38 1GM Friday July 31 2020 | the times
Business
3i’s share price closed down 15¾p, or 1.8
per cent, at 868½p last night.
The performance of Action, which is
based in the Netherlands, is crucial to
3i. The retailer is by far the largest of 3i’s
investments, with the private equity
firm’s 52.6 per cent stake in the business
valued at £3.7 billion at the end of last
month. 3i itself has a market capitalisa-
tion of about £8.5 billion.
The FTSE 100 private equity group
traces its roots to 1945, when the Bank
of England set up a £15 million fund
called the Industrial and Commercial
Finance Corporation aimed at reviving
businesses after the war. It listed on the
London Stock Exchange in 1994.
Simon Borrows, 3i chief executive,
said yesterday: “Our private equity and
infrastructure portfolios have been re-
silient and delivered strong earnings
performance this quarter.”Private equity firm takes
heart from Action replay
Britain’s biggest listed private equity
firm has hailed a revival at the discount
retailer in which it has made its biggest
investment.
3i said that Action, the European
chain, was “executing a very impressive
recovery” after coronavirus lockdowns
forced it to shut about 900 stores in
France, Belgium, Austria, Germany,
Luxembourg and Poland. Since mid-
May all of its shops have been reopened
and the non-food retailer’s cash bal-
ance is above €631 million, surpassing
the €500 million target that had been
set for the end of this month.
3i gave the update on Action in a first-
quarter trading statement that showed
the private equity group’s net asset
value per share stood at 858p on June
30, up from 804p at the end of March.Ben Martin Senior City Correspondent
Shell falls to record $18bn loss
Royal Dutch Shell fell to a record
$18.4 billion loss in the second quarter
after the pandemic hit oil and gas prices
and forced the group to cut its price
forecasts.
The Anglo-Dutch oil giant, which
reported a $3 billion profit in the same
period a year earlier, booked $16.8 bil-
lion of impairment charges on its assets
as a result of its new price outlook.
Underlying profits, excluding such
one-off charges, collapsed by 82 per
cent to $638 million due to lower prices,
refining margins and fuel sales in the
quarter. However, this was better than
the $674 million loss analysts had fore-
cast thanks to a strong performance in
its oil and fuels trading division.
The quarterly loss is the biggest since
the unification of Royal Dutch and
Shell Transport & Trading in 2005.
Shell is Europe’s biggest oil company
with about 83,000 employees and oil
and gas production equivalent to 3.4
million barrels of oil per day.
Oil and gas prices plunged in the
second quarter as lockdowns to try to
halt the spread of coronavirus caused acollapse in demand. Brent crude, the
global benchmark price, dipped below
$20 a barrel in April from more than
$65 a barrel at the start of the year,
while US benchmark prices turned
negative briefly.
Shell had already warned last month
that it would take impairments of
between $15 billion and $22 billion after
cutting its near-term oil price outlook
to $35 a barrel this year and $40 next
year, from $60 previously.
The shares fell 67½p or 5.7 per cent to
£11.13¾ yesterday.
Ben van Beurden, Shell chief execu-
tive, said it had “delivered resilient cash
flow in a remarkably challenging envi-
ronment” and was on track to slash up
to $9 billion from its spending plans and
operating costs this year.
He said Shell would “resize as appro-
priate” to a smaller, lower-cost and sim-
plified company that would be better
positioned for a new strategy to be un-
veiled in February. He suggested it
would be able to give an indication after
this summer of how many jobs would
be lost and said it had already begun a
voluntary redundancy programme.
In April Shell cut its dividend for the
first time since the Second World War,
saying oil prices could remain low for
years and it would not be “prudent” to
fund the payment from borrowing.
Some of its rivals such as BP and
France’s Total have so far maintained
their dividends, though some analysts
believe BP may cut its next week.
Mr van Beurden defended the
dividend decision, highlighting the fact
that its net debt levels had increased
even after it had “tremendously taken
the knife” to its cost base. “The com-
pany was not able to withstand the on-
slaught of Covid if we wanted to adopt
a prudent stance,” he said,
Jessica Uhl, Shell’s chief financial
officer, warned there was still “signifi-
cant uncertainty” as to how the pan-
demic would play out and its impact on
the economy and Shell’s assets.
While oil prices have recovered, Shell
warned that its liquefied natural gas
business would see a more significant
impact in the third quarter because of a
lag in the pricing of oil-linked contracts.
Colin Smith, an analyst at Panmure
Gordon, said that Shell’s better-than-
expected underlying profits for the
second quarter reflected a “stunning
result from its oil products business”.
However, Oswald Clint of Bernstein
Research said that there was “little for
investors to get excited about on the
stock today with sector sentiment
continuing to be so weak”.Emily Gosden Energy Editor Some of the UK’s biggest
corporate losses
Royal Bank of Scotland (2008)
Vodafone (2005-06)
Vodafone (2001-02)
HBOS (2008)
Cable & Wireless (2002-03)
Tesco (2014-15)
Source: Refinitiv£24.1bn
£21.8bn
£13.5bn
£8.5bn
£6.5bn
£6.4bn
BAE Systems, which
has contracts with
the US navy, expects
sales to be 5 per cent
higher than last yearDefence
giant BAE
is set for
take-off