Mark Kleinman: Melrose 2.0 may shine more than Shein
Mark Kleinman is Sky News’ City Editor and is the man who gets the City talking in his weekly City A.M. column. This week, Kleinman tackles Rosebank Industries aka Melrose 2.0, Heathrow Airport drama, and the ownership saga around Everton
Melrose 2.0 may shine more than Shein
0.1 per cent: that’s the likely valuation of Rosebank Industries – aka Melrose 2.0 – relative to the Chinese-founded online fashion retailer Shein if and when both make their London stock market debuts in the coming months.
With an initial seed capitalisation of about £50m, Rosebank is the new vehicle of Simon Peckham, one of Melrose’s co-founders. He has assembled a team from his former company with over a century of experience between them, and now intends to reprise the ‘Buy, Improve, Sell’ playbook which made its investors handsome returns over two decades.
Yet while political and media attention focuses on when Shein will push the button on a UK listing, Rosebank’s listing may be disproportionately significant in what it says about the recovery story for London’s flagging stock market.
According to insiders, Peckham and co have for months been discussing a privately owned version of the vehicle which would secure substantial capital commitments from one or two deep-pocketed private equity firms.
Sources tell me that the decision to pursue a public capital raise instead reflects a judgement about institutional investors’ willingness to finance another listed company from the team which made Melrose so successful.
An investor presentation I’ve seen unsurprisingly makes hay with that track record: Elster, which generated a 33 per cent internal rate of return, and Dynacast, for which the comparable figure was 30 per cent.
Overall, Melrose made an average 2.5x return on equity across all of the businesses it sold since its 2003 flotation, and generated a total shareholder return of nearly 3,400 per cent.
Past performance, of course, offers few assurances about the future, but Peckham has sounded bullish during recent interviews about the opportunity to work alongside management teams of target companies, rather than simply replacing them, as was the pattern at Melrose.
That should present an easier door-opening tactic for Rosebank’s pipeline of prospective acquisitions.
The presentation also makes clear that Peckham will deploy the same approach to remuneration that made his previous venture such a perennial talking point in the City.
Low salaries and below-average bonuses tied to a long-term incentive structure which has the potential for bumper rewards, with ‘real’ industrial assets listed in London – it’s a familiar, and welcome, story.
Heathrow drama taxing towards the runway
Talk about a terminal situation. After months of negotiations, Saudi Arabia’s sovereign wealth fund and Ardian, the private equity firm, have struck a £3.3bn deal to buy a stake of nearly 40 per cent in London’s Heathrow Airport.
Announced late last week, it addresses the tag-along demands of investors excluded from the original deal unveiled late last year.
While the delay will have been frustrating for the Saudi Public Investment Fund and Ardian, it eventually landed at an appetisingly reduced valuation of £8.7bn. Based on rising passenger numbers and earnings, the price looks cheap.
Challenges remain, however. Recent remarks by the bosses of British Airways and Emirates highlight the rough deal many of Heathrow’s most prominent airline customers believe they are getting.
I suspect the advent of a new government will herald a fresh effort by those carriers, along with Virgin Atlantic, to call for a further overhaul of the airport’s ownership structure
Previous attempts, and international comparisons, imply their focus will be on breaking up Heathrow’s monopoly ownership of its five terminals. Expect this to be the biggest aviation battleground – and lobbying blitz – under a new government.
Watchdog won’t solve sticky Toffee drama
It looks like a case study ready-made for a new football regulator. As the ownership saga surrounding Everton, the Premier League side which has made a habit of late escapes from relegation in the last few years, enters its next chapter, the prospect of a famous club starting another top-flight season in limbo escalates.
The Toffees’ nickname is apt, given that resolving the financial mess enveloping the club has been akin to wading through treacle.
Farhad Moshiri, the long-standing owner, has pumped hundreds of millions of pounds into Everton since buying it in, but will see little in return.
Creditors including Rights and Media Funding, MSP Capital and local businessmen and lifelong Evertonians including Andy Bell, the AJ Bell founder, are owed nine-figure sums, some of which are secured against the club’s new stadium at Bramley Dock.
A solution may be in sight after myriad false starts: step forward, Dan Friedkin, the owner of AS Roma, who has now been granted a period of exclusivity.
Much of the responsibility for the mess lies with 777 Partners, which signed a deal with Moshiri to buy Everton last year and has since turned obfuscation into an art form.
The Premier League appears to have had no definitive reason to block the transaction despite a complete absence of visibility over 777’s funding and deep misgivings about financing troubles elsewhere in its sporting and insurance affiliates.
Ultimately, the conditions imposed on 777 by the Premier League – which included a deadline to repay outstanding loans and to deposit funds into an escrow account for use by the club – put paid to the deal.
If a new regulator is to have real teeth (and thereby justify its existence), it will require greater powers to intervene in takeover situations like the Everton one.
Square Mile and Me – Conservative City candidate Tim Barnes: ‘I live here, so I understand the everyday problems’
Ahead of the the election, we’re asking the candidates for the Cities of London and Westminster to introduce themselves. Today, Conservative candidate and Centre for Entrepreneurs CEO Timothy Barnes gives his pitch to the Square Mile
What was your first job?
As a teenager, I did quite a lot of things that might have felt like work, but were probably volunteering! My first paid job was when I was 18 and I spent a couple of months doing graphic design and layout for a small charity that trained and supported community volunteers across Cambridge. It was my first experience of the daily routine of heading into an office and helped me understand that I would always like work that has a creative element involved.
When did you decide to try your hand at politics and what were you doing before?
I ran successfully to be the finance and societies officer for the student union at UCL, where I had been studying, and led to me taking a year out after university. I first ran to become a councillor over fifteen years ago and have always combined politics with having a day job. For the last two years, I have been the CEO of a charity based on the borders of the City. We promote entrepreneurship and help push policies that make it easier for those who want to help themselves to get going. Before that I have worked in universities, management consultancy, venture capital and set up my own businesses.
What’s one thing you love about the City of London?
The Dragon boundary markers! Also, so many of the interesting and quirky old venues. I was saddened by the closure of Simpson’s Tavern and it would be great to see it revived as the site is still unoccupied and just falling into abandonment. The coverage in City A.M. has really saddened me. One of the wonderful things about the City are the little pockets of heritage among the daily bustle. If we lose those, things will just be a little too bland. Am still sad about the closure of the Wig and Pen, opposite the Royal Courts of Justice, as much for the idea of the place as anything.
And one thing you would change?
One of the first meetings I had after I was selected as a candidate for the election was with some of the Aldermen and women in the City to understand its needs and issues. I would like to see more outreach and support for the residents who live here. The Corporation has done a huge amount to improve the liveability of the City in recent years, but there’s more that can be done for those who reside here permanently in terms of housing and having access to a ladder of opportunity, which are two of the six core themes of my campaign.
Why should people vote for you?
I want to see the City flourish as a financial and service centre and as a place to live. My background in entrepreneurship policy and teaching at universities including UCL and Cambridge underline my belief in the value of business and wealth creation and I would like to see the regulatory frameworks adapted to reflect UK capital and market needs. The Mansion House reforms were a good starting point but we need to see more to attract new listings and deeper pools of capital. Residents should know I am the only candidate of any major party who lives in the constituency, so the services I use and the problems I experience everyday are the same as theirs.
What’s been your most memorable moment of your political career?
Four years ago, I led the development of a new class of business rates relief that applied to grassroots music venues, a first in the UK that’s since been copied. We launched it at the 100 Club on Oxford Street and it was reported in the NME complete with a photo of me on stage. Making it into the hallowed pages of the NME has to be one of the most unexpected and memorable moments of my political life to date!
And any political faux pas?
Am really not sure I have one, but if I do I am absolutely not going to bring up again!
What’s been your proudest moment?
As a councillor during Covid, it was the work we did to support residents and businesses at an unprecedented time of disruption. Individuals who had never had to turn to the council for help before came to see what we could and how to navigate things. As the cabinet member for young people and learning, we brought in the first scheme in the country to buy digital devices for the children who needed to learn from home during the pandemic, to ensure those from less affluent families didn’t fall behind those with easy access to laptops and tablets.
And who do you look up to?
In politics, Ken Clarke. He was a real influence on me in my formative years as I was working through my own beliefs and attitudes to politics. I don’t agree with everything he said or did, but his capacity to find the things that mattered and bring about change in what he did, his reputation as a heavy weight with a bit of personality thrown in, left his mark. My mum is a bit of a hero, too, but that’s probably not quite the original insight you are hoping for!
Are you optimistic for the year ahead?
Inflation is coming down and I think the Bank of England will cut rates in the second half of the year, so it should be a year of things getting better. England should do well in the T20 Cricket World Cup, too, and that would make me smile. But I might need you to ask me my thoughts on the rest of the year after 4 July! If Labour wins the election, taxes and inflation may well be back up by Christmas.
What does a typical day in your life look like?
Days vary a lot, to be honest. Mondays tend to start early as I have a lot of team and board calls first thing to get ready for, so that’s a 5.30am start or so. If there’s been a late work night the night before, I try and sleep a bit extra. Two or three days each week, I walk from home through Leicester Square and Covent Garden to my day job office on the Strand. Work is usually a mixture of team meetings and calls through the day with a nip out to one of the sandwich shops at lunchtime. Evenings are always work or political events with at least five a week, and sometimes two or three on an evening! Right now, that’s getting in the way of eating in the evenings, which is my main form of regular relaxation, whether I am going out or cooking it. The evenings are for social media and messaging catch ups and bed by midnight before it all rolls around again!
We’re going for lunch, and you’re picking – where are we going?
So many places I could recommend or feel like. Eating and drinking out is one of the reasons I love living and working here. There’s a bit of me that would love to be a restaurant critic or even opening one of my own.
There are a lot of chains now in the City, so perhaps we should head out for somewhere that will have something for every palette but still feels a little bit more like a one-off? How about Cabotte on Gresham Street? Classic French cooking and a glass of wine if you don’t have anything too important to do in the afternoon? If you want something a little less formal, I am quite a fan of a good food truck, so perhaps we could wander and see what comes up?
And if we’re grabbing a drink after work?
There’s always a buzz standing outside of the New Moon in Leadenhall Market.
Where’s home during the week?
I live in Soho, which also means I can walk to work!
And where might we find you at the weekend?
Here! You don’t live in the West End to disappear from the city at weekends – it’s so you can walk home after a night out whether that’s eating, drinking, film, theatre or cultural life!
You’ve got two weeks off. Where are you going and who with?
Over the years, I have been lucky enough to have travelled to some pretty far off places across Africa and Asia – next time I am hoping that will be somewhere in West Africa. I like to alternate between those adventures and somewhere more relaxing and try as I might to be original, the answer is Italy: the weather, the food, the people, the history and the views – it really is the complete package.
Quickfire:
- Favourite book? Hitch Hiker’s Guide to the Galaxy
- Favourite film? 12 Angry Men – the Henry Fonda version
- Favourite artist? Matisse – his Snail, in Tate Modern, changed my life when I was twelve and he still mesmerises me. The chapel he designed in Vence plays with light to create a space quite unlike any other I have experienced.
- Favourite place in London? There’s plenty of places with great personal memories But home is the West End and when I cross the road from any direction and place my feet here, I know I am where I should be.
- Cocktail order? Tom Collins.
- Coffee order? Cappuccino before 11am, flat white in the afternoon and sweet East Mediterranean coffee in the evening
- Early bird or night owl? Right now, it’s both!
Industry welcomes Labour plans to win over first-time buyers with housing reforms
Within its 125-page manifesto, Keir Starmer said he would work with local authorities to give first-time buyers first dibs on homes and limit developments being sold off to international investors.
The wannabe Prime Minister also vowed to “introduce a permanent, comprehensive mortgage guarantee scheme, to support first-time buyers who struggle to save for a large deposit, with lower mortgage costs”.
It follows a torrid time for would-be-buyers as they remain stuck in the rental market because of wage stagnation and economic turmoil which has impacted mortgage rates.
Labour, which is currently leading the polls, previously promised to reform planning rules to build 1.5m more homes over the next Parliament, a major selling point amid Britain’s housing crisis.
Starmer reaffirmed this promise today and vowed to “get Britain building again”.
The manifesto read: “The dream of homeownership is now out of reach for too many young people. The Conservatives have failed to act even though the housing crisis is well known to be one of the country’s biggest barriers to growth.”
‘Labour victory to lead to significant increase in housing supply’
Labour’s housing shake up has been generally well received amongst property big wigs.
Melanie Leech, chief executive of the British Property Federation said: “Labour is right to focus on improving the planning system as the key enabler of growth.
“Introducing effective strategic planning means that decisions are made at the appropriate national or regional level, rather than just locally, which will allow us to deliver more homes against a clear target and also provide the logistics infrastructure and business spaces we need to support sustainable communities.
She added: “Measures to ensure up-to-date local plans are in place and a new approach to ‘grey belt’ land are also welcome, as is the commitment to more local authority planners so that existing projects can be unblocked, and local authorities are better able to engage with our sector to provide for future needs.”
Starmer also promised to abolish Section 21 ‘no fault’ evictions, pressing ahead with the Renters Reform Bill.
Antony Codling, managing director at RBC Captial Market, said a Labour victory is “likely to lead to a significant increase in housing supply over the coming five years.”
“A rising tide of housing supply that we think will also lift the share prices of the UK housebuilders,” he added.
Meanwhile, the Conservatives have committed to building 1.6m homes over the next parliament. The pledge comes despite the party failing to deliver on their promise of delivering 300,000 homes annually in the last four years.
Richard Branson’s Virgin Hotels to open first London hotel in Shoreditch
Virgin Hotels, the luxury lifestyle hospitality brand owned by Sir Richard Branson’s Virgin Group, has announced its first London hotel will open this August in Shoreditch.
London will be the eighth Virgin Hotels opened by the business magnate, having just announced a new property in Kenya and the launches of Virgin Hotels Edinburgh and Virgin Hotels New York in 2023.
The 120-bedroom hotel will be located at 45 Curtain Road in the heart of Shoreditch.
Sir Richard Branson, founder of the Virgin Group, commented: “We’re all absolutely delighted that Virgin Hotels Collection will be opening a Virgin hotel in London.
“Since the inception of Virgin Hotels, we’ve had our sights set on London; a place that so many of our customers either call home, or name as one of their favourite destinations – and of course where Virgin’s story started.”
“At Virgin, we’ve been disrupting the travel industry for more than 40 years, from land to air to sea – even to space. Our success comes from identifying where we can make a difference.
He added: “Virgin Atlantic customers have always said to me that we give them a wonderful experience in the sky, but they don’t have the same Virgin experience when they land. Well, we’ve sorted that in Las Vegas, New York, Edinburgh and now London too.”
The hotel will form part of a long-term agreement between Virgin Hotels and real estate investment and development group Reuben Brothers.
Go ahead given for new nine-storey hotel in London’s Square Mile
Plans to build a new hotel between the Museum of London and the Barbican have been given the green light.
The buildings at 1-8 Long Lane will be combined and developed into a single, nine-storey hotel with 128 rooms, including a 10 per cent provision for disabled access.
It comes as figures by the Greater London Authority’s London Plan found an additional 58,000 bedrooms of serviced accommodation will be needed across the capital by 2041.
The need for visitor accommodation has been reinforced by the City of London Visitor Accommodation Sector Commercial Needs Study, dated January 2023, which identified a demand capacity for an additional 350 rooms per annum in the City of London to 2037.
Shravan Joshi, chairman of the City of London Corporation’s Planning and Transportation Committee, said: “This new hotel will deliver much needed accommodation for visitors to the City, as it continues its transformation into a seven day and evening destination.
“Its location at Long Lane is ideally suited to this vibrant area.”
He added: “The Square Mile has a unique history and culture, which naturally attracts global audiences.
“Hotel development is therefore key in supporting the business and cultural attraction of the City, especially as it complements our business function and potential for future economic growth.”
The development will join a number of other retail and hospitality developments that have been approved in the City over the past few months.
Earlier this week, a plan to add three storeys and a roof garden to the former London HQ of Deutsche Bank were also given the green light by the City of London Corporation.
The scheme, developed by London-based architects Orms will increase capacity at 75 London Wall by 40 per cent to 688,000 sq ft.
Real investors Gamuda Berhad and Castleforge Partners will be joint partners for the redevelopment, which is set to be completed in the third quarter of 2027.
Midscale London hotels outperform cheaper rivals as back-to-the-office drives weekday bookings
Midscale hotels are currently on top of the accommodation food chain in London, new data has found, as revenue available per room across the semi-affordable chains has risen seven per cent over the year to April.
The figures, published by CoStar and shared exclusively with City A.M., found demand was driven by customers looking for a room at a midscale hotel during the middle of the week.
Since the reopening of offices following the pandemic, commuters have been returning to the capital for business meetings and social events.
CoStar said revenue improvements have been occupancy-driven, “offsetting any losses in pricing”.
“Reductions in room supply have supported occupancy growth as demand softened in recent months, limiting revenue loss to some extent,” the firm said.
The health of the midscale market contrasts trends spotted in the more budget side of London’s hotel market.
At economy chains, revenue available per room was down seven per cent in the year to April. CoStar blamed increased supply compounded with softer demand patterns that may be affecting these hotels.
“From a consumer perspective, price sensitivity may also have influenced rate growth in recent months, with weekend pricing experiencing a seven per cent decline year over year, indicative of the leisure segment’s performance,” the firm said.
Cristina Balekjian, director of UK Hospitality analytics, said: “Overall, London hotel performance is expected to experience stable growth, which could impact hoteliers’ ability to drive profitability.
“The summer months are expected to be more robust, however. As of the end of May, occupancy on the books is trending about two percentage points ahead of last year’s performance, while market participants are also reporting stronger trading for the summer months, as events across the capital and the ongoing recovery of the international market support demand into London hotels.”
She added: “Nonetheless, some challenges are likely to remain. Pricing could be challenged, especially in areas and classes with greater additions to supply, while a more price-conscious and value-driven customer base could make competition tougher.”
Norcros shares rise as bathroom supplier shows signs of resilience amid DIY slump
Shares in Norcros rose slightly this morning after the bathroom and kitchen supplier showed signs of resilient trade amid a slowdown in the home improvement market.
Analysts at Shore Capital slapped a ‘Buy’ rating on the stock after the London-listed firm revealed a slightly better-than-expected profit for the period.
Operating profit came in at £39.9m in the year ending March, up 45 per cent on last year.
However, revenue slipped 11 per cent to £392.1m as the company was impacted significantly by market conditions, including power interruptions in the first half of South Africa.
Meanwhile, in the UK and Ireland, the firm recorded an underlying profit of £38.4m, up over £1m on last year’s figure.
Thomas Willcocks, chief, said: “I am delighted with the performance over this period and excited by the significant opportunities that remain in the more resilient mid-premium market segments that we hold leading positions in.
“Our strategy is building from a position of strength and scale as we actively leverage the customer and operational synergies within the group.”
The firm held its guidance for the year.
Shares in Norcos have jumped 13 per cent year-to-date despite the very public challenges faced by home retailers as shoppers are feeling the pinch.
Analysts at Shore Capital, said: “Norcros’s UK businesses showed resilience with LFL sales down 3.3 per cent , which we believe is a better outturn than the majority of listed peers and the overall market, due to its positioning in the more resilient mid premium segment of the RMI market.”
David Beckham-backed Guild gains entry into Esports World Cup Club
Guild Esports, a gaming company co-owned by David Beckham, has confirmed its entry into a number of competitive gaming competitions.
This morning, Guild Esports said its ‘Serenity’ team had gained re-entry into Apex Legends, a first-person, online multiplayer game published by Electronic Arts and developed by Respawn Entertainment.
The team also recently qualified for the Esports World Cup and will represent the company at the tournament, competing for a share of the $2m (£1.5m) prize pool.
Beckham-backed Guild previously competed in Apex Legends between October 2021 and June 2022 and has returned to the esport for the EWC.
Alongside Apex, Guild said it has qualified for the Esports World Cup in ESL R1, a high-profile sim racing competition.
Each esports team must qualify for the EWC in at least two games to be eligible for the Club Championship, and as such Guild has now met the requirement for entry.
“Apex Legends is the perfect game to secure our entry into the Club Championship. Our talent scouts have long been on the lookout for the perfect team to bring us back to the esport.
He added: “We’ll be cheering them on as they take the Esports World Cup by storm – we can’t wait to see what they can do.” Guild is a global gaming-focused media business that fields professional players in gaming competitions under the Guild banner.”
Crest Nicholson: House builder’s profit craters 71 per cent ahead of new chief’s arrival
Shares in house builder Crest Nicholson have fallen by 11 per cent after the firm forecast earnings would fall by one third amid challenges in the property sector.
The board of the FTSE 250 firm said operating profit slid 71.9 per cent on last year to £6.2m, while revenue over the six months to April was down 8.9 per cent to £257m.
Crest Nicholson said it was still feeling the pinch from a tough market, with volatile mortgage rates and low consumer confidence having eaten into property builders’ bottom line in the last 18 months.
Over the period, Crest completed the build of 788 new homes, slightly below last year’s reading of 894.
Back in March, Crest said it is likely to build 11 per cent fewer homes in the financial year 2024.
Today’s results come just one day before Martyn Clark’s arrival as the new chief executive officer.
He replaces Peter Truscott, who has been the boss since 2019 and during his time in charge reshaped Crest Nicholson’s strategy and oversaw an efficiency drive.
Truscott said: “We have made some important operational progress in the first half of the year against our strategic priorities.”
“We are on track to achieve a five-star customer service rating, have a clear and comprehensive plan to resolve the legacy and operational issues, and continue to focus on maintaining a strong balance sheet.
“The group is continuing to focus on completing its low margin sites, with FY23 and FY24 being the peak years of impact and the majority of the remainder expected to be traded through during FY25.”
Confidence in UK property market starts to dip ahead of election
Confidence in the UK housing market is starting to dip despite signs of improvements in recent months, according to the latest property surveyor report from the Royal Institution of Chartered Surveyors (RICS).
A net balance of eight per cent of property professionals saw home buyer demand falling rather than rising in May, marking the weakest reading since November 2023.
Buyer demand was weakest in the South East and South West of England, the report said.
Respondents to the survey also reported a fall in the number of sales agreed during May, although it is expected that sales volumes will rise modestly over the coming three months.
Despite this, the outlook for the next twelve months remains relatively upbeat, with 43 per cent of survey participants anticipating an uplift in sales activity, rising from 33 per cent in April.
Justin Young, chief executive of RICS, said: “Despite an improving overall outlook, today’s data reveals that confidence in the housing market is beginning to dip – just as parties launch their manifestos.”
The report also showed demand continued to outstrip supply across the UK’s rental market.
A net balance of 35 per cent of professionals saw tenant demand rise rather than fall.
RICS said the growing gap between supply and demand for lettings “indicates that rental prices will continue to rise for the foreseeable future, albeit at a slower pace than previously”.
Labour, which is currently leading the polls, has promised to reform planning rules to build 1.5m more homes. Keir Starmer’s party also said it would give a “first dibs” to locals to end developments being sold off to international investors.
Meanwhile, the Conservatives have committed to building 1.6m homes over the next parliament. The pledge comes despite the party failing to deliver on their promise of delivering 300,000 homes annually in the last four years.