Raise £700 million, take £1.1 billion off the company’s market value. It’s lucky Centrica’s “strategy is on track”. Just imagine if it wasn’t. Whatever Iain Conn thought he was up to yesterday, it backfired badly. The boss of the British Gas owner believed he was just being proactive: securing £400 million to ensure Centrica keeps its “strong investment-grade credit ratings” plus a planned £350 million more for two acquisitions. Instead, he sparked a minor panic. The shares dived 10 per cent to 208½p, with Centrica raising £50 million less than intended. Mr Conn thinks the reaction “disproportionate”. But he’s only got himself to blame. Well, himself and his expert advisers from Goldman Sachs and UBS.
Most “equity placings” come as a bit of a surprise. But there was nothing to prepare the market for Centrica suddenly flogging another 7 per cent of stock. Neither is it logical to be diluting shareholders while simultaneously banging on about maintaining a “progressive dividend” costing £650 million a year. Who’s fooled by that? Mr Conn’s justification is that the divvy is covered by cashflow while the fundraising is a one-off. But maybe there’s another explanation: cutting a £900 million dividend was one of Mr Conn’s first acts after taking over in January last year and he just couldn’t face another cut.
Mr Conn’s intentions may well be sound. A cut to Centrica’s credit rating jacks up the servicing costs on its £4.75 billion net debt and forces the company to put up more collateral against everything from supplier contracts to its North Sea decommissioning liabilities. But its communications to the market look all over the shop. Five days before February’s full-year results, Moody’s put Centrica’s Baa1 credit rating on review for a downgrade. Asked by analysts then if he would cut the dividend to preserve the rating, Mr Conn suggested he’d be content to let it fall a notch and rebuild it over time. No hint of any other action.
True, things have changed a bit since then. The rating agencies have become jumpier about companies exposed to the oil and gas markets, while British Gas’s loss of retail customers has hardly helped. But not much has happened in the two weeks since Centrica’s AGM, where 14.5 per cent of shareholders voted against Mr Conn’s £3 million pay. There, he welcomed investors with the news that Centrica continued “to make good progress in implementing our strategy”.
Now Centrica’s advisers, who don’t deserve to get paid, have just passed the hat round at 200p — a 10 per cent discount to Wednesday’s closing price. That’s not quite the progress shareholders had in mind.
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No joking matter
Maybe Gavin Patterson, the BT boss, has spent too much time watching Fletch and Sav, the knockabout footie show on BT Sport. It’s fronted by Darren Fletcher and Robbie Savage, a duo apparently bringing “intelligent, provocative and interactive debate” to the game’s big talking points. Mr Patterson might think he can get away with that level of debate with Ofcom. He can’t. The telecoms regulator’s not really into jokes.
So you doubt that Sharon White, the Ofcom boss, will see the funny side of the latest talking point from BT: an announcement headed “BT to invest billions more on fibre, 4G and customer service”. Squint a bit and there are no “more” billions at all: adjust for the near-£2 billion BT plans to invest in its new mobile acquisition EE and the £4 billion left for Openreach over three years is bang in line with the current spend.
Neither is there anything new in the commitment to halve the time to fix line faults to 24 hours. And, while the pledge to bring ultrafast broadband to 12 million premises by 2020 looks like 2 million extra, they are unlikely to include your house: business parks, high streets and newbuild housing estates will be the main beneficiaries. Meantime, BT’s network strategy still seems to be based on eking out its copper wires, not the new fibre Ofcom wants.
In fact, given Ms White hasn’t completely ruled out forcing BT to spin off network arm Openreach, it does seem a pretty odd way for the company to carry on, not least Mr Patterson’s provocative insistence on “regulatory certainty”. True, there’s no knocking his stewardship of BT, as the full-year results show. But they also highlight how BT can afford to do a lot more. It’s almost as if he’s asking for a savaging.
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A friend indeed
It can be lonely having two jobs. So no surprise Burberry has begun to wonder if its chief creative and chief executive officer, Christopher Bailey, could do with an executive friend to help him at work. A Burberry bag carrier, say, to chase after him, picking up anything that drops, such as one of his ponchos or the share price.
Mr Bailey looked such good value when he was handed a £30 million pay package in July 2014 that 41 per cent of the shareholders revolted. Then the shares were £14.50. Now, they’re £11.78. A new friend for Mr Bailey seems the obvious answer.
Cleaning up
Dettol, Harpic and Cillit Bang are all Reckitt Benckiser brands. But nothing has ever cleaned up quite like Bart Becht, its former chief executive. One year he got paid £92 million — and no one even named a brand after him. So it’s a bit much to expect his successor, Rakesh Kapoor, to receive such an honour. He earned a mere £23.2 million last year, a sum opposed by only 18 per cent of investors, but eye-watering enough when the company is embroiled in a South Korean inquiry over allegedly fatal disinfectants. Besides, Kapoor doesn’t look an appropriate brand name. Karich has a better ring to it.
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alistair.osborne@thetimes.co.uk