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Global Britain Plc – ‘Project Brexit’ transaction, investor call transcript

Summary:
Participants: Theresa May, chief executive; Philip Hammond, chief financial officer; David Davis, chief operating officerOperator: Ladies and gentlemen, following the chief executive’s remarks, if you wish to ask a question, please press star one on your phone. Again, for audio questions at this time, please press star one to begin. Our first question comes from the line of Alf Aville with Befuddled Securities. Please proceed.Alf Aville: Hi! Great quarter, guys. Great quarter. Hi Theresa – thanks very much for the colour on the call about the transaction to exit the stake in European United (GmbH). Love the ‘Global’ rebranding, plus the simultaneous ‘take back control’’ and ‘profoundly internationalist’ slogans for the quarter. Deft messaging in terms of ex-Europe market share

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Participants: Theresa May, chief executive; Philip Hammond, chief financial officer; David Davis, chief operating officer

Operator: Ladies and gentlemen, following the chief executive’s remarks, if you wish to ask a question, please press star one on your phone. Again, for audio questions at this time, please press star one to begin. Our first question comes from the line of Alf Aville with Befuddled Securities. Please proceed.

Alf Aville: Hi! Great quarter, guys. Great quarter. Hi Theresa – thanks very much for the colour on the call about the transaction to exit the stake in European United (GmbH).

Love the ‘Global’ rebranding, plus the simultaneous ‘take back control’’ and ‘profoundly internationalist’ slogans for the quarter. Deft messaging in terms of ex-Europe market share opportunities, guys. (Will you be reviving the old ‘East India Company’ brand?)

Impressed also with your attack on “every stray word and hyped-up media report”. That always scares the short-sellers. It really shows that the company definitely isn’t rattled, at all, about the guys saying you don’t have a plan for the demerger.

Yeah, the demerger. Could have appreciated some commentary on the company’s chronic productivity problems, its lack of capital spend and the balance-sheet concentration in the finance and real estate portfolio, especially as the stock is down a fifth since you became CEO. But I can see this is absorbing a lot of management time.

I realise there’s a lot of, y’know, macro distraction on this point, but when it comes to making a deal on the demerger terms, you seem to be saying… you’d be happy with no deal if it comes to it.

Meanwhile, other than saying you’d like a ‘free trade arrangement’, you don’t seem to be making many opening demands of EU GmbH for getting to an actual deal.

All this with the tight timetable you’ve set yourself, of 2019.

It’s… getting a little hard to recommend people buy the name long-term here, Theresa.

I was just wondering if you could maybe, like, qualitatively walk us through with a little more colour about the headwinds you see sequentially hitting the bottom line.

I was wondering, basically, if you could tell us exactly what’s going on.

I have some questions.

1)

First, you said you’d put a final deal to a vote by the shareholders. Now, I get the whole ‘enemies of the will of the people’ thing that probably means the shareholders will be slightly reluctant to vote against it, but…

In case they do vote against a ‘final’ deal presented to them in 2019, does that mean an exit without any deal?

Could shareholders vote to make you negotiate a second deal?

Conversely, could they veto any future arrangements with EU GmbH?

The company has some pretty unique corporate governance structures, so forgive my befuddlement here. Thanks guys. Appreciate you have ongoing litigation here as well.

2)

You say that a big reason for exiting the stake is because you don’t agree with ‘supranational courts’ deciding on company law.

In terms of the bilateral trade deals you prefer, what will you do if partners to these deals say they want an independent arbitration regime to resolve potential disputes? Because it seems those may function a lot like supranational courts.

3)

You said you don’t want to continue being a member of the ‘Single Market’ joint venture. But you would like the ‘greatest possible access’ to it.

Guys, I’m confused. But I’m more curious about the negotiating strategy. What concession do you expect to achieve from dropping one of the biggest features of the relationship with EU GmbH before talks have begun?

4)

You didn’t say anything about financial liabilities that Global Britain™ may have to EU GmbH even after it exits its stake. Any colour at all here?

5)

You mentioned establishing interim business-continuity arrangements for what seems to be each of the company’s businesses, from lorries to finance, while the stake is exited. Isn’t that looking pretty complicated to achieve and monitor in the timetable you’ve given?

6)

I could ask the same question about permanent arrangements for the movement — well, lack of it — of personnel between the two companies going forward, which you seem really interested in. But there was relatively little detail. I kind of query this, guys, what with the old saying about your best assets being able to walk out of the door tomorrow and all.

7)

Finally, on the transitional arrangements you mentioned. You said no to “unlimited transitional status” but there might be a “phased process of implementation”. How long for?

8)

Ultimately, by saying “no deal… is better than a bad deal,” isn’t that a big hint you’re already going into the talks with the assumption you won’t get a good deal?

And how is that evidence of the ‘great global trading’ spirit you say is waiting to be unlocked?

Hi, Theresa — are you there?

…Theresa?

Joseph Cotterill is the FT’s Southern Africa correspondent

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Joseph Cotterill
Joseph is the FT’s Southern Africa correspondent based in Johannesburg, after previous stints as private equity correspondent and on the Lex column. But he still writes for Alphaville, which he joined way back in March 2010 — right in the middle of the Greek bailout crisis. He has been very interested in all things credit and sovereign debt ever since…

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