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Just do it: time for JD Sports to return furlough money


A £2m provision for a potential fine from the Competition and Markets Authority (CMA) for price-fixing on replica football shirts counts as small beer at JD Sports, a FTSE 100 company worth £6bn even after a halving of its share price in the past eight months. But it all adds to the sense of distrust around the corporate “king of trainers” after last month’s messy exit of long-serving executive chairman Peter Cowgill.

Indeed, the alleged larks with Rangers kit represent the second run-in with the CMA in a matter of months. The last episode involved a £4.3m fine and an illicit meeting in a car park between Cowgill and the boss of Footasylum, a business JD was supposed to be holding at arm’s length until the takeover got regulatory approval (it didn’t in the end).

The events seems to have been one factor behind Cowgill’s sudden departure after a dramatic board meeting. That, at least, was a natural way to read the board’s lament that “internal infrastructure, governance and controls” had not kept pace with the company’s spectacular growth. Put another way, the publicity-shy Rubin family, the controlling shareholder with a 55% stake held via Pentland Group, would like JD to look more like a regular FTSE 100 outfit and avoid getting into so many scrapes.

If that’s the case, Cowgill’s defenestration may be for the best, even if it has given other shareholders a fright. But there’s another reforming action JD could take on the road to corporate normality: return the £61m of furlough support claimed during Covid.

Almost every other Footsie retailer – Associated British Foods’ Primark, for example – has done so in cases where financial results have turned out better than expected. JD’s performance certainly fits that description: the company said in February that headline profits for last year, due to be announced this month, would be at least £900m – a record.

The board and the Rubins are said to have discussed repaying the furlough money, and be inclined to do so. The CMA sagas give them an extra reason to demonstrate a break with the past. As they say in one corner of trainer-land: just do it.

Cazoo hunkers down

There was wailing last summer when Alex Chesterman, of LoveFilm and Zoopla fame, shunned the London stock market and floated Cazoo, an online retailer of second-hand cars, in New York via one of those breezy “blank cheque” vehicles. Since Cazoo’s operations are primarily in the UK, the choice was seen as a slight to London’s ambitions to be bigger in tech and e-commerce listings.

Chesterman explained that US investors better understood the business of “investing in the short term for future growth”, which was true if he really meant they were willing at the time to award sky-high valuations to companies that are years away from making hard bottom-line profits. Cazoo was somehow valued at $7bn (£5.6bn).

Price now: about $1bn after the US market’s rapid reappraisal of the worth of early-stage tech firms. On cue, the company is adopting “a business realignment plan” – in short it is cutting 750 jobs, or 15% of the workforce, to save cash and hunker down for recession.

Cazoo still hopes to double the number of cars it sells this year, it should be said. And – who knows? – taking a slower road to disrupting the used car market may succeed eventually. But London’s promoters could be forgiven for breathing a sigh of relief. The UK still had Deliveroo (down 75%) and other pandemic IPO dogs, so is in no position to crow. But Cazoo was a good one to miss.

Biffa bid might be a waste

The last time Biffa, the waste management firm, was bought by private equity, the buyers ended up incinerating themselves. A 2008 leveraged buyout was followed by a debt-for-equity takeover by lenders in 2012.

And here we go again. Biffa, having been returned to the stock market in 2016, is now the subject of a £1.4bn approach by US private equity outfit Energy Capital Partners. Given that the proposed price of 445p-a-share would be a 37% takeover premium, you can see why Biffa’s directors would be “minded to recommend”.

It is harder to understand why the would-be buyers think there are easy pickings here. Collecting bins and removing waste sounds like it should be immune from cyclical swings; in practice, a shifting regulatory landscape complicates matters. An unresolved dispute with HMRC over the payment of landfill taxes, where Biffa said liabilities could be a maximum £153m, is just one complication in this case. This doesn’t look an obvious play for private equity’s leverage games.



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