Dave Lewis is not a happy man. The task of reviving Tesco is proving more Sisyphean than he could have imagined when he left the comparative comfort of Unilever in July last year. He has showed his frustration, moaning about the tax burden that today’s shopkeepers have to bear. Profits and property values are down, but business rates are up “dramatically.” Why, they are now 2.3 times the corporation tax bill, and three times the OECD average. Don’t even get him started on next year’s increases in the national living wage.

This catalog of woes does fall somewhat short of a three-hanky tearjerker. The rates are much higher than Tesco’s corporation tax bill because its profits have plunged while the rate of corporation tax has been cut. Prices for big sheds are down since Tesco was forced to abandon its strategy of trying to buy every site.

There is plenty wrong with business rates and their domestic cousin, council tax, but Mr Lewis should not expect much sympathy when he says that retailers contribute £8bn, or a quarter of the rates total. There is no evidence that we’re short of shops as a result. They open and close all the time, in one of the most dynamic sectors of the economy. The Germans may be carpet-bombing us with Aldis and Lidls, but their impact is hardly comparable to, say, that of imports on Britain’s steel industry.

If the competitors make Mr Lewis’s life hard, that’s too bad. They will have to pay the national average wage too, so he must make better use of his staff to compete. He was on better ground in complaining about the apprenticeship levy, equivalent to Tesco’s total training budget. However, with Tesco shares almost back down to their post-crisis nadir, you have to wonder whether he is starting to seek excuses for failure.

A right to refuse

If things were not so bad, you might think the bankers to Lonmin were having a laugh. Shares in this African platinum miner have plunged into the 99 per cent club, and after holders were softened up to expect a $400m rights issue, they are now being offered 46 shares for every one they own, at just 1p each.

With the old shares at 10p, valuing the company at £54m, it’s not so much a rights issue as a complete recapitalisation, and before shell-shocked holders vote on Thursday, they should consider whether this really is their least worst option. Many are reluctant holders in the first place, having been given the shares when Glencore was unable to find a buyer for its stake, and two resolutions require 75 per cent majority votes to pass.

Nobody doubts that Lonmin needs the money, but this extreme rights issue looks more like a device to help the bondholders than a long-term solution. Rejection would force more of the pain onto the lenders (and the South African government) and might produce something slightly less gruesome for the shareholders. Sadly, Lonmin is doomed unless there’s a speedy turnaround in precious metal prices – and there are better ways to bet $400m on that happening.

Money in those old brands

Lonmin aside, there is life after corporate near-death. Last week saw some remarkably nourishing results from Premier Foods, the owner of brands your children have never heard of. In March last year the maker of Ambrosia creamed rice, Bisto and dozens of other gastronomic blasts from the past, staggered out of financial intensive care having eaten £1.1bn in a rescue rights, placing and refinancing.

The share price then halved, and even now they cost little more than two-thirds of the 60p rights price. Premier’s problems stem from the confection of debt which financed the purchase of all those second-division brands, and now it’s set to fall “significantly.” Gavin Darby, the long-suffering CEO, sounds positively chipper and is sending Mr Kipling to conquer America. Darren Shirley at Shore Capital thinks he might even succeed, although he’s “not counting any chickens.” Perhaps he should start. At 41p a share, the rewards from backing these old brands seem to outweigh the risks.

 

 

 

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