UK’s new corporate elite
THe pandemic is creating its own band of stock market winners.
Unilever and Astrazeneca were long viewed as underperforming and underrated, and became targets of rejected bids from across the Atlantic in the past five years.
Both have come roaring back and top the FTSe100, creating value for the nation’s pension funds.
Unilever often has been considered bureaucratic and slow to make decisions. Covid-19, for all its terrible outcomes, has given lie to that. Among the more fascinating product developments has been the revival of the long-forgotten Lifebuoy brand.
The brand has been revved up into a huge hygiene success story. Manufacturing and sales have been established in more than 50 countries, using advanced technologies to make sanitisers. As in other UK companies, Unilever had streamlined decision-making by making full use of online video, with chief executive Alan Jope and fellow top executives interacting more regularly and efficiently with units around the world.
As expected, Unilever is beginning the process of separating out its tea brands.
It is hanging on in India and Indonesia, where its subsidiaries are separate quoted companies in their own right. But everything else, including PG Tips and the trendy
Pukka label, is being hived off with an initial public offering, a trade sale or a joint venture in prospect. One should not underestimate the potential value to be released when one considers that Unilever itself paid GSK some £3bn for Horlicks.
Growth in the US, Unilever’s biggest market, fizzed in the first half of the year with the group benefiting from people eating at home under semi-lockdown conditions. Hellman’s and Knorr performed strongly as well as ice cream brands such as Breyers.
The main concern for Unilever is the impact of the pandemic in the southern hemisphere, with Latin America and Africa badly affected. even so, sanitising products offer a counter-cyclical opportunity. In parallel with changes in its internal governance, the company is pushing ahead with its unification by hoisting the union flag in Britain and ending the outmoded AngloDutch ownership structure.
Dutch investors are coming together in support, according to the company. One trusts that this time around the engagement with investors has been intense enough to prevent a repeat of 2018 fiasco when previous management backed down on a proposed move to Rotterdam after it faced humiliating rejection.
Arm wrestle
BORIS Johnson’s government is taking technology seriously. The decision to spend £400m on a stake in satellite group OneWeb provoked a splenetic response in the Department for Business, energy & Industrial Strategy. But it is hard to take seriously the view of a government department which, in recent decades, allowed great swathes of British manufacturing and technology to fall under overseas control.
In much the same way as Downing Street is seeking to reclaim satellite capability, it should also be working hard to make sure the UK’s unique capabilities of microchip design at Japanese-owned ARM Holdings are not lost. Bloomberg reports that £205bn Santa Clara chip maker Nvidia has approached Softbank boss Masayoshi Son about acquiring ARM, which is being prepared for a float next year.
ARM’s advanced processors are among the most sought-after technology in the world and a vital component of smartphones. Whitehall and the City referee, the Takeover Panel, should not forget that when it was sold to Softbank, promises were made to double the workforce in Cambridge and expand R&D capability. How these commitments would be enforced if ARM were to be sold to Nvidia is hard to know. The gravitational pull of Silicon Valley would leave ARM denuded of much of the home-grown and nurtured talent. It should not be allowed to happen without thorough scrutiny.
Gilt trip
THe Government’s financing mountain so far is being scaled without too much difficulty, in spite of swelling furlough costs, Brexit uncertainty and the meltdown in relations with China.
In latest trading, the yield on the 10-year government bond fell to its lowest ever level at 0.12pc. This just 24 hours after data showing the Government borrowed an eyepopping £128bn between April and June. The Treasury has been helped in its task by record levels of purchases by the Bank of england. But with another £370bn or so to be raised by year-end, there are still peaks to be conquered.