FT : Volkswagen managers set to secure frozen bonuses

Volkswagen managers set to secure frozen bonuses

Volkswagen has been strongly criticised after it emerged that the company’s executive pay plan makes it easy for top managers to secure bonuses that were withheld after the diesel emissions scandal — and they could even double their money.
Share price performance hurdles set by VW’s supervisory board for senior managers to recoup the withheld bonuses — or double the frozen payments — are not difficult to clear, according to experts.
VW was attacked by investors last month after it agreed to pay 12 current and former members of its management board a total of €63.2m for 2015, the year in which it slumped to its worst ever loss because of the emissions scandal.
TCI, a leading activist investor, last week demanded sweeping reform of executive pay at VW after revealing it had amassed a €1.2bn stake in the company’s preference shares.
To try to mollify investors and trade unions, VW trumpeted at its results last month how €4.2m of top managers’ bonuses, including that of Matthias Müller, chief executive, was being withheld because of the emissions scandal.
But VW’s supervisory board agreed that if the company’s preference shares rise 25 per cent by 2019, the managers will secure their withheld bonuses in full — plus stock appreciation and dividends. The total could therefore be €5.68m.
Crucially, the starting point for measuring the 25 per cent rise is €112 per preference share.
This is a depressed valuation compared with past performance of VW’s shares and forward-looking estimates by analysts.
Just before the emissions scandal was revealed in September, VW’s preference shares traded at €162.6. The average price for the year until then was €208, hitting a peak of €255 in March.
But VW did not take these figures into account.
Instead, the starting point for the pay plan is based on a 30-day average trading price for VW’s preference shares leading up to April 22, when VW revealed it had fallen to a €1.6bn net loss for last year. That average, which is not included in VW’s annual report, is €112.
“It’s definitely not a high hurdle,” said Jürgen Pieper, analyst at Metzler Bank. He added he was surprised at the arrangements under which VW’s top managers could recoup withheld pay.
The VW annual report also discloses executives can secure double the value of the withheld bonuses. This means they could obtain €8.4m.
Christian Strenger, a corporate governance expert, calculates that VW’s shares must rise 50 per cent, to €168, for managers to double their withheld bonuses.
“It’s extraordinary,” said Mr Strenger, who called the €112 starting point “unjustifiably low”.
According to Bloomberg, the average 12-month price target for VW’s preference shares among 33 analysts polled is €140.
Adam Hull, analyst at Berenberg, expects the shares to rise to €210 in 12 months. His estimate is the highest among his peers, but his analysis to justify this is not especially bullish.
“It’s very feasible that this company is trading at €250, or €260, within two or three years,” said Mr Hull.
Ingo Speich of Union Investment, a VW shareholder, said it would be “perverted” if management could actually profit from the emissions scandal, by receiving up to two times the withheld bonuses should the company’s shares perform moderately well.
“The target reference price should at least be higher than it was before the diesel scandal became public,” he added.
A VW spokesman said management’s 2015 pay would still be less than that for 2014, even if the withheld bonuses were doubled, reflecting how the company fell to a loss last year.
He added that variable remuneration for management board members was, on average, cut from €5.3m in 2014 to €3.2m last year.
Mr Pieper said the low thresholds for receiving withheld bonuses were another example of weak corporate governance at VW.
But he added that, after 20 years of covering VW, it was not particularly surprising. “We simply have gotten used to it,” he said.
VW’s supervisory board on Wednesday recommended that shareholders approve the work of senior management during 2015 at the company’s annual meeting on June 22.
The board said that, based on work so far by Jones Day, a law firm commissioned to investigate the emissions scandal, “no serious and manifest breaches of duty on the part of any serving or former members of the board of management have been established”.

>>> Street Pre-Market Indications

CS
Adidas +2% Adidas/Chelsea terminate partnership, raises guidance again
Aegon -3-5% 5% operating miss, net income miss, Solvency 2 at 155%
Aldermore UNCH CET1 capital ratio slightly light 11.5%, outlook inline
BASF M/P Said to Mull Monsanto Takeover – Twitter/Streetinside
Brunello -2-3% LFL sales 2% light, Sees Double-Digit 2016 Sales Growth
Dassault Avi +1% Rafale fighter deal likely to move ahead now
Drillisch M/P Gross pft and EBITDA light, 2017 guidance slightly better
Duerr +0.5% 1Q sales 825.2mln vs cons 823.1mln, confirms forecasts
DSV +1% Q1 operating profit 5% beat, keeps FY outlook
Euronext +1-2% Revs inline, EBITDA better on better cost cutting
Generali -1% 1Q net income and net profit slightly light, confirms tgts
Hikma -1-2% FY16 rev. in range of $2b-$2.1b vs cons 2.07bln
ITV +1-2% Numbers inline, outlook muted
KBC +2% Headline beat, 1Q NET EU392 MLN, EST. EU304 MLN
Lafargehol -2% 1Q EBITDA 12% below cons, guidance inline
Miners UNCH Copper +0.65%, Brent +1.00%, Iron Ore -0.90%, China -0.40%
Mondi +1% Price wekaness in packaging, outlook remains positive
Refresco -2-3% Volumes -4% cons +2%, guidance towards lower end
Renault -2% Nissan looking to take a 33% stake in Mitsubishi
Rheinmetall -2-3% Q1 sales €1.18b vs cons €1.22b, confirm FY guidance
RWE UNCH Q1 EBITDA 10% beat, 2016 guidance confirmed
Schaeffler +1% EBIT €421m cons 417m, better automotive/weaker industrial
Skanska +1% 1Q revs 35.3bln vs cons 34.9bln
Snam -1% EBIT and net both a 1-2% miss vs cons
Stada M/P revs €497m vs cons 497m, ebitda €92m vs cons 90m
SLM Sol -2-3% Revs fine but order backlog is poor
SMA Solar +1-2% Sales and EBITDA slightly better, confirm FY guidance
Sunrise M/P Revs 1.5% light, EBITDA 4.5% beat, keeps outlook
Super Group +2-3% Revs 589.5m vs cons 568.667m, FY guidance inline
Talktalk +5-7% 2% ebitda beat in H1, confirm guidance
Tods -5% CS downgrade to UNDERPERFORM (Earnings visibility poor)
Tullet M/P Rev's running in line, Trading conditions remained mixed
Vesuvius +1-2% Trading performance inline with FY estimates
Vedanta +1% EBITDA small beat 4% ahead, restarting dividend
Vonovia +1-2% Raised FY FFO guidance to €720m-740m, cons at €710m
Zalando +1% ADJ EBIT 20m vs cons 19.4m, outlook inline
Zurich +2-3% Net income better and 16% beat at operating line

Jefferies
ITV +1% beat in studios but mixed overall
Mondi +2% Q1 14% profit growth, outlook confident
SIG plc -2% lfl sales +1.1% is sl light, tough environment
Talk Talk +2% strong Q4, low churn, net debt lower
Vedanta +2% FY results inline, secures covenant changes, reduced net debt
Adidas unch raise FY guidance again, one off
Aegon -3% weak net and capital
Cr Agricole -3% Q1 net €227mn v 220mn, big miss in French retail
Dia +2% Q1 figs in line should provide relief
Generali -1% net income 8% miss
KBC +2% headline beat, low quality but no blow up
LafargeHolcim unch Q1 revs in line
RWE +3% Q1 adj. net income €857m vs cons 663m, good figs
Snam -1% Q1s v sl light, key is conf call and gas distn biz spin off
Swiss Life -1% Q1 fee income ok , GWP bit light
Vivendi -1% Q1s in line, C+ FRance weak
Zurich +2% Q1 net income $875mn v e$757mn

EXane
ACCIONA -1%
BRUNELLO -1%
CIE +1%
CRED AG -2%
DIA UNCH
EURONEXT +1%
FINCANTIERI +1%
GENERALI -1%
ITV -2%
KBC +2%
LAFARGE -3%
LAGARDERE +2%
RAI WAY +2%
RHEINMETAL -1%
RWE +2%
SALZGITTER +1%
SMA SOLAR +2%
SNAM -1%
STADA UNCH
TALKTALK +1%
TODS -3%
VIVENDI +2%
WACKER NEUSON -1%
ZALANDO UNCH
ZURICH +2%

HOUSEBUILDERS - April RICS survey 41 vs 35 est.new buyer enquiries at -22...UNCH
SIG - grp revs +9.3%,LfL +1.1%,margins +20bps,confident on meeting targets...+1%
PHOENIX GRP - on track to meet cash generation target,confident outlook.....UNCH
GALLIFORD TRY - trading inline,good sales at Linden Homes,sales +21%........UNCH
WILMINGTON - grp revs +9%,mixed outlook statement,sees FY inline.............-1%
SUPERGROUP - Q4 revs +29.9%,robust LfL against tough comps,margins at top end+2%
ITV - Sees good grp pft grwth in H1.Had good start to 2016...................+2%
RANK - Board sees fy performance in line with management expectations.......UNCH
TALKTALK - Fy ptp 14m.Revs 1.84b(Est1.85b).Sees headline rev decline in 2017.-2%
HIKMA - Has made good start to year.Reiterates guidance for 2016.............+1%
VESUVIUS - Sees trading performance in line with Fy estimates...............UNCH
FIRSTGROUP - Approval for new London-Edinburgh rail service.................UNCH
ALDERMORE - strong start to yr,loans +43%....................................+3%
TULLETTS - rev +2% £291m,conditions mixed,pick up in activity continued.....UNCH

>>> CNP Assurances/La Banque Postale: merger blocked by French government – repo

CNP Assurances/La Banque Postale: merger blocked by French government 

The combination of CNP Assurances [EPA:CNP], the French insurance group, and La Banque Postale, the banking arm of state-owned postal services group La Poste, has been blocked by the French government.

An unsourced report from French daily Les Echos claimed that the government deemed the operation “too risky”.

The report noted that Philippe Wahl, head of La Poste, was proposing to create a major financial services group by increasing La Poste’s shareholding in CNP Assurances.

CNP Assurances reported net profits of EUR 281m on revenues of EUR 9bn in 1Q16.

Les Echos

>>> Iliad a potential buyer for O2 – report (translated)

Iliad a potential buyer for O2

Iliad/Free [EPA:ILD], the listed French alternative telecoms group, has been rumoured to be a potential candidate for the acquisition of UK mobile phone group O2, French daily Les Echos reported.

Iliad is indeed interested in the UK market and would have been a buyer for the assets of O2 and Hutchison if the two had been allowed to merge, which the European regulator did not agree to, the report, which did not reveal its source of information, noted.

The report hinted that an acquisition of O2, described as the sector’s jewel, was a whole different ballgame as the EBITDA of O2 is higher than that of Iliad.

Les Echos

>>> What to look at today - 12th of May 2016

Dow-1.21% S&P-0.96% Nasdaq-1.02% Russell-1.25%
US MArket closed lower pushed by weaker ern and guidance in the retail sector and consumer sector ahead of key US Retail Sales report tomorrow. WTI crude ended its pit session higher by 3.4% at $46.20/bbl. helped by inventories. IBB -3%, S&P Retail ETF -4.4%, Macy's -15.2% FOSL -29.1%, Kohl's & Nordstrom UP ahead of numbers. Volume were in line with average @ 922mil shares. US After Hours LINE -58%, LNCO -54% after filing Chapter 11; GST -10% on common share offering news. Asian equity markets are tracking the selling on Wall St, Despite the bounce in crude oil, markets in Australia are underperforming, with shares of AMP particularly soft after Q1 update. In Japan, shares of Toyota are down 2% after a 6% decline in US ADRs following FY15 results and FY16 outlook where the automaker cut op profit forecast by over 30%. Nissan is down 1.6% after press speculation that it could take a 30% stake in Mitsubishi Motors, whose shares are halted. BOJ Gov Kuroda said Japan economy continues moderate recovery trend, adding that large downside risks to Japan economy and external uncertainties pose large risks. Kuroda also reiterated that low oil prices and fx factors contributed to soft inflation conditions.

Nikkei +0.29% Hang Seng -0.40% CSI +0.24% Shanghai -0.14%

Eur$ 1.1419 CNH 6.5341 CNY 6.5044 GBP 1.4434 CHF0.9715 RUB64.8629 WTI$46.15 (-0.19%)

S&P +0.21% EuroStoxx-0.10% Dax-0.10% SMI-0.05%

Macro :
- China Fund’s Zhang Criticizes Hedge Funds for Shorting Yuan
- BoJ’s Kuroda Says Rates Can Technically Go as Low as ECB
- EU Prepares Sanctions for Spain Over Deficit Miss: Economista

Keep an eye on :
- ANA SM : Acciona 1Q Ebitda EU277m; Ebitda EU278m
- ADS GY : Adidas Raises 2016 Net Outlook, Ends Chelsea Partnership Early
- AB1 GY : Air Berlin 1Q Operating Loss Widens as Revenue Declines
- AGN NA : Aegon 1Q Underlying Pretax Rises 7%, Net Drops 50%; ROE Up Y/y
- AKA FP : Akka 1Q Rev. Rises to EU268m, Helped by Strong French Growth
- AREVA FP : Former Areva CEO to Be Quizzed by Investigative Judges Friday
- AR4 GY : Aurelius 1Q Sales Rise 58%, Op. Ebitda Down 8%
- BYW6 GY : Baywa 1Q Revenue Rise 0.5%, Ebit Loss, Net Loss Widen
- BC IM : Cucinelli 1Q Rev. In Line, Sees Double-Digit 2016 Sales Growth
- BCART BB : Biocartis Affirms 2016 Outlook to Add 150-175 Idylla Instruments
- CNV US : Casino to Bid $5.50 Per Outstanding Cnova Share - Closed @ $3.40, ie 61.8% premium vs yest close
- CO FP : Casino to Bid $5.50 Per Outstanding Cnova Share
- CON GY : Hankook (161390) Tire choosed by Tesla as manin supplier +3.3%
- ACA FP : Credit Agricole 1Q Net Beats; Large Customers Unit Net EU163m
- DIA SM : Dia 1Q Adj. Ebitda In Line, Expects to Increase Ebitda in 2016
- DIC GY : DIC Asset 1Q Operating Profit Rises 20%; Keeps FY Targets
- DRI GY : Drillisch Posts Growth in Subscribers, Revenue; Ebitda Up 38%
- DSV DC : DSV 1Q Operating Profit Beats Estimates; Outlook Maintained
- DUE GY : Duerr 1Q Ebit, Revenue Beat Estimates; FY Forecast Confirmed
- EDL FP : Euro Disney 1H Net Loss EU183.8m Vs Loss EU118.8m 1H 2015
- EMGS NO : Electromagnetic Geoservices Net Loss Widens as Sales Drop
- RF FP : Eurazeo NAV Drops, Rev. Up 8.2%; No Plans for Farfetch IPO
- ENX FP : Euronext 1Q Net Income Beats Estimates, Revenue in Line
- EVS BB : EVS Broadcast Sees 2016 Rev. EU120m-EU140m; 1Q Rev. Misses Ests.
- G IM : Generali Hires Axa Italy Chief, COO Departs Amid Reorganization
- G IM : Generali 1Q Net Misses Estimate; Combined Ratio 92%
- GLEN LN : Glencore Has Good News for Metal Bulls Doubting 2016 Rally
- GSF NO : Grieg Seafood 1Q Ebit Before Fair Value Adj. of Biomass NOK214m
- GOOGL NA : Google Faces New Scrutiny From FTC: Politico
- KBC BB : KBC 1Q Net Tops Ests. on Loan Losses; Net Interest Margin Widens
- LHN VX : LafargeHolcim 1Q Ebitda Below, Says All 2016 Targets on Track
- LNZ AV : Lenzing 1Q Rev, Profit Rise; Still Sees 2016 Earnings Increase
- MRL SM : Merlin 1Q Ebitda EU67M vs EU29.7M a Year Earlier
- ML FP : Hankook (161390) Tire choosed by Tesla as manin supplier +3.3%
- MGN GY : Mologen Year Forecast Unchanged, Pipeline Review Results at AGM
- RNO FP : Nissan -1.6% ahead of numbers and on spec of Nissan will buy a 30% stake in Mistubishi
- RHM GY : Rheinmetall 1Q Rev, Ebit Miss Ests; Reiterates FY Forecast
- RWE GY : RWE 1Q Adjusted Net Income Beats Estimates, Confirms Forecast
- RWE GY : RWE Hedges More 2-Yr-Ahead German Coal, Nuclear Output in 1Q
- SAHN SW : Schaffner 1H Loss CHF0.3M vs CHF1.9m Y/y
- SGL GY : SGL Carbon 1Q Sales Below Estimate; Guidance for 2016 Confirmed
- SKAB SS : Skanska 1Q Sales, Op. Profit Beat Estimates
- SLHN VX : Swiss Life 1Q Premium Income Declines; Fee Income Rises
- SAZ GY : Stada 1Q Adjusted Net Beats Estimates; 2016 Outlook Confirmed
- SAX GY : Stroeer Swings to Profit in 1Q, Reiterates 2016 Outlook
- S92 GY : SMA Solar 1Q Sales Beat Estimate, Confirms Year Forecast
- SRG IM : Snam 1Q Ebitda, Revenue Miss Ests.; Sees 2016 ‘Broadly Stable’
- SYNN VX : Syngenta Launches New Biological Seed Treatment
- TOD IM : Tod’s 1Q Total Sales, Constant FX Sales Growth Misses Ests.
- UCG IM : UniCredit’s Sale of Ukrsotsbank to Conclude in 3Q, Vivaldi Says
- VIV FP : Vivendi 1Q Rev. Misses Est.; Unfavorable Tax Effect Hits Net, Yannick Bollore Co-Opted to Supervisory Board
- VNA GY : Vonovia 1Q FFO I, Profit Jump; 2016 FFO I Forecast Raised
- VOW3 GY : Lower-Saxony President Backs Discharge of VW Managers: HB
- VOw3 GY : VW Works Council Says Bonuses Should Be Part of Wage Talks: Bild
- ZURN VX : Zurich Insurance 1Q Net Income Beats; Combined Ratio Rises Y/y

>>> Europe : Brokers Upgrades & DOwngrades - 12th of May 2016

>>> Up
*ABERDEEN ASSET MGMT RAISED TO SECTOR PERFORM AT RBC CAPITAL
*ARKEMA UPGRADED TO OVERPERFORM AT CREDIT SUISSE
*BARCLAYS UPGRADED TO NEUTRAL AT EXANE
*ING RAISED TO OUTPERFORM VS NEUTRAL AT MEDIOBANCA
*SANOFI RAISED TO OVERWEIGHT VS EQUALWEIGHT AT BARCLAYS

>>> Down
*HELLENIC TELECOM RAISED FROM UNDERWEIGHT TO OVERWEIGHT AT MORGAN STANLEY
*RAIFFEISEN CUT TO HOLD AT KEPLER CHEUVREUX
*TOD’S CUT TO UNDERPERFORM VS NEUTRAL AT CREDIT SUISSE

>>> PT Change


>>> Initiation
*CTS EVENTIM REINITIATED BUY AT BANKHAUS LAMPE, PT EU37
*CYFROWY POLSAT RATED NEW HOLD AT BERENBERG; PT PLN25.70
*MAGYAR TELEKOM RATED NEW BUY AT BERENBERG; PT HUF549
*ORANGE POLSKA RATED NEW HOLD AT BERENBERG; PT PLN6.50

>>> Call