City Snapshot: EG Group names former M&S CEO Lord Rose as chairman

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EG Group, run by prospective Asda owners the Issa brothers and TDR Capital, has appointed former M&S CEO and current Ocado chairman Lord Stuart Rose as non-executive Chairman with immediate effect.

Rose is currently chairman of Ocado, but will retire from the FTSE 100 online grocery and retail solutions business in May after more than eight years as chair.

He previously served as CEO and executive chairman at Marks & Spencer.

EG Group is jointly owned by the Issa brothers, Zuber and Mohsin, and by private equity firm TDR Capital. The brothers and TDR agreed last October to acquire Asda, the UK’s second-largest grocery retailer, subject to regulatory approval, which is expected in the first half of 2021.

The group started 20 years ago and now operates convenience stores, foodservice outlets and fuel stations at more than 6,000 sites in 10 countries including the UK and Ireland, the US, Australia, Germany, Italy, France and Benelux.

The Group reported sales in excess of €20bn for the year to December 2019 and EBITDA of €910m.

Lord Rose said: “I am delighted to chair the Board of EG Group and I look forward to working with the Board and management, including fellow non-executive John Carey, in the next stage of the development of a world-class, global scale retail business.

“The Issa brothers are great British entrepreneurs of enormous drive, vision and ambition. EG’s Board has asked me to develop appropriate governance structures for a business of this scale. The business has exciting development plans and exceptional prospects in the years to come.”

Zuber Issa CBE and Mohsin Issa CBE, co-founders and co-CEOs of EG Group, in a joint statement, said: “Stuart has an excellent record in business and we are delighted that he is joining us at this exciting time for EG Group. We have plans to create significant convenience and foodservice opportunities for our customers, and Stuart’s retail and consumer experience will provide invaluable insight and support.”

Gary Lindsay, Partner, TDR Capital, said: “The recruitment of Stuart Rose is a clear signal of our ambition for EG Group and our commitment to continuous improvement.”

Morning update

Tesco has become the first retailer to launch a sustainability-linked bond, which will be driven by its commitment to reduce its greenhouse gas emissions.

Tesco said the launch of the €750m bond “further demonstrates the strength of our commitment to reduce our impact on the environment and become a net zero carbon business in the UK by 2035”.

It said it was the first business globally to set a zero-carbon goal in 2009 and later the first FTSE 100 Company to set science-based carbon reduction targets on a 1.5-degree trajectory.

The €750m bond with a 0.375% coupon offers an 8.5-year maturity and is the first bond of its kind to be issued by a retailer. It said it represented an important step in setting tangible incentives for its environmental and social performance and follows the announcement in October 2020, that Tesco established a £2.5bn revolving credit facility, with interest linked to the achievement of three environmental targets.

The bond is aligned to an agreed ‘sustainability performance target’ of reducing Scope 1 and 2 Group greenhouse gas emissions by 60% by 2025 against Tesco’s 2015 baseline.

It has already achieved a 50% reduction in group greenhouse gas emissions against a 2015 baseline as well as sourcing 97% of electricity from renewable sources.

The bond will be aligned to Tesco’s newly introduced sustainability-bond framework, which follows the ICMA Sustainability-Linked Bond principles, and has been independently assessed by Sustainalytics.

CFO Alan Stewart commented: “I’m delighted that we have issued our first sustainability-linked bond. Linking our financial strategy to our long-term commitment to tackle sustainability is an important step in ensuring that this commitment is embedded across all our business operations and ensures we are driving continuous improvement.

“We are proud to be making good progress on our journey to be a net zero carbon business in the UK by 2035 and for the entire Group by 2050.”

Pets at Home continued to ride the wave of demand for pet care products during the coronavirus crisis with its Christmas sales rising by 18%.

For the 12 weeks from 9 October to 31 December 2020 the pet retail and ventinary services specialist reported total group revenue growth of 18% to £302m, with group like-for-like revenue growth of 17.6%

Retail revenue growth was sustained despite COVID-related restrictions on both a regional and national level in the period.

The retail performance was broad-based across categories and channels, with Q3 store LFL growth of 12.3% despite a second national lockdown in England across four weeks of the quarter.

Trading momentum accelerated across the festive period, with December like for like sales up 19.3% and cumulative retail LFL growth for the 44 weeks2 commencing 28 February 2020 of 11.8%

Its online business posted revenue growth of 70.7%, supported by previous investment in distribution capacity. Participation of retail sales of approximately 15% across the quarter as a whole included 18% during the second national lockdown in England.

Online sales were boosted by the launch of one-hour Click and Collect service across its 451-strong store estate, and a ‘Deliver to Car’ service across more than 150 stores

Vet Group revenue up 22.1%, with LFL revenue growth of 17.8% across the quarter as a whole.

The group has maintained full year guidance, previously announced on 8 January, with full-year underlying pre-tax profits, including the repayment of £28.9m of business rates relief, of at least £77m.

The group said the UK pet care market remains robust with our customer acquisition and retention strategy continuing to generate strong growth across all channels.

Its number of VIP members increased 12% to 6.2m, while the number of Puppy and Kitten Club members grew, who typically spend 25% than non-members across the group, grew by 47.2% in the quarter.

It also said Brexit mitigations were in place well ahead of the transition deadline, and it continues to monitor the situation in Northern Ireland to ensure continuity of supply and the smooth running of operations locally.

CEO Peter Pritchard commented: “Against a backdrop of continued uncertainty our pet care model remains robust, with our performance during the third quarter testament not only to the advantages of our scalable omnichannel pet care platform and unique joint venture veterinary model, but also the hard work and commitment of all our colleagues across the Group, to whom I express sincere thanks.

“We entered our final quarter facing renewed challenges in the form of higher COVID infection rates and restrictions on a national level, and our priority remains the health, safety and wellbeing of all of our colleagues, partners and customers.

“Mindful of this challenging environment, I remain confident that the changes we have made to our business enable us to continue providing essential pet care to our customers in a safe and appropriate manner, not only through strict adherence to the protocols which we introduced across our stores and veterinary practices at the onset of the pandemic, and continue to strengthen, but also in a number of other ways, from contactless collection and delivery of pet products to virtual heath care consultations.

“I am very pleased with the progress we have made in this quarter, in particular how we have adapted to the changing environment in which we operate. We remain as determined as ever to create the best pet care platform in the world, and our strong liquidity gives us the capacity to make the right investments to support our ambition.”

Meanwhile, Payment specialist PayPoint has announced a 10% drop in revenues from continuing operations in the three months to 31 December, but insisted it remains “strongly positioned” to benefit from the trends brought about by COVID 19.

Underlying group net revenue fell by £3m (10.8%) to £24.5m, which included the cessation of a £1.7m contract with British Gas.

UK retail services net revenue decreased by 1.4% to £10.6m, with increases in card payment transactions and service fees from PayPoint One offset by the £0.4m impact of compensation paid to retail partners following a card services outage on 14 November 2020 and reduced ATM volumes

However, strong card payment volumes maintained, growing significantly by 46.2% year on year to 49.7 million transactions. Its UK retail network increased to 27,758 sites from 26,829 in March, with minimal impact from ongoing Covid-19 restrictions

UK parcels transactions also increased by 6.6%, delivering a resilient performance despite Covid-19 restrictions.

UK bill payments net revenue decreased by 33.5% to £9.5m, with revenues down 23.5% even excluding the British Gas impact as consumers made fewer large payments during the pandemic.

PayPoint insisted it remains “well placed to take advantage of the continued shift from cash to digital payments, the growing demand for online shopping fulfilment and the increase in shopping local”.

It also said it was “strongly positioned to leverage structural trends accelerated by Covid-19”.

It said that during the current lockdown in January 2021, over three quarters of field sales staff have been refocused to engage with PayPoint One retailer partners, delivering training and support to maximise the value of the technology in their stores

It continues to shake up its portfolio, with the integration of Handepay/Merchant Rentals acquisition on track to complete in early 2021 and having successfully completed the acquisition of i-movo at the end of November 2020, while selling its Romanian business, which is on track for the end of March.

CEO Nick Wiles commented: “During the quarter, we have continued to renew and win client business across multiple sectors and made progress with a number of our initiatives to enhance our retailer proposition to increase footfall, revenue opportunities and engagement with our retailer partners.

“The business continues to show strong resilience and adaptability, delivering a robust performance, in line with expectations, despite increased restrictions in response to Covid-19. We have refocused our field team to work with our retailer partners to help them maximise the value of the PayPoint technology in their stores, enabling them to continue to provide essential services to their local community as well as helping them run their businesses more efficiently and understand sales trends from increased footfall as customers continue to shop local.

“Strategically, we continue to accelerate our delivery as we identify new opportunities for growth in our core UK market, both through internal investment and the integration planning of i-movo and Handepay/Merchant Rentals. I am confident the steps we have taken during this year have strengthened the business and its prospects for the future. As we enter the final quarter, our underlying trading performance is at the higher end of our expectations for the year as a whole.”

Elsewhere, Tate & Lyle has appointed Vivid Sehgal as its new chief financial officer, effective from 1 May 2021.

Sehgal will join Tate & Lyle as CFO designate and will be appointed to the board from 1 March 2021.

Over the following two months he will work with current CFO Imran Nawaz to ensure a smooth transition before Nawaz leaves Tate & Lyle, as announced on 7 October 2020, to take up the position of CFO of Tesco.

Sehgal is a former CFO of Delphi Technologies, a global provider of automotive propulsion technologies , having served from 2017 to 2020 when it was acquired by BorgWarner. He also served as CFO of LivaNova, a global medical technology company, from 2015 to 2017 and has previously held senior management positions in Allergan, Gillette and GlaxoSmithKline working across the US, Europe and the Middle East.

CEO Nick Hampton said: “Vivid brings with him a proven track record of financial leadership as well as extensive commercial and transactional experience. I very much look forward to working with him as we continue to progress Tate & Lyle’s growth agenda.”

Gerry Murphy, chairman said: “Vivid’s broad financial, business and international experience will be of great value to Tate & Lyle and he is a very welcome addition to our Board.”

On the markets this morning, the FTSE 100 has held yesterday’s gains, edging up 0.1% to 6,743.6pts.

Early risers include WH Smith, up another 2.9% to 1,766p, Devro, up 2.1% to 174p, Just Eat Takeaway.com, up 2.1% to 8,174p and PayPoint, up 1.9% to 658.1p.

Fallers include McColl’s Retail Group, down 3.7% to 26.1p, Greencore, down 1.5% to 115.7p and Nichols, down 1.4% to 1,336.3p.

Yesterday in the City

The FTSE 100 ended the day up 0.4% to 6,740.3pts as Joe Biden became President of the US.

Premier Foods fell back 3.7% to 99p despite Tuesday’s strong growth in its third quarter as its rate of sales growth in the period including Christmas fell back from its first half levels.

Also on the way down were Coca-Cola European Partners, down 1.6% to €39.20, AG Barr, down 1.3% to 493.5p, Kerry Group, down 0.8% to €112.00 and Unilever, down 0.6% to 4,353p.

The day’s risers included food to go players WH Smith, which leapt 10.4% to 1,717p after a surprise boost to Christmas sales, while SSP Group was up 4.3% to 353.8p.

Other risers included Science in Sport, up 6% to 44.5p and PayPoint, up 4.4% to 646p.