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Was it the Bank of England governor’s raised eyebrows that ended the London Stock Exchange dispute?
Some 24 hours ago, Mark Carney said he was “mystified” by the succession battle at the top of the LSE, in which an activist investor was arguing that chief executive Xavier Rolet should not step down, but chairman Donald Brydon should go instead. Mr Carney said: “Everything comes to an end. We were apprised of the succession plan before it was announced — the agreed succession plan.” And this morning, the agreed succession plan — or a form of it — is finally being implemented.
Mr Rolet has said he will step down as CEO with immediate effect, at the request of the board, citing the “unwelcome publicity” surrounding the spat, which was to be put to a high-profile shareholder vote.
In an announcement this morning, he explained:
Since the announcement of my future departure on 19 October, there has been a great deal of unwelcome publicity, which has not been helpful to the Company. At the request of the Board, I have agreed to step down as CEO with immediate effect. I will not be returning to the office of CEO or director under any circumstances. I am proud of what we have achieved during the past eight and a half years.
Chief financial officer David Warren will step in as interim CEO.
Activist investor The Children’s Investment Fund, led by Sir Christopher Hohn, had accused the LSE of forcing Mr Rolet out against his will, and was demanding that the CEO’s contract be extended to 2021.
Now, under a new agreement Mr Rolet will leave with immediate effect – and Mr Brydon will go in 2019. He will not stand for re-election as chairman at the annual general meeting of LSE in that year. According to Mr Brydon, he and the board believe that it would be “in shareholders’ interests to have a new team at the helm to steer the future progress of the company”.
Despite Mr Rolet’s departure, the LSE says it still thinks the original plan, to have him stay on board until December 2018 “was in the best interests of the company”.
It is more than a month since the dispute began. On October 19, the LSE announced that the board was initiating a transition process to find a successor to Mr Rolet, who was to leave by the end of December 2018.
But on November 9, The Children’s Investment Fund, a shareholder in the LSE, sent a requisition for a general meeting and proposed two resolutions aimed at retaining Mr Rolet and removing Mr Brydon.
Today Mr Brydon said:
The Board is confident the LSE will continue to prosper with David Warren as Interim CEO and the existing strong management team…I look forward to working with David and his team. We acknowledge, as I said last month, Xavier’s immense – indeed transformative – contribution to the business.
Shareholders in ZPG, owner of property portal Zoopla, will be hoping the Bank of England governor is hopelessly wrong about something else, though: its worst-case Brexit scenario. In yesterday’s bank stress tests, the regulator assumed a house price fall of 33 per cent. But today’s full year results from ZPG suggest the company may soon be sufficiently diversified for this to be less of a risk.
Total revenues rose 24 per cent to £244m in the 12 months to September 30. But, tellingly, property contributed £122m of this, against a Peel Hunt estimate of £124m, with exactly the same amount – another £122m – coming from price comparison services, exceeding estimates of £120m.
This lifted adjusted earnings 25 per cent to £96m, against consensus estimate of £92m. Statutory profit for the year was up 2 per cent after acquisition-related costs and share-based payments.
Much of the comparison revenue was driven by consumers switching energy suppliers, after a concerted four-week PR campaign about “rip-off bills” over the summer. Even though this was fronted by Z-list celebrities with almost zero charisma, it proved enormously effective. It was called The General Election.
As a result, analysts were looking forward to strong performance from ZPG’s uSwitch website, given Energy UK had noticed a 16 per cent rise in supplier switching this year. Analysts at Australian bank Macquarie suggest the market has underestimating the extent to which switching activity drives ZPG revenue growth.
Growth has been driven by acquisitions, too.
Earlier this month, rival price comparison website Gocompare revealed it had received not one but two takeover bids from ZPG in the past six months – the most recent being one of £460m earlier in November. But Gocompare said they had been “unanimously and unequivocally rejected”.
Peel Hunt analysts had hoped for more clarity on the future strategy of the comparison business now that the group will not be pursuing Gocompare.
Instead, ZPG preferred to focus on another acquisition: it has agreed to buy Calcasa, the leading provider of automated property valuations and statistical market analysis in the Netherlands, for £26.5m on a cash-free, debt-free basis. In addition there will be a performance-based earn-out of up to £44.2m. Calcasa boasts the largest Dutch property database of over 10 million unique price points, and offers services to mortgage lenders, brokers, investors, surveyors, estate agents, developers, and investors.
Today’s Lombard column focuses on the Bank of England’s grown-up approach to the stress tests and LSE spat:
Bank of England governor Mark Carney needs another job title: The Nation’s Grown-Up.
In the space of two hours on Tuesday morning, he got the banks ready for Brexit, chased-up legal protection for derivative contracts, stepped in to help London’s clearing houses and tried to end an increasingly bad-tempered dispute at the London Stock Exchange. Well, he at least did more than bickering politicians and directors have managed. And, for that, bankers and LSE shareholders should be grateful.
Read the rest of today’s Lombard column here.
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