VIPsight - October 2015
COMPANIES
Aware of the ramifications of professional co-branding, global newswires are relishing twisting the dagger in the wound that Coca Cola inflicted on the chairman of FIFA Sepp Blatter in the message “step down now”.
When the Coca Cola edict is mentioned in polite company, are we really getting the full story? All, it seems, is contained in a terse 325 keystrokes, fewer than 62 words:
“For the benefit of the game, The Coca-Cola Company is calling for FIFA President Joseph Blatter to step down immediately so that a credible and sustainable reform process can begin in earnest. Every day that passes, the image and reputation of FIFA continues to tarnish. FIFA needs comprehensive and urgent reform, and that can only be accomplished through a truly independent approach.“
Bravo Coke, MacDo et al. Your trumpet blasts, delivered with the same enthusiasm that you applied to weaving your web of corruption over the decades now ushers in the new and sweeps away a weakened chief Sepp Blatter. N’est-ce pas? Or is it all done, perchance, with an artful use of mirrors?
According to Coca Cola’s last 10-K report, the company has pension funds on the lookout for a good home. So, are we sure there are no FIFA sponsors in this $2,9bn woodpile? Careful how you answer that! Companies can be surprisingly lax about keeping moral issues under wraps.
The best-case scenario shows a ”mere” $1.3bn worth held in American equity while the combination of non-US plus international funds where Coke is present amounts to …
If the message that Coca Cola delivered were not only pronounced but ALSO voted on at every shareholder meeting, dear McDonalds, Coca-Cola, Nike, adidas and friends, I’d be willing to bet that
The world would very soon
Become both
A little bit better AND a great deal more trustworthy.
Do YOU have a pension fund manager whom you can ask? You do?
Ask him what’s really being done about FIFA sponsorship and let me know – every 10th notification wins a prize!
Deutz: future uncertain
SDax-listed engine manufacturer Deutz AG has failed to obtain orders sufficient to reach its targets and forecasts for this financial year despite basing these forecasts on a 10 percent lower turnover than the previous year. In the profit alert of September management admitted that turnover could be even 20% less.
Deutz AG, supplier to the automobile industry is struggling against consumer reluctance to invest. The upshot is that the second half-year figures will be much lower than those of the first half-year. The more severe European directives on exhaust emissions that came into effect last October induced many clients to shift their whole order timing forward. Clients’ warehouses are replete with stock but the market languishes.
The company had forecast an EBIT for this year of 3 percent which has now been revised to be more or less balanced. Deutz has announced its intention of delaying forecasting for 2016 until the year has begun.
VTG: freight train growin’ so fast
VTG AG, the freight wagon rental company, saw growth in all three business areas in the first half-year of 2015, posting an increase in turnover of almost 27 percent to some 512 million Euros. The SDax-listed concern’s EBITDA rose by some 86 percent to 168 million Euros. VTG consolidated its takeover of Ahaus Alstätter Eisenbahn Holding (AAE) in the first half year and in so doing increased momentum and exceeded growth targets. The takeover increased VTG’s fleet by 30,000 to 80,000 wagons which explains the 57 percent increase in wagon rental turnover to approximately 272 million Euros.
The company, however, has set its sights much higher. As soon as it has successfully concluded the present 2010-15 growth phase VTG intends to expand the European fleet within the core business of freight wagon rental and then launch a reorganization programme to increase market flexibility. The logistics company confirms its forecast for financial year 2015 with turnover between approximately1.0 and 1.1 billion Euros and EBITDA between 325 and 350 million Euros.
Tom Tailor: Textiles on a downturn
SDax-listed Tom Tailor Holding AG has revised its financial forecast for 2015 downwards. The textile manufacturer is, however still expecting to end the year with a slight increase on the previous year’s turnover of 932 million Euros to 945-955 million this year. The company presently estimates EBITDA simply as between 75 to 80 million Euros against the 2014 figure of approximately 87 million Euros with a margin of between 8 and 8.7 percent. Management cites the hardships faced by today’s textile market aggravated by the ever present trade discount wars. The new logistics warehouse is still not up to speed which is delaying deliveries. Tom Tailor is still confident of accelerating growth by opening new branches.
The German Mittelstand
SMEs are sluggish in catching on to the abundance of apprentices
“Conditions for hiring apprentices have never been better” was how the Minister of Education summed up the numbers and the basic areas of development presented by the Ministry for Education and Research (BMFB) at the conclusion of the 2013/14 school year last Spring. If anything, its momentum is still gaining; the numbers presented by the Federal Employment Agency underscore the Minister’s comments. Last August the gap between the supply and the demand of apprentices was a mere 31,000, 15,000 fewer than the years before.
These rosy statistics made little difference to the small and very small enterprises that are still part and parcel of German SMEs. According to the Institut für Mittelstandsforschung in Bonn one out of two openings for apprentices in this sector is still vacant. The underlying reasons are explained in a survey conducted by the Agency at the beginning of September from which it emerges that small enterprises willing to train apprentices are in a quandary. Qualified applicants tend to prefer larger companies which they see as more appealing whereas those less qualified often do not have the basic skills necessary for beginning a company’s course of professional training. In addition, it would appear that many fresh graduates prefer continuing their studies in academia.
The Federal government, the Länder, the world of economics and finance, the trades unions and the Federal Employment Agency have pooled their resources and launched “The Alliance for Professional Training 2015-2018” which, since December 2014 has offered tailor-made programmes for small and medium SMEs to attract new recruits. The BMFB “Jobstarter” programme provides assistance and guidance to companies in recruiting and training a specialised workforce. “Jobstarter plus”, on the other hand reaches out to young people who have dropped out of university, orienting them towards professional training in industry. The Ministry of Economy and Energy (BMW) works hand in glove with the campaign that helps young people towards companies who offer apprenticeship training courses.
The commitment is praiseworthy, but many small companies will gain nothing from it – partly through their own lack of keeping abreast of opportunities . The Institut für Mittelstandsforschung has discovered in the past many small and very small companies knew nothing about all these initiatives being promoted at national level. The Institute is thus calling for more effective promotion, perhaps by making use of resources made available by Chambers of Commerce and Industry.
IFM’s points are well taken; finding candidates to select and recruit is not easy. On the other hand, companies and entrepreneurs must take the lead in all aspects of filling apprenticeship vacancies, from advertising to selecting and recruiting. Today, those who fail to reap the benefits offered by the projects in which Germany is investing billions of Euros by inaction have only themselves to blame for their lack of success.
Buhlmann's Corner
Have you ever met your alter ego?
I called mine on the phone just the other day. The first thing he asked me, with a hint of archness, was why all this should be happening to the company in such perfect time for the meeting of the Supervisory Board, just before finalising the renewal terms of the executive board chairman’s contract. Generally speaking, he remarked, administrative bodies (and that of the United States is no exception) are all very slow but, he continued, they grind (in the true sense of the word) exceeding small.
No way, I replied. I don’t buy it either. Considering the frosty rapport between Ferdinand Piech and Martin Winterkorn , the way the events unfolded could only have been coincidental. And yet, he mused, thinking aloud, what on earth could be important enough for a person who already has a sizeable chunk of Volkswagen in hand do such a thing? Why should he still be trying to get his own back if it meant slashing his wealth (calculated) by billions of Euros. Do you reckon, he continued, that now that, his wealth is arithmetically down to single figures this could have triggered an emotional landslide. No way, I countered, Ferdinand Piech is an engineer, and engineers are not given to wearing their heart on their sleeve.
It was then that I noticed more than a whiff of cynicism creeping into his words. Imagine, for a minute, he said, that I am he and that one fine day I take a look at my fortune. That was when my pragmatism gave me a prod and I realised that “my fortune by then grown so vast / / was fading I’d no idea so fast”, its very size inuring me to matters arithmetical. It might even occur to me that my share in grandfather’s factory had remained the same even though the numbers were lower. Right?
Come on! Are you trying to tell me that this man detonated the bombshell that led to the nosedive on the stock exchange and then recomposed the distance between him and the CEO to buy up some more stock that at that point was going for a song – all without any talk of insider trading ? Because if it had been insider trading he would have had to sell off his shares in August and then, use those same funds ... in October to ....
Well, you know, remarked my Alter Ego, this could all just have been a ruse for grandson to get an increased ownership of grandfather’s factory without having to shell out a single Euro in capital. A boardroom seat can solve all sorts of problems and more shares gives him the power to get his wife elected to the chair of the Supervisory Board. Politically speaking, it is an exact reflection of what makes the world go round. Just then, though, we got cut off, my mobile had run out of credit. Line of credit revoked because of losses on the stock market. Pity; my next call was going to be to Martin Winterkorn. Just to say “Hey Joe! Haven’t we been here before?”
Now we’re all up the creek:
The elderly, honourable trade unionist sits at the head of the table; he’s going to have to pass the sceptre to the former treasurer who, with no regard to cooling off procedures, will be overseeing his ex-boss, who, in turn is riding a carthorse being made to gambol like a foal. Who will have the boldness to open their mouth at the next Supervisory or executive board meeting …. Best wait for someone with years and years of experience to come along and sort things out just like he did once before.
Volkswagen builds cars for the people and a factory for grandfather’s grandson.
ACTIONS CORNER
It seems increasingly inevitable that BASF will have to face billion dollar claims for damages in the USA. When it took over its competitor Engelhard 9 years ago for 5 billion dollars, little did it know it was taking delivery of a ticking time bomb of legal fees. Now, the company is having to devise a defence strategy against allegations of reticence in asbestos claims related to events that took place decades ago. Lawyer Tom Bevan who acted then on behalf of hundreds of claimants against Engelhard has resumed their actions and states that the liability risk involved could cost several billion Euros.
The only witness to appear in court on September 22 in the penal trial against five top managers of Deutsche Bank was Christian Graf Thun-Hohenstein who could turn the whole case round in favour of the plaintiff. Jürgen Fitschen’s defence counsel had accused the Munich magistrates of spinning the trial out by rejecting the testimony of a further two witnesses on the grounds that their evidence would not have contributed to further clarifying the facts. In the proceedings against the former Deutsche Bank co-CEO and other top-level bankers accused of fraud the court has ruled that the trial can be concluded before the end of this year.
VOLKSWAGEN is in need of legal assistance and has selected the American law firm Kirkland Ellis, the same firm who defended BP after the explosion on the drilling rig Deepwater Horizon in 2010. The scandal of the exhaust gas emission figures has already slashed 24 billion Euros off the company’s market value. The estimated number of vehicles involved is 11 million and there are 40 class actions on the horizon in the USA and Canada alone. The accusation cites fraud, violation of contractual obligations and other breaches of the law. Consumers feel they have been craftily, deliberately and systemically swindled with regards to the environmental-friendly promises.
Politics
Power companies. Abandon hope
The strategy of the Federal Ministry of Economy, contained in the “Bill for the Development of Electric Energy”, is oriented towards a future in which market shifts are the results of free competition. This deprives E.ON, RWE and others who fought until the very end for financial preference for conventional power stations if they are to have any hope of a future. From now on, incentives to build new generating stations to complement the more volatile types such as solar or wind-powered must emerge from the market prices. These units that deliver power to the grid at almost zero cost are depriving traditional power stations of profitability. Sigmar Gabriel is also seeking to pass a law to prevent generating companies skipping the decommissioning of nuclear stations. E.ON is presently considering legal action against this project. In June, the Federal Minister for the Economy had ordered auditors to ascertain whether the reserves in the accounts of nuclear energy groups such as E.ON, RWE, Vattenfall and EnBW to verify that the reserves amounting to 36 billion Euros are sufficient and guaranteed. Power companies could find themselves short of 30 billion Euros of reserves to pay for future decommissioning of the power stations and preparing a secure dump for nuclear waste. After a period of speculation about a steep rise in the costs of abandoning nuclear energy, many investors unloaded the shares they possessed in these major groups.
More protection for small shareholders in delisting
A document issued by the German government on September 21 states that shareholders in a situation of delisting should by rights have their shares indemnified. Previous proposals were conditional to no purchase offer being made to shareholders for their shares, whereas now delisting without some form of compensation for investors who reject a purchase offer has been discarded. The governing parties also reached a compromise for when stock market prices have been manipulated, for example where false information is provided deliberately, or the processes are fixed. In cases of this kind the reference point will be the earning-capacity value and not the share value. The indemnity must consider the average value of the share over the previous six months instead of the average of the previous three. If things work as they should, the new regulations, which are part and parcel of directives on transparency, will be ratified by the Bundestag on October 1. The coalition‘s financial experts are following the advice of those safeguarding the interests of shareholders who previously had been critical of the absence of legislation on the matter.
RWE CEO favours Brandt to be elected to the Supervisory Board
Peter Terium is backing former SAP CFO Dr. Werner Brandt to succeed Manfred Schneider to the chair of the RWE Supervisory Board. “We need a candidate who knows the issues” says Terium. According to a RWE communiqué “Brandt stands for continuity and is a very suitable candidate”. Typical of the most skilled financiers, he stays on top of the business; he has a keen eye for detail and is incisive in in-depth analyses. In SAP he always kept the CEO at just the right distance. The municipality shareholders and a number of the employees’ representatives are more in favour of former Federal Minister for the Economy Werner Müller. The outgoing chair of the Supervisory Board, Manfred Schneider, instead would prefer his place to be taken by Brandt. The RWE executive board was open in expressing its irritation at media attention focussed on speculation on the appointment and thus “was harmful to the company”. In December, the appointments board must present the proposals of the candidates representing the capital sector for submission to the Supervisory Board. The new chair of the Supervisory Board will be elected by the AGM in April 2016. The generating company is going through one of the most difficult periods in its 117 years of existence. The CEO is therefore going to be under great pressure.
Deutsche Wohnen takes over LEG Immobilien
The union of the second and third most important real estate rental companies in Germany has spawned an authentic leader. Last year, the then Deutsche Annington, which has been Dax listed since September 21 under the name Vonovia, joined forces with its competitor GAGFAH. On September 20 Deutsche Wohnen announced its intention of taking over LEG Immobilien, it too, MDax listed. The new company will keep the name Deutsche Wohnen and have a register of some 250,000 apartments with a portfolio value of 17 billion Euros. The gap between it and Vonovia’s 350,000 is less but still sizeable. The new group’s market capitalization of 12-13 billion gives it a good chance of following Vonovia with its 13.8 billion capitalization to Dax . Deutsche Wohnen and LEG Immobilien expect to conclude the deal before year’s end by a share swap. Including indebtedness, it is worth some 8 billion Euros. Both companies boast high-end apartments and low indebtedness. The merger between the second and third largest companies of their kind in Germany set off a shockwave on the stock market. Consumer protection bodies are unhappy with this, yet another merger in the property rental market. A company so large will assuredly relegate the interests of tenants to second place, after profit maximisation .
People
Aareal Bank terminated its contract with Wolf Schumacher on September 17 and with immediate effect replaced him with Hermann Merkens, previously CFO. From its headquarters in Wiesbaden, the real estate finance company announced that the former CEO is leaving after 10 years service on the executive board and on “agreed terms”. Schumacher’s contract was due to expire at the end of March 2018.
In an announcement dated September 3, Commerzbank stated that “with deep regret” the Supervisory Board had been informed of Stefan Schmittmann’s intention to bring forward termination of his contract from October 2016 to year’s end 2015. The Supervisory Board will appoint his successor in due course. Schmittmann stated that with new regulations being introduced “it makes more sense that the new risk manager be in charge of the process from the outset”.
A communiqué issued by Deutsche Bank on September 14 stated that its Supervisory Board had nominated Richard Meddings for election to join it. Presently a non-executive director in the Treasury of the United Kingdom, Meddings will take the place of John Cryan whose seat has been vacant since his appointment to chair of the executive board. According to the recommendations of the German Corporate Governance Code, Meddings has to be nominated by the court and then stand for election at the next AGM.
On September 11 Drägerwerk announced that at a meeting of the Supervisory Board Reiner Piske had been appointed head of Human Resources with effect from November 1. Born in Hoyerswerda in 1970, Piske studied management engineering in Karlsruhe and Berlin. He is presently head of Human Resources in Groz-Beckert. With this appointment, the manufacturer and distributor of medical and security technology raises the number of its executive board members to five.
At a meeting on September 9, the Supervisory Board chaired by Andreas Renschler of Munich-based MAN, appointed Joachim Drees new company CEO with effect from October 1. Former CEO Georg Pachta-Reyhofen resigned after a restructuring of the executive board at the end of September.
Hans Dieter Pötsch is expected to succeed Ferdinand Piech as head of VOLKSWAGEN. The current CFO should be elected to the Supervisory Board in place of Julia Kuhn-Piech at an extraordinary shareholders meeting. As ways are sought to continue somehow to draw from the technical expertise of the niece of VW’s former patriarch, Piech’s other niece, Louise Kiesling, will stand for election. The frontrunner for the post of CFO seems to be Audi CEO, Rupert Stadler but so far no decision has been made because other considerations apart there is more than one candidate. Martin Winterkorn resigned from the post of CEO because of the uproar surrounding the alleged falsification of exhaust gas emission figures of diesel powered vehicles. Currently the group is headed by former Porsche boss, Matthias Müller.
Rational: a new face in finance
Erich Baumgärtner presently CFO of Rational AG the household appliance manufacturer is quitting the company’s executive board at the end of the year. After 17 years as head of the SDax-listed company’s financial affairs Baumgärtner will maintain ties with the company as a consultant. His boardroom seat will be taken by Axel Kaufmann, latterly CFO with Koenig & Bauer AG. Previously he had occupied a managerial position with Siemens and Nokia Networks gaining a wealth of experience in finance and strategy. Kaufmann will begin in October and take up Baumgärtner’s tasks in stages.
Steilmann: new team
While still in the process of becoming a European joint stock company (SE), the Steilmann fashion group acquired a new CFO. The new executive board member in charge of finance is Jens Brüggemann, previously head comptroller in Steilmann since 2001. Initially he was financial director of the Italian group Radici which later bought over Steilmann. Up to now, the financial sector came under the leadership of Paola Viscardi-Giazzi who has been appointed COO, while Michele Puller continues as CEO. Steilmann is still planning a stock market flotation this year and has already issued an SME bond with a volume of some 30 million Euros that matures in 2017.
NordwestHandel: Officially CFO
General Standard listed Nordwest Handel AG, has appointed a new CFO. From now on, the company’s financial division will be officially headed by Jörg Simon. Simon has been in charge of finance under a pro tempore contract since July when former CFO Annegret Franzen was dismissed because of allegations of illicit competition. Previously, Simon was head of the finance business unit. He will work in tandem with CEO Bernhard Dressler who was appointed CEO last February.
Capital News
Rhön-Klinikum is launching a second share buy back in order to distribute another instalment of the revenue from the sale of clinics to Fresenius, and to consolidate the share value that had lost some of its stability recently. The company paid 25.54 Euros for each of the 7,108,824 shares (including the accessory expenses charged for the transaction). The company aims to collect up to 9.76 percent of the share capital by October 8. Rhön expects to incorporate the recovered stock by lowering its share capital, and, should exploitation be full, 181.6 million Euros will be channelled back to shareholders. Apparently, an extension to the deadline is not to be ruled out. In 2014 Rhön was able to distribute most of the three billion revenue from the sale of 40 clinics to Fresenius, by share buy back.
An increase in capital has yielded RIB Software 6.5 million Euros. On September 4, the building software developer announced that it had placed all 3,378,696 new shares. The south German company placed the stock with institutional investors, excluding shareholders’ option rights prior to the capital increase. RIB Software has earmarked the net revenue from the issuance to broadening its iTWO platform. The money will also be used to ensure continuity of international growth. A first step in this direction was the purchase of Spanish competitor Soft SA. This is expected to create business opportunities in Hispanic markets, in particular Latin America.
MAN: less clarity, fewer costs
At the beginning of September, MAN SE applied to change its listing from Prime Standard to General Standard. This would mean that the company would also quit its MDax listing. The Volkswagen owned company is cutting costs, an exercise that would be favoured by having to meet fewer stock market related transparency obligations.
Verbio: first dividend
At the closure of the most profitable financial year in the company’s history organic fuel producer Verbio AG announced its intention of distributing a dividend for the very first time. The proposal put before the shareholders’ meeting was for 0.10Euros per share. At closure of financial year 2014-15 on 30 June, Verbio posted a turnover of 619 million Euros, down on the previous year’s 734 million. This year, however, the Prime Standard-listed company increased its EBIT by no less than 161 percent to almost 29 million Euros.
M & A
Tele Columbus: buys up the competition
Tele Columbus, the third largest cable network provider in Germany is forging ahead with its acquisition campaign. After the Primacon takeover last July, the SDax-listed company recently bought up its competitor pepcom, number four on the list of cable networks, for approximately 608 million Euros.
This has further reinforced the company and its market position – today 3.7 million households are wired up through Tele Columbus, 810 thousand of which through pepcom. Pepcom’s turnover for 2014 was 126 million Euros but what is of great worth to Tele Columbus is the dowry brought by Pepcom of 1600 commercial clients which could be the starting point for future growth. The parties expect to conclude the transaction at the end of this year or by Spring 2016 at the latest. Tele Columbus expects to fund the acquisition mainly by new debts and an increase in share capital.
Indus: further takeovers
Indus Holding AG, an SME holding company has purchased another two packets of share quotas. Its portfolio company Obuk, manufacturer of high quality panels for front doors has acquired Eumatic/Frohmasco a manufacturer of ornamental frames and composite elements for doors. Eumatic/Frohmasco is particularly strong in the Swedish and Norwegian markets. With headquarters and factory in Poland, the group’s turnover in recent years has been in the region of 5.5 million Euros. Not only does this takeover broaden SDax-listed Indus’s range of products but gives it a footing in new target groups and export markets. In the past, Obuk used to be a customer of Eumatic/Frohmasco.
Ancotech – the Swiss-based Indus portfolio company specialised in concrete slab anchorage technology, has purchased the Swiss company Murinox, also a producer of anchorage systems with a 2014 turnover of some 1.1 million Swiss Francs. So far this year Indus has bought five companies investing approximately 50 million Euros. According to company management, a sixth acquisition this year is not to be ruled out.
Balda: selling to an investor
Medical technology specialist Balda AG is selling its business for 63 million Euros to financial investment company Paragon Partners. The revenue deriving from the company’s operational sector and other assets will be sold at a price of 2 Euros per share. Balda has announced that Paragon intends maintaining the company structure and strategy of the operational business as well as all the staff. The shareholders meeting and the monopolies commission still have to ratify the deal. The shareholders’ meeting called for November will also be called on to rule on the change of company objective and name.