Damaging brawl at the LSE
THE brawl at the London Stock Exchange is an unedifying spectacle. As a pillar of the City of London, the exchange is meant to be an exemplar of good governance. It is also immensely important to Britain’s prosperity as we move towards Brexit. Its crown jewel LCH Clearnet transacts and settles derivatives deals from across Europe and the globe.
At a moment when the Aramco float plans are being prepared by Saudi Arabia, the chaos at the top of the LSE can only be succour for the City’s rivals.
There should be no confusion about the cause of this mess. It may have been triggered by a demarche from activist investor TCI (with 5pc of the stock), but the origins date back almost a year when chairman Donald Brydon set out on an ill- fated merger with Germany’s Deutsche Boerse.
At the time of the bid, chief executive Xavier Rolet was encouraged to fall on his sword and retire to make way for his German opposite number Carsten Kengeter. The former DB boss is currently bogged down with insider trading allegations.
After the mistake of leading the LSE into a failed merger, LSE chairman Brydon should have done the honourable thing and immediately resigned.
He didn’t and seems to have organised a coup against Rolet, the leader who over nine years delivered a 600pc total return for investors. With an extraordinary general meeting pending, it is now reported that Rolet’s domineering style may be the reason he is scheduled to depart by the end of next year. But we can’t be sure because so far the LSE has failed to produce the confidential dossier behind the resignation deal.
What is absolutely plain is that senior non-executive director Paul Heiden and his colleagues should be arranging for the departure of Brydon and Rolet without delay. No company likes to lose its chairman and chief executive at the same time, but there are plenty of precedents. Until that happens, the stain which damages the LSE and reputation of the City will remain.
Taking off
SWANSoNG results from Carolyn McCall at EasyJet may not look that good. Disruption at BA over the late May bank holiday and the pilot debacle at Ryanair have so far produced no halo effect. The beneficiary could be travel industry veteran Johan Lundgren, who takes the controls on December 1 when McCall leaves for ITV.
The slippage in pre-tax profits expected at EasyJet for the last financial year is largely down to a £100m currency impact as a result of the fall in sterling.
The market is likely be comforted by a better forward outlook for the winter quarter, with EasyJet starting to reap some benefits from a reduction in industry capacity with the failure of Air Berlin and Monarch.
There could also be spillover from Ryanair’s careless treatment of pilots.
The big gain going forward will come from EasyJet’s acquisition of a new hub at Tegel in Berlin which fits in with the carrier’s policy of focusing on Western European bigcity markets. It could potentially be a winner from Monarch’s demise on routes such as Malaga and Alicante if and when the tangle over slots emerges from the courts. Even if the latest results are disappointing, no one can dispute McCall’s turnaround at the carrier. Customer service has improved with innovation such as allocated seating. The fleet has been expanded and modernised and the airline has become a credible competitor to the flag carriers without sacrificing ‘no-frills’ pricing.
McCall has also better managed to keep the peace with fractious founder and 33.7pc shareholder Stelios Haji-Ioannou.
Whether Lundgren can work the same magic is a known unknown.
Conn tricks
No oNE can accuse Centrica chief executive Iain Conn from failing to lead from the front. His effort to drive a coach and horses through the Standard Variable Tariff which hooks consumers into uncertain prices could be a useful step.
Tariffs fixed over a time-specified contract (much the same principle as fixes for mortgages) will switch price risk from consumers to suppliers. Similarly, he is right to point out that the ‘green’ and other network charges imposed on energy bills and costing consumers up to £200-a-year are deeply inequitable.
But woe betide the Government which seeks to transfer these stealth taxes onto the Budget.