Stores such as Harrods also rely on the theatre of the retail experience, which has been hammered by social distancing. Queues outside shops, as doormen or ‘hosts’ enforce social distancing, and the closure of areas such as cafes and beauty demonstrations, have taken the joy out of a day of retail therapy – and many simply are not bothering. 

The roll call of well-known retailers, which sometimes charge enormous sums for their wares, shows that every portion of the economy has been hit. 

It is unimaginable that the likes of Harrods or Selfridges could disappear, but the pandemic has shown that the top-end of retail is not immune from the crisis affecting the wider High Street. 

As she announced the redundancies, the boss of Selfridges, Anne Pitcher, told her staff that ‘how we work, shop and socialise is changing’ as she promised to leave ‘no stone unturned’ in planning for changes to consumer behaviour. 

Independent retail expert Richard Hyman said: ‘These companies have got to think beyond Covid, because now their model does not really work.’

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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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Show us the money, say G4S investors: Canadians told to raise offer

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show us the money say g4s investors canadians told to raise offer

The battle for G4S heated up yesterday as its two biggest shareholders spurned a £3billion hostile takeover bid from a Canadian rival – but stressed they are open to a deal at a ‘fair price’.

Fund manager Schroders said it agreed with the security giant’s board that the 190p a share offer from Garda World ‘significantly undervalues’ the scandal-prone company.

The same offer was unanimously rejected by the G4S board just over a fortnight ago. But Schroders, with a 10.49 per cent stake, offered hope to Garda World by making it clear it is willing to engage in talks and is open to a takeover if it increases its bid. 

Too low: Fund manager Schroders said it agreed with G4S's board that the 190p a share offer from Garda World 'significantly undervalues' the scandal-prone company

Too low: Fund manager Schroders said it agreed with G4S’s board that the 190p a share offer from Garda World ‘significantly undervalues’ the scandal-prone company

G4S has appealed to shareholders to ‘take absolutely no action in relation to the unattractive and opportunistic offer’.

But Sue Noffke, Schroders’ head of UK equities, said: ‘As the largest shareholder in G4S, Schroders agrees with the G4S board that the 190p bid from Garda World significantly undervalues the company and its prospects.

‘However, we are prepared to engage and are open to a deal at a fair price for that more fully reflects peer multiples, synergies and other strategic benefits for an acquirer.’

The other top ten investors include Chicago-based investment firm Harris Associates, which has a 10.04 per cent sake, and Mondrian Investment Partners with a 5.07 per cent stake.

David Herro, of Harris Associates, said Garda World’s bid ‘does not come close to closing the gap between their offer and our measurement of intrinsic value for G4S’. But he added: ‘We would be open to a higher bid’.

Garda World is contacting shareholders directly in an attempt to win them over. It needs to secure a 90 per cent vote among investors to seal the deal. 

Yesterday, the Canadian firm launched another attack on G4S in an attempt to persuade shareholders to accept the offer on the table. 

The Montreal-based firm’s boss Stephan Cretier claimed he would ‘educate’ shareholders on how best to manage G4S. 

And he dismissed protests from the company’s management that it is back on track following a series of scandals, that date back to the 2012 London Olympics when the army had to be drafted in after it failed to provide enough security guards. 

When the hostile takeover bid was announced on Wednesday shares jumped above £2 for the first time since February. 

They edged up again yesterday, rising 0.8 per cent, and are up almost 40 per cent since news of the £3billion takeover bid emerged just over two weeks ago.

G4S declined to comment.

The chairman who mentored Fred Goodwin 

G4S chairman John Connolly owns more than 600,000 shares worth £1.16m

G4S chairman John Connolly owns more than 600,000 shares worth £1.16m

The chairman of G4S stands to make more than £1million if the Garda World takeover goes ahead.

John Connolly owns more than 600,000 G4S shares worth £1.16million at the 190p a share offer price.

The 70-year-old – whose chequered career includes the collapse of Barlow Clowes in the 1980s, and whose protege Fred Goodwin brought RBS to the brink of collapse – insists the bid ‘significantly’ undervalues the firm.

The former accountant is no stranger to controversy and has shown an uncanny knack for survival. Since he took over as chairman at G4S in June 2012, the company has been rocked by scandals, from its failure to supply enough security guards for the London Olympics to charging taxpayers for tagging offenders who were dead or back in prison.

But Connolly remains in his £382,000 a year job following a lucrative accountancy career. 

As chief executive of ‘Big Four’ auditor Deloitte, he became Britain’s highest paid accountant in 2008 when he earned £5.7million.

That was the year that RBS imploded under Goodwin, who worked under Connolly at Deloitte. 

When Goodwin became chief executive of RBS in 2001, one of his first acts was to award the contract to audit the doomed bank to Deloitte.

The collapse of investment broker Barlow Clowes in 1988 after massive fraud was one of the biggest City’s biggest ever scandals. 

Connolly managed to brush off calls to resign and instead rose to become UK senior partner and chief executive of Deloitte.  

This post first appeared on dailymail.co.uk

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Rolls-Royce races to raise £5bn as it fights for survival

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rolls royce races to raise 5bn as it fights for survival

British engineering titan Rolls-Royce has unveiled plans to raise £5billion in emergency funds as it scrambles for survival.

The aircraft engine maker intends to go cap in hand to shareholders to help shore up its finances which have been devastated by the Covid-19 pandemic.

If approved by the Treasury, the £2billion rights issue could unlock another £1billion loan from the Government’s UK trade finance body, UK Export Finance.

Cash strapped: Rolls-Royce intends to go cap in hand to shareholders to help shore up its finances which have been devastated by the Covid-19 pandemic

Cash strapped: Rolls-Royce intends to go cap in hand to shareholders to help shore up its finances which have been devastated by the Covid-19 pandemic

Rolls also plans to borrow another £1billion by issuing new bonds to investors and said it has secured a £1billion loan on top of this.

The sheer scale of the fundraising underlines the desperate plight of the world-renowned business, which has become one of the biggest corporate casualties of the coronavirus pandemic.

Shares fell another 10.2 per cent, or 13.2p, to a 17-year low of 116.8p – taking losses so far this year to 83 per cent. ]

Two years ago shares were worth more than £10 each. Rolls-Royce is now valued at just £2.2billion – less than half the £5billion market cap of discount retailer B&M.

Rolls has already announced it intends to lay off 9,000 staff to slash costs and sell off parts of the business to raise £2billion. 

Chief executive Warren East said the plans to raise extra cash ‘improves our resilience to navigate the current uncertain operating environment’. The 58-year-old added: ‘The sudden and material effect of the Covid-19 pandemic has a significant impact on the commercial aviation industry, resulting in a sharp deterioration in the financial performance of our civil aerospace business and, to a lesser extent, our power systems business.’

Rolls-Royce designs, manufactures and services engines and turbines for the defence, marine and oil and gas industries.

Rolls Royce Chief exec Warren East said the plans to raise extra cash 'improves our resilience to navigate the current uncertain operating environment'

Rolls Royce Chief exec Warren East said the plans to raise extra cash ‘improves our resilience to navigate the current uncertain operating environment’

But the company is particularly reliant on the civil aerospace business which accounts for just over half of its revenues.

The engineer makes money not from selling engines, but on payments airlines make when its engines are flying.

This ‘power-by-hour’ model typically generates around £4billion a year for the firm. Flying hours have roughly halved since the pandemic started, with planes grounded around the world.

Last month, Rolls-Royce slid to a £5.4billion half-year loss as the company was battered by the downturn in air travel.

Russ Mould, investment director at stockbroker AJ Bell, said: ‘Once seen as a shining light of British industry, Rolls been laid low by a combination of events which range from technical problems with its engines to a global pandemic which has hammered global demand for air travel and aircraft.

‘This has left the company looking for cash to try to see it through the downturn to make sure it can come out the other side so it can capitalise on the eventual upturn in global travel.’

Experts said the coronavirus pandemic came at the worst time for Rolls-Royce, which has already spent billions to resolve technical problems with some of its aircraft engines. 

The firm has been exploring a range of options to ensure it emerges from the crisis, including raising £500million by selling a stake in the company to sovereign wealth funds in Singapore and Kuwait.

But it is understood Rolls ditched talks due to unease among institutional shareholders that it would dilute their holdings in the firm.

The company has instead turned to the Government for more help, having already borrowed £2billion in state-backed loans. 

Yesterday it said the extension of another £1billion loan depended on the Treasury and UK Export Finance approving the £2billion fundraising with existing shareholders.

The Government holds a ‘golden share’ in Rolls which prevents the company from coming under foreign control as it is deemed to be of strategic interest to the UK. 

This post first appeared on dailymail.co.uk

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