Hull - Beyond the Black Stump (long post, sic)
If easily bored click “Thread”, if you want some opinionated background on KC's dominant shareholder read on.
A few comments on take-overs, the Council and KC in general.
First, Hull is different, it's about 1 hour from anywhere of note. The isolation historically meant it had almost all trades represented, to meet the local demand. The lack of competition produced an unusually large number of businesses that went on to be national, I guess KC fits into that category to some extent. The city itself is losing people, the population was about 300,000 forty years ago, now it's about 250,000. Mostly people move out to the satellite villages and Beverley, they hate Hull council so much that Hull CC can never get the boundary expanded to include the full conurbation. The boom that should have resulted from joining the EU never happened, the trucks, and tourists just pass through en route to Leeds, or York.
The Council is using the KC cash to fix a number of problems, Hull has the UK's highest proportion of council housing, much of the stock being poor quality, a lot of the older private housing is not much better. The schools are consistently bottom of the league tables, how the Council retains control is a mystery. So the Council is spending lots of cash on improving the housing stock, improving the schools, and as the Council aspires to be a top City, building high profile facilities such as “The Deep” aquarium and a flash sports stadium. The council has also frozen the Council Tax. Other MF's have commented that the Council has plenty of cash, not so. The Hull Daily Mail caries a story today (10 Nov 2000) under the heading “Probe into spending” that includes the comment from Mike Price, the HCC chief financial officer that “The council's revenue position is tightly constrained and the capital programme is already substantially greater than the capital receipts from Kingston Communications' flotation”.
The sports stadium in particular is gobbling money like the Millennium Dome.
Does the Council care? IMO, no. The council used to have 59 Labour councillors and 1 Conservative, the Chairman of KC, a councillor, went to prison for fraud a few years ago, he was claiming allowances and expenses for attending Torch meetings in Bradford, but not attending, a reflection of how little control the council exercised. IMO the council is a 'gravy train', off the top of my head, about 6 Labour councillors pick up about £30,000 pa, when people complain, such as about being bottom of the school tables, the responsible councillor just says it will be better next year and refuses to resign. But things are changing, today the council membership is 44 Lab; 10 Lib Dem; 2 Con; 2 Ind Lab; 2 Ind. The opposition is now starting to challenge the ruling Labour group. So the Council needs more cash, and it needs to keep the voters sweet.
For those who bought in to KC at £10 plus, the locals who bought at 225p at IPO may appear to have nothing to complain about, but for most it will be the only share they own, or a large part of a small portfolio. I reckon that if we take lost interest into account, and the negligible dividend, then if KC drops below 250p 'ish then even the local IPO buyers will be upset. And what about the share options for staff and management, I recall that the Inland Revenue upped the value for options at IPO because they said the price had been set too low, I don't remember the figure they set but would guess at about 270p, so the options are about worthless at the moment, (although they may by now have been used).
Talking it over with someone who, although not working there, does get involved at both local and national level, we came up with a few interesting point's. Firstly, the changing relationship between Hull KC and Torch is reflected by the KC board discussing relocating from Hull to Leeds.
Secondly, the role of Rupert Murdoch, (children playing with nitro glycerine comes to mind). Murdoch has a problem, satellites are quick to give national coverage but ultimately lose out to the power of cable. The problem is the lack of a 'back path'. Murdock, by keeping a finger in the KC pie is keeping his options open for taking over Torch/KC to get control of a national telecomm network and video on demand technology. As far as I can see it's costing him nothing to maintain a privileged position.
KC has been a 'lucky' company, both SCL, it's former Edinburgh based software business, and Torch, were partnership/joint ventures where KC bought out the partner, IMO because the KC management had trouble working with others, but both turned out to be good investments. But to put it into proportion, the comment was made yesterday that Vodafone went from nothing to bigger than BT in the past 16 years, well KC started it's big push about 16 years ago as well, a result of the same deregulation, and it came close to bankruptcy at one time despite the virtual local monopoly. KC still has a lot to prove.
In Summary, IMO Hull CC would love to sell, even at today's price, but can they risk the job losses? If the share price continues to fall how will the local voters react? although the shares, like the wealth, is mostly held in the commuter belt outside Hull, ie not Hull voters. How much pressure is Murdoch under from the cable companies?
The trigger points are the shares dropping below about 250p, and local elections and council budget balancing and rate setting. The Labour council is stubborn, and likes the kudos of 'owning' KC, but it isn't only the Railtrack lines that are getting wobbly, anyone got any Yorkshire puds to spare?
I expect I have got some things wrong, and that some of my opinions will not find favour (I am NOT a Tory supporter), but at least I am giving some new angles for those who don't know 'ull. I for one am fed up of the share ramping disguised as take-over rumours, I even heard that the KC cleaners are looking to fund a staff buy-out with finance from a local credit union!
Regards
Rik (Born, bred, but hopefully will not die, in 'ull)
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