James Moore: Betfair looks like a winner, but a degree of patience is required from its backers
Outlook If you bought shares in Betfair over the last few months, congratulations you’ve backed a winner! The shares jumped even higher than Aurora’s Encore during his Grand National-winning run yesterday after the private-equity firm, CVC Partners, confirmed that it was pondering a bet on the gambling company that could value it at £750m or more.
Before rushing towards the winners’ enclosure to cheer the bidders home, however, perhaps investors should take a moment to study their form.
When debt was cheap, plentiful and easy to raise from gullible banks like HBOS, public-to-private partnerships were all the rage. It sometimes seemed as if private-equity firms like CVC only needed to knock on the doors of a stable for a deal to get done.
City institutions sold off the family silver, then got rid of the crystal wine glasses, and then scratched around in the loft to see if there were any more heirlooms they could flog off.
This gave them plenty of money to invest into all those natural-resource companies with interesting governance arrangements that were then queuing up to float. Many of them have subsequently provided a better return for us scribes than for the people who put money with them.
Eventually the institutions’ clients started to raise questions and that, combined with the financial crisis which starved the debt markets, slowed the flood of public-to-private deals to a trickle.
Not that it has stopped enterprising private-equity firms taking a crack where they feel they are onto a winner, and in Betfair they know they might have one.
Floated on a wave of hype, the company struggled to justify its valuation and the shares sank.
Most recently, they pecked on landing after new chief executive Breon Corcoran basically told the market what ought to have been obvious from the off: international expansion will take a while because regulators move at a snail’s pace. Unless, that is, you try to force yourself where you’re not wanted when they can move surprisingly quickly. So a degree of patience is called for. In the meantime, Mr Corcoran still has the world’s biggest betting exchange and an enviable position in the fast-moving online gaming market.
Betfair has some big private shareholders, so it’s not just about institutions. But they could all have a winner with Betfair without the help of CVC. So they’d be best off sticking with their horse. It would be stupid to sell this colt cheaply only to then see CVC benefiting from a Derby win down the line.
Most-complained about Barclays is hard done by
The Financial Services Authority wasn’t all bad. No, I haven’t taken leave of my senses. It actually did, before the financial crisis, push through useful reforms.
One of them was forcing the publication of industry complaints data, and then putting the names of firms against the numbers.
As Martin Wheatley, the head of its successor,the Financial Conduct Authority (FCA), said alongside the latest batch, the leaders of regulated firms do not like being known as the head of the most complained-about bank/insurer/fund manager. It’s embarrassing.
The title of Britain’s most moaned-about bank belongs to Barclays, with 414,302 complaints in six months according to yesterday’s news release.
But Barclays is getting beaten in part because of the way the FCA presents the data, which is by legal entity.
In second place, with 349,386 complaints, was Lloyds TSB and in third, with 338, 912, was Bank of Scotland. Both of those are, of course, owned by Lloyds Banking Group and ultimately have the same chief executive, same head of complaints, same head of compliance, and so on. The Lloyds numbers should really be added together.
In general, the message to all banks, and all insurers, fund managers, etc is “must try harder”. While complaints are falling, there are still too many.
But the FCA also needs to try harder in the way it presents the figures, because tagging Barclays as Britain’s most-complained about bank isn’t quite cricket.
The business case for a living wage makes sense
If you’re going to make work pay, then you should at least make sure that people in work are paid properly.
Yesterday, below-inflation rises were announced for the various different minimum wage bands, with the headline adult rate set to go up by a pitiful 1.9 per cent, well below inflation.
There was some grousing from companies, but the general perception was that business secretary Vince Cable had managed a difficult balancing act reasonably well.
That said, with tax credits and other benefits being cut, it’s still very chilly if you’re among Britain’s legion of minimum-wage workers.
To support a family on the income it offers in some parts of the country will require you not just to work, but to work two jobs. Or at least one and a half, with the half, perhaps, being part-time cleaning work after you’ve finished the day job.
Better is offered by those subscribing to the living wage, a voluntary scheme which aims to pay not just the minimum, but an amount which takes account of what it actually costs to live.
The right despises the scheme, complaining that it heaps costs on to business and destroys jobs. In other words, the same sort of hysterical arguments which were used before the introduction of the minimum wage.
However, those who’ve signed up – and interestingly retailer Lush is among them as well as some deep-pocketed City firms in need of a PR boost – argue that the living wage pays for itself. The reasons are simple: staff who get it work harder, stay in post longer and are less inclined to take time off sick.
There is a genuine business case for it because the benefits flow not just to staff, but to living-wage employers’ bottom lines.
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