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Surge in ecommerce a boon for Segro, which reported a 10.8% rise in pre-tax profits

Coronavirus has brought about a “step-change in consumer behaviour” and will cause a permanent shift to more online shopping, according to the UK’s largest listed property company.

Warehouse owner Segro, which announced its results for the year to December 31 on Friday, said a surge in ecommerce across Europe during the pandemic would leave a lasting legacy, with consumer habits likely to be “changed irrevocably”. 

The migration of shoppers online has been a boon for Segro and other logistics and warehouse companies. The value of the company’s portfolio of UK and European warehouses increased 10.3 per cent to £13bn in 2020. Adjusted pre-tax profits increased 10.8 per cent on 2019 to £296.5m. 

Segro has been a rare beneficiary of the pandemic in the commercial property industry. The rise in online shopping and the stockpiling of essential goods have made logistics and warehousing facilities in high demand. 

In the UK, the proportion of sales made online has surged in the past year, rising from 19 per cent of the total in February 2020 to 36 per cent in January, according to the Office for National Statistics. 

“Our customers certainly do not expect there to be a significant retreat and are already preparing to adapt their businesses to respond to levels of online sales that are well ahead of previous expectations,” said Segro.

According to index provider MSCI, average UK industrial property values rose 4.6 per cent in 2020. 

Segro’s shares are trading above their pre-pandemic levels, having recovered from 698p in mid-March to trade at 963p on Friday morning. 

The company collected 98 per cent of the rent it was owed over the year, despite concerns early in the pandemic that some tenants would be unable to pay.

“The pandemic has reinforced the importance of efficient and resilient distribution networks to facilitate the provision of a wide variety of goods and services, leading to increased demand for warehouse space,” said David Sleath, Segro’s chief executive.

The pandemic “will likely change the way that our world functions”, added Sleath, whose company announced on Friday that it was introducing a policy to allow staff to work wherever they want after the pandemic.

January’s 8% decline provides the year’s first measure of the scale of the impact from coronavirus

UK retail sales in January fell on an annual basis for the first time since June, missing forecasts as tougher coronavirus restrictions inflicted more pain on the high street.

The volume of retail sales slid 8.2 per cent last month compared with December, the Office for National Statistics said on Friday.

This is a much larger fall than the 4.1 per cent drop in November, when England was previously in lockdown and a bigger contraction than the 2.6 per cent drop forecast by economists polled by Reuters.

“The latest national lockdown led to a sharp monthly fall in January’s retail sales, with April 2020 the only month on record to see a bigger slump,” said Jonathan Athow, deputy national statistician for economic statistics. “Department and clothing store sales were particularly affected this month.”

Compared with the same month a year ago, sales were down 5.9 per cent, the first annual contraction since June.

However, the contraction was milder than in April, a sign that businesses and consumers may be adapting to Covid-19 restrictions, particularly thanks to strong internet shopping.

Online accounted for 35 per cent of the total in January, the highest on record. This rose from 29.6 per cent in the previous month and 19.5 per cent reported in the same month last year.

The share of ecommerce rose in all store types, reaching a historic high of 12 per cent in food stores.

However, given the rapid vaccine rollout and prospects of reopening, economists and consultants forecast sales to rebound in the next few months.

“We think the tide will turn by spring, leading to a real uptick in sales,” said Duncan Brewer, partner for retail and consumer goods at the consultancy Oliver Wyman Digital. “With the vaccine programme well under way, a flurry of spending will be driven by older parts of the population.”

Carmaker had more difficult first half in 2020 but warns of pandemic and chip supply ‘unknowns’

Renault tumbled to a record €8bn loss last year as the French carmaker and its alliance partner Nissan suffered from European demand decimated by the pandemic.

The net loss was worse than the €7.8bn predicted by analysts but much of the damage came in the first half, with Renault describing 2020 as a “year of contrasts”. 

In the second half, operating margin was 3.5 per cent and Renault generated positive automotive operational free cash flow.

However, chief executive Luca de Meo warned that the carmaker faced a painful period ahead: “2021 is set to be difficult given the unknowns regarding the health crisis as well as electronic components supply shortages.”

The group estimated that the global microchip shortage could reduce its production this year by 100,000 vehicles.

“The priority is profitability and cash generation, as announced during our strategic plan,” said de Meo.

The new Renault boss has already said he will slash factory capacity by a quarter, increase cost cuts from €2bn to €3bn by 2025 — including 15,000 job cuts — and overhaul its brands in a turnround plan aimed at reviving its fortunes. 

De Meo, who took over last July, will also scrap revenue and market share targets and focus only on operating margins, cash flow and return on investments, a clear break from the strategy of former Renault and Nissan boss Carlos Ghosn.

Renault said on Friday that 60 per cent of the original €2bn savings plan had already been achieved, well ahead of targets. In 2020, the group’s revenues came in at €43.5bn, slightly behind estimates and down 22 per cent over the previous year.

Emmanuel Faber says consumer group can pivot to address activists’ concerns

Danone chief executive Emmanuel Faber has defended his turnround plan and record at the French consumer goods maker, which has come under fire from a group of dissatisfied shareholders. 

“I am conscious of the fact that this is not an easy moment for our shareholders,” he told the Financial Times, as Danone reported largely in-line annual results on Friday with its stock at seven-year lows. “We take the decline of the share price very seriously. I have been talking to all our shareholders over the last several months and will continue to do so.”

But Faber said moves he has laid out since October — to cut €1bn in costs by 2023, restructure along geographical rather than category lines, renew management ranks, and sell underperforming businesses and brands — would pay off.

“We are starting this pivot to reinvent Danone . . . we can deliver superior, profitable, sustainable growth in the long term. But to do this, we need to adjust the way the company works.”

The company behind brands like Activia yoghurt and Aptamil baby formula pledged to provide details at an investor day on March 25.

Faber, who has been at the helm since 2014, hit back against the critique made by activists that Danone had lagged competitors such as Nestlé and Unilever, pointing out that it had “gained or grown market share in 70 per cent of our businesses last year”.

Pressure has been mounting on Faber, who is also board chairman, since activist investor Bluebell Capital made a public call in January for him to be replaced.

It has been joined by Artisan Partners, a US-based fund which says it is Danone’s third-biggest shareholder. It criticised the group for lagging “on almost every measure” in recent years despite having “one of the best collections of assets in the global food industry”.

Artisan has enlisted a former Danone executive and consumer industry veteran Jan Bennink to draft a new strategy, which it presented to the board this week. The fund detailed its “wishlist” of changes that include splitting the chairman and chief executive roles, ousting Faber, and halting the organisational overhaul he has championed.

Faber declined to comment on Artisan’s proposals, or on whether he was the right person to lead Danone through its promised turnround.

“The topic is not me. The topic is the company and what it is doing,” he said. “I’m leading this right now and we are very clear that this is the agenda that will restore growth.”

Danone’s businesses in dairy and yoghurt, baby formula, and bottled water have been hit hard by the Covid-19 pandemic that has caused rapid changes to consumer behaviour, while pushing up costs on everything from transport to raw materials. In bottled water alone, Danone lost almost €1bn, or one-fifth of revenue, and €340m, or half, of operating profit last year as lockdowns kept people at home, sapping demand for high-margin small bottles of its Evian or Volvic.

Group sales last year came to €23.6bn, down 6.6 per cent on a reported basis and 1.5 per cent on like-for-like, which strips out currency effects. Danone’s operating margin was at 11.8 per cent in 2020, down from 12.8 per cent a year earlier, on operating income of €2.8bn.

Danone’s dairy business, its largest, generating almost half of group sales, took the smallest blow from the pandemic as sales fell 2.6 per cent on a reported basis to €12.8bn. It was helped by its expanding business in plant-based and vegan alternatives to milk and yoghurts sold under the brands Alpro, Silk, and So Delicious.

Faber has put such plant-based products at the centre of Danone’s strategy, and has set a goal for them to reach €5bn in annual sales by 2025 from more than €2bn in 2020. To that end, Danone on Friday announced the acquisition, for an undisclosed price, of California-based Follow Your Heart, which is a leader in vegetarian cheeses.

Faber said plant-based cheeses represented an untapped market for Danone. “You can imagine the potential of the growth there. We don’t need transformative deals to achieve our €5bn target.”

For this year, Danone expects the first quarter to be “tough” given continued business closures because of Covid-19 but said it would return to “profitable growth” in the second half and aim to keep annual profitability stable.

State lawmakers search for revenues as the state faces an $8.2 billion deficit

New York state lawmakers are considering an unprecedented form of wealth tax as they search for revenues to plug a budget hole exacerbated by the coronavirus pandemic.

A growing coalition of unions, progressive advocacy groups and Democratic officials has endorsed a slate of six revenue bills, including a so-called mark-to-market tax on billionaires, which would require them to pay capital-gains taxes each year as their assets appreciate, even if they don’t sell.

The tax menu also includes increases to income and capital-gains taxes as well as a proposed tax on financial transactions. Gov. Andrew Cuomo, a Democrat, proposed a $1.5 billion income tax hike as part of his $193 billion budget plan, but hasn’t embraced a mark-to-market tax.

Democrats who control the state Assembly and Senate said all measures—including the mark-to-market tax—remain on the table in fiscal talks. The state faces an $8.2 billion deficit.

Opponents said the tax is unworkable and could drive away wealthy people who already pay a large share of state taxes. They also said the proposal might violate a provision of the state constitution, which prohibits ad valorem or excise taxes on intangible personal property, including securities.

Supporters said the mark-to-market tax would bring in the most revenue—an estimated $23 billion—in the coming state fiscal year that could be used to fund education and healthcare that would otherwise face cuts because of the pandemic.

“There is no excuse as to why our billionaires are not paying their fair share, and that they’re hoarding their wealth and using loopholes to escape their fiscal responsibilities,” said state Sen. Jessica Ramos, a Democrat from Queens who sponsors the tax.

Currently, individuals are taxed on wage income, certain business profits outside of corporations and capital gains from the sale of assets. Some assets are also subject to postmortem estate taxes. The mark-to-market tax would require New York residents with a net worth of more than $1 billion to assess the fair market value of their assets on Dec. 31 of each year, and pay state income tax on any gains.

As an example, a person who owned securities with a fair market value of $2 billion at the start of one year and $2.5 billion at the start of the next would be charged 8.82% in state income taxes on the $500 million difference, even if the securities weren’t sold.

Ms. Ramos said she was interested in the mark-to-market tax because it would generate the most revenue during its first year on the books. For 2021, an individual subject to the levy would pay taxes on all of their assets, less their initial costs.

Personal income tax collections currently fund about half of New York’s operating budget, and are disproportionately drawn from the filers with the highest income. According to state officials, the top 2% of taxpayers—about 188,000 filers—account for just over half of the state’s income taxes.

Business groups and aides to Mr. Cuomo have said they are concerned that some taxpayers could leave the state if their taxes are further increased, especially after the pandemic demonstrated their ability to work remotely.

Scott Rechler, who as chairman and president of RXR Realty oversees a $20.5 billion portfolio that includes several buildings in Manhattan, said a mark-to-market tax could create perverse incentives for how capital is allocated.

“I think there’s rationale for the right taxes to be considered if there is a gap in the state budget,” he said. “The question is, what are the right structures for those taxes to make sure they don’t have adverse consequences?”

Mr. Rechler declined to discuss his net worth, or whether he might be subject to the tax.

Ms. Ramos said fears of migration are unfounded, and that she continues to talk to colleagues about her bill, which is part of the union-backed “Invest in Our New York” campaign.

Ten other progressive officials endorsed the campaign’s multi-bill platform this week, which already has support from Democratic U.S. Reps. Alexandria Ocasio-Cortez and Jamaal Bowman as well as the Democratic Socialists of America’s New York City chapter.

Similar tax proposals haven’t gained traction at the federal level or in other states. U.S. Sen. Ron Wyden (D., Ore) proposed a mark-to-market tax in 2019, and as Senate Finance Committee chairman, he is poised to advance it this year. But he is still working on the details, and President Biden has proposed a different, less dramatic change to capital-gains taxation.

A spokesman for New York state Senate Majority Leader Andrea Stewart-Cousins said all the revenue proposals were on the table as lawmakers negotiated a budget, which is due before April 1. A spokesman for Assembly Speaker Carl Heastie, a Democrat from the Bronx, said “supply has to equal demand, so nothing is off the table.”

The tax proposals will be discussed at a Tuesday budget hearing. Freeman Klopott, a spokesman for Mr. Cuomo’s budget division, said the administration believes the state constitution prohibits taxing unrealized gains.

James Wetzler, a former state tax commissioner, said the proposal was unworkable because it would be difficult to assess the value of assets like interests in private business or real estate each year.

David Gamage, a professor at Indiana University law school who helped draft Ms. Ramos’ bill, said the proposal was constitutional in New York because it taxed changes in the value of assets, not simply the value of assets themselves. He said the valuations were possible because the number of affected taxpayers was likely below 200.

“It’s only in recent years that governments around the world have started to realize that our existing tax rules aren’t working as applied to the superrich, so that reforms are needed,” he said.

Hedge fund says defunct streaming service is focusing on ‘personal matters in order to put forward a false narrative’

Defunct streaming service Quibi is trying to force executives at Elliott Management to explain whether the hedge fund’s involvement in financing a patent lawsuit against the company was motivated by a relationship between Elliott’s founder and a colleague.

In a brief filed Thursday in Los Angeles federal court, Quibi said Elliott’s founder and co-Chief Executive Officer Paul Singer, 76 years old, is in a romantic relationship with an Elliott colleague, age 70, whose son is employed by Eko, the interactive-video company claiming trade-secret theft.

“Elliott’s motivation for involvement in the lawsuit appears personal,” the filing said.

In a statement, Elliott said that it is funding the lawsuit because it believes Eko’s case has a strong chance of prevailing. Elliott said it has no other motivations for funding the lawsuit.

“The irrelevance of Quibi’s focus on personal matters in order to put forward a false narrative about Elliott’s role related to this case demonstrates Quibi’s reluctance to engage forthrightly on the actual underlying legal issues,” said Richard Zabel, Elliott’s general counsel and chief legal officer.

Representatives for Eko didn’t immediately respond to requests for comment.

The development is an unusual and personal twist in a case that has already proved unusual and personal since Eko sued Quibi in March 2020. Citing people familiar with the matter, The Wall Street Journal reported last May that Elliott Management was financing the lawsuit, which first emerged as a dispute between Quibi and Eko two months prior. The Journal reported that Elliott would wind up with an equity stake in Eko as part of its agreement to finance the lawsuit.

At the heart of the dispute between Quibi and Eko is the streaming service’s “turnstyle” feature, which allowed viewers to adjust their perspective depending on the orientation of their devices. Eko said the feature infringes on its own technology, which Quibi disputes.

In Thursday’s filing, Quibi attorneys said the company wants access to communications between Elliott and Eko concerning the merits of Eko’s claims. The company also wants depositions from Mr. Singer and Terry Kassel, who is Elliott’s head of strategic human resources and with whom Mr. Singer is in a relationship, the filing said. Ms. Kassel’s son, Stephen Backer, holds a senior position at Eko, according to the filing.

Mr. Backer didn’t immediately respond to requests for comment.

“Discovery will reveal whether Elliott’s stated confidence in Eko’s claims is based on evidence or based on fabrication and a personal favor,” the filing said.

Elliott has opposed the requests to subpoena Mr. Singer and Ms. Kassel, which Quibi argued for in another filing earlier this week.

Mr. Singer and Ms. Kassel have been in a committed romantic relationship for about a decade, and their relationship is well known to many people affiliated with Elliott, according to a person familiar with the matter.

New York-based Elliott is known for campaigns against Peru and Argentina, pressuring the countries to make payments on defaulted bonds, and for battles with companies such as Arconic Inc.

Eko said earlier this week in a filing that many of the documents requested by Quibi are protected under attorney-client privilege and should be exempt from disclosure. Eko also argued that Quibi’s requests are overly broad and aren’t aimed at unearthing admissible evidence.

A judge ruled in December that Eko presented enough circumstantial evidence to suggest that some of Quibi’s employees had taken elements of Eko’s technology with them when they joined the short-form streaming service. The court dismissed many of Eko’s other arguments, saying the company hadn’t proved it was likely to prevail on some of its patent-ownership claims. The judge dismissed Eko’s request for a preliminary injunction, saying Eko hadn’t proved Quibi’s efforts to sell its remaining assets would cause Eko irreparable harm, but directed Quibi to keep the court updated on developments related to its wind-down.

Quibi was one of Hollywood’s biggest flops in recent memory, a streaming service that raised $1.75 billion from investors with the hope that short-form, high-quality entertainment would win over a wave of new subscribers. The service attracted movie stars like Liam Hemsworth and Anna Kendrick, secured investment from movie studios like Walt Disney Co. and Comcast Corp.’s NBCUniversal and was led by film mogul Jeffrey Katzenberg and well-known tech CEO Meg Whitman.

The service, which launched during the Covid-19 pandemic, missed its subscriber targets by a wide margin and failed to gain traction with viewers. Quibi announced it was shutting down last year and sold its content catalog to video-streaming company Roku Inc. for less than $100 million.

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