GlaxoSmithKline (GSK) has nominated Emma Walmsley to replace Sir Andrew Witty as chief executive next March. She knows the business well, having worked for GSK for six years, and has outside experience with an established company, L’Oreal, in senior roles across the globe. She deserves to become the seventh woman currently running a top 100 company in the UK.
As she is head of GSK’s healthcare division, the assumption is that this is a smack in the eye for activist investor Neil Woodford, who is campaigning to have that division hived off. That’s no bad thing. She will know better than anyone whether it should stay part of the group. I’m no great fan of breaking up perfectly good companies just for the sake of making a quick buck. Walmsley’s duty is to assess what is best for the long term.
I’ve always regretted not backing one woman, Kate Swann at WH Smith. As I’m already a GSK shareholder, I won’t be making the same mistake with another. Count me in.
Time to Reconsider Troubled Stocks?
Banking group Royal Bank of Scotland (RBS), clothing retailer French Connection (FCCN) and sporting goods chain Sports Direct (SPD) have one thing in common: they have long been shares for sensible investors to avoid. That view was confirmed in different ways this week.
When you’re down, everyone kicks you, as RBS continues to discover. The attempt to spin off 300 branches under the Williams and Glyn name runs from one expensive misfortune to another, with potential buyer Santander refusing to pay the price demanded.
It is worth remembering that this is not the only problem facing RSB and not necessarily the largest. Getting back into profit remains elusive.
French Connection is closing loss making stores yet still failed to reduce first half losses. Chairman and chief executive Stephen Marks finds the retail performance pleasing and says the strong performance has continued into the second half. Pleasing and strong are two adjectives that I would not use to describe the company.
Dave Forsey resigned suddenly as chief executive of Sports Direct. The back-slapping announcement plumbed new depths of nausea. It doesn’t say why the departure is so abrupt. The upshot is that Mike Ashley takes even more control.
This is a one-man band badly out of tune. It is always a massive risk backing companies where one person can do as he pleases. For some reason the battered shares shot up on the announcement. Was there ever a better opportunity to cut losses and get out?
Budget Deficit Looms Large
Did former Chancellor George Osborne really want a balanced Budget enshrined in law, to start in 2020? The deficit is coming down, but more slowly than expected and it remains horrendously large. If forecasts that UK economic growth will slow as the Brexit negotiations progress prove accurate, that will limit the scope that Theresa May has to spend while increasing the need to do so.
A Mistake Corrected
My thanks to reader George Davenport for pointing out that I got my forex calculation back to front when commenting on City of London Investment Group (CLIG), which has borrowed in dollars but has its income in pounds. It is, as he rightly says, the fall in the value of the pound that has hurt the fund and any recovery in sterling would help. However, the general principle that companies should as far as possible match borrowings and income in the same currency stands.
Rodney Hobson is a long-term investor commenting on his own portfolio; his comments are for informational purposes only and should not be construed as investment advice.
