The Times - UK (2020-07-31)

44 1GM Friday July 31 2020 | the times

BusinessMarkets

news in brief

Iraq bribe plotter jailed

A businessman has been jailed

for three years over a multi-

million-pound bribery plot to

secure oil infrastructure contracts

in Iraq. Stephen Whiteley, 65, of

Beverley, East Yorkshire, was part

of a scheme to pay $6 million to

politicians and companies after

Saddam Hussein was toppled in

2003. Executives at Unaoil in
      Monaco hoped to secure Iraqi
      contracts worth $800 million. At
      Southwark crown court yesterday
      Whiteley was convicted of
      conspiracy to make corrupt
      payments alongside Ziad Akle,
      45, of London.

Fuller’s full of cheer

Fuller, Smith & Turner lost more

than £10 million in March alone,

but insisted its future was secure

because it owns all its pubs.

Simon Emeny, chief executive,

said that its freehold approach

underpinned the group’s ability

“to survive the toughest of times”.

The group has reopened 163 of its

managed pubs and hotels and

almost all its 177 tenanted pubs,

but Mr Emeny said it was “too

early to draw any conclusions” on

trading. Shares jumped by 72p, or

14.12 per cent, to 582p.

Hedge fund profits dive

Client withdrawls at Man Group

reached $1.7 billion during the

second quarter as coronavirus

impeded the hedge fund group.

First-half results showed assets

under management fell by 8 per

cent to $108.3 billion. Pre-tax

profits slumped 40 per cent to

$94 million. Luke Ellis, chief

executive, said: “The first half was

challenging.” Redemptions

increased in the second quarter

“but it is pleasing to see flow

momentum normalising as we

enter the second half”, he added.

Recruitment group hit

Pre-tax profits at Robert Walters

dropped by 79 per cent to

£4.3 million in the first half of the

year after the pandemic disrupted

the recruitment industry.

Revenues at the recruiter were

down by 22 per cent at

£496.4 million after the disease

hit demand for services across all

its regions of operation, including

Asia Pacific and Europe. Robert

Walters, founder and chief

executive, said that Covid-19

“presented the group with an

unprecedented set of challenges”.

related claims frequency was down

by between 15 per cent and 60 per

cent year-on-year in the second

quarter.

This helped to offset the impact of

virus-linked claims, such as weddings

insurance, and the impact on RSA

investments.

Net written premiums dipped 3 per

cent to £3.1 billion after coronavirus

pushed down prices and led to some

refunds. Overall, pre-tax profits were

down 7 per cent to £211 million and

RSA shares fell 4.2 per cent to 420p.

RSA has set aside £47 million to

cover claims under business

interruption policies. The pandemic

has not triggered many of these

policies across the industry, angering

Hester became chief executive in

2014, when he was asked to

transform RSA after several profit

warnings and an accounting scandal

at its Irish business before he joined.

While he succeeded in reviving the

group, performance at its British arm

weakened. It is also wrestling with

the fallout from Covid-19. There was

good news on this front when RSA

posted its first-half results yesterday.

It said the net impact of the virus

was expected to be “neutral” once

the impact on claims, premiums and

investments were taken into account.

Lockdowns have led to fewer

claims in some areas, such as motor

cover, where fewer cars on the roads

led to fewer accidents. Non-Covid

T

he insurance industry is in the

eye of the coronavirus storm

(Ben Martin writes). Lloyd’s of

London, the world’s biggest

insurance market, has estimated that

the crisis could deal a $203 billion

blow to the industry. Yet it is not all

doom and gloom. RSA Insurance

even gave investors cause to be

optimistic yesterday.

RSA is one of Britain’s leading

insurers, listed in the FTSE 100 and

with operations overseas, including

Scandinavia and Canada. Stephen

Tempus

Buy, sell or hold: today’s best share tips

Slow recovery gives food for thought

I

f investors in Compass Group

had been hoping for an early

bounce-back from the Covid-19

crisis, they would have been left

disappointed by yesterday’s

update. As well as reporting a 44 per

slump in third-quarter underlying

revenues, it predicted a continuing

“slow recovery scenario” outlined in

May (Dominic Walsh writes).

All of which is uncharted territory

for the world’s biggest catering group.

Although not immune to the impact

of economic and geopolitical

upheaval, Compass has over the

years deployed its huge scale and

geographical spread to good effect,

churning out quarter after quarter of

strong numbers and rewarding

investors with billions of pounds in

dividends and share buybacks.

Compass operates in 45 countries

and before the lockdown was serving

5.5 billion meals in work canteens,

schools and universities, on offshore

oilrigs, in the defence sector and at

sporting events. It employs 600,000

people and last year generated

revenues of more than £25 billion.

Covid-19 has driven a coach and

horses through those advantages.

The virus is no respecter of borders

or sectors and the lockdowns

brought in across most of its markets

have forced the FTSE 100 group to

dispense with forward guidance. If

ever a company was guaranteed to

issue detailed guidance on organic

revenues and operating margins and

meet or exceed it, it was Compass.

No longer. Yesterday the headline

third-quarter numbers were decline

in revenue and an operating margin

of minus 6.3 per cent. With the pace

of a recovery “still unclear”, it was at

least encouraged by signs of relative

improvement in June, with the

number of outlets open increasing

from 55 per cent to 60 per cent and

retention “robust” at 95 per cent.

By sector, its performance in

healthcare, defence and offshore was

“good”, but education and business

and industry were mostly closed in

April and May before starting to

reopen “cautiously” in June. Sport

and leisure remained fully shut.

Another ray of light amid the

gloom was its comment that it is

seeing signs of an acceleration in

first-time outsourcing opportunities

as companies and venues seek to cut

costs by using an outside contractor.

The FTSE 100 group has itself

taken stringent measures to cut costs

and strengthen its financial position,

Losing direction

Share price

Source: Refinitiv

Organic revenue

Q3 (Year to date)

Operating margin

North America

-45%

(-13%)

-3.1%

(5.7%)

Europe

-54%

(-21%)

-14.5%

(1.1%)

Rest of World

-20%

(-5%)

3.1%

(5.4%)

Group

-44%

(-14%)

-6.3%

Q4 (3.9%)

2020

Q1 Q2 Q3

500

1,000

1,500

2,000

2,500p

including scrapping the dividend,

cutting boardroom pay and putting

staff on furlough. In May it raised

£2 billion of new equity at £10.25-a-

share — a little below today’s price of

£10.69½ — to give it £5 billion of

liquidity to “weather the crisis”.

Amid the cost cutting, Compass

makes no mention of job losses but

there are plenty of phrases that

imply they are happening. It said

that it was spending £42 million in

the third quarter in “resizing costs in

North and South America”.

In Europe, where lockdown

measures have been “deeper and

more widespread”, the reopening has

been slower as people continue to

work from home or remain on

furlough. Its operating costs in

reopened units are higher and it is

working with its clients to pass these

on, but it said that with a less flexible

workforce it was having to “actively

manage the situation” and progress

in Europe would be slower.

In the UK, Compass is understood

to have made about 350 of its UK

employees redundant as a result of

the Covid-19 lockdown. That is fewer

than 1 per cent of the catering group’s

60,000-strong British workforce, a

surprisingly small number given the

pandemic’s impact, although with a

“slow recovery”, the figure could rise.

In early May this column

recommended that investors avoid

Compass and the shares have fallen

a further 17 per cent since. It is still

difficult to advise investors to buy

into what is undoubtedly a quality

business in this environment.

ADVICE Avoid

WHY A best-in-class business

that will return to growth

and restore returns to

shareholders, but not yet

business customers. The Financial

Conduct Authority has brought a

test case in the High Court to resolve

the dispute, with which RSA is

involved.

RSA scrapped its dividend earlier

this year after pressure from the

Bank of England, which is concerned

about insurers conserving cash amid

the crisis. RSA said yesterday that it

“expects to resume dividends by the

time of full-year results 2020”.

ADVICE Hold

WHY Uncertainty over

disruption and dividend

compass group

2019 revenue

£25.2 billion

Meals served

5.5 billion

rsa insurance

Market

capitalisation

£4.4bn Pre-tax

profits £211m

Commodities

ICIS pricing (London 7.30pm)

Crude Oils ($/barrel FOB)

Brent Physical 42.93 +0.25

BFOE(Sep) 42.94 -0.86

BFOE(Oct) 43.35 -0.84

WTI(Sep) 39.92 -1.35

WTI(Oct) 40.24 -1.30

Products ($/MT)

Spot CIF NW Europe (prompt delivery)

Premium Unld 355.00 357.00 -11.00

Gasoil EEC 355.75 357.75 -17.00

3.5 Fuel Oil 235.00 236.00 -6.50

Naphtha 362.00 364.00 -21.00

ICE Futures

Gas Oil

Aug 364.00-363.50 Nov 374.25-374.00

Sep 366.25-366.00 Dec 376.75-376.25

Oct 371.00-370.75 Volume: 756432

Brent (9.00pm)

Sep 43.14-43.12 Dec 44.12-44.10

Oct 43.44-43.43 Jan 44.43-44.41

Nov 43.78-43.76 Volume: 1790122

LIFFE

Cocoa

Sep 1607-1599 Dec unq

Dec 1620-1615 Mar unq

Mar unq May unq

May unq

Jul unq

Sep unq Volume: 73488

RobustaCoffee

Sep 1341-1340 May unq

Nov 1358-1349 Jul unq

Jan 1372-1368

Mar unq Volume: 28727

White Sugar (FOB)

Reuters May unq

Aug unq

Oct 368.90-368.80 Oct unq

Dec 365.00-363.50 Dec unq

Mar unq Volume: 44044

PRICES

Major indices

New York
Dow Jones 26313.65 (-225.92)

Nasdaq Composite 10587.81 (+44.87)
S&P 500 3246.22 (-12.22)

Tokyo
Nikkei 225 22339.23 (-57.88)

Hong Kong
Hang Seng 24710.59 (-172.55)

Amsterdam

AEX Index 549.20 (-14.91)

Sydney
AO 6177.50 (+49.50)

Frankfurt
DAX 12379.65 (-442.61)

Singapore

Straits 2529.82 (-43.63)

Brussels

BEL20 3340.48 (-65.14)

Paris
CAC-40 4852.94 (-105.80)

Zurich

SMI Index 10095.34 (-177.47)

DJ Euro Stoxx 50 3208.20 (-91.96)

London

FTSE 100 5989.99 (-141.47)

FTSE 250 17017.05 (-230.61)

FTSE 350 3362.73 (-73.70)

FTSE Eurotop 100 2661.77 (-62.83)

FTSE All-Shares 3325.68 (-71.68)

FTSE Non Financials 4064.04 (-77.92)

techMARK 100 5466.54 (-5.76)

Bargains n/a

US$ 1.3079 (+0.0098)

Euro 1.1055 (+0.0039)

£:SDR 0.98 (+0.00)

Exchange Index 77.45 (-0.06)

Bank of England official close (4pm)

CPI 108.58 Jun (2015 = 100)

RPI 292.70 Jun (Jan 1987 = 100)

RPIX 290.10 Jun (Jan 1987 = 100)

Morningstar Long Commodity 473.62 (+2.52)

Morningstar Long/Short Commod 3929.53 (+8.24)

London Financial Futures

Period Open High Low Sett Vol Open Int

Long Gilt Sep 20 138.47 138.81 138.41 138.65 190802 519464

Dec 20 137.40 137.40 137.40 137.66 1 1

3-Mth Sterling Sep 20 99.895 99.910 99.890 99.900 58566 464173

Dec 20 99.915 99.925 99.910 99.915 52948 530171

Mar 21

Jun 21

Sep 21

3-Mth Euribor Sep 20 100.46 100.47 100.45 100.46 70243 478995

Dec 20 100.46 100.47 100.45 100.47 68368 421278

Mar 21

Jun 21

Sep 21

3-Mth Euroswiss Sep 20 100.73 100.74 100.72 100.72 1579 45177

Dec 20 100.74 100.75 100.74 100.74 326 36079

Mar 21

Jun 21

FTSE100 Sep 20 6115.0 6125.5 5885.0 5942.0 106869 730424

Dec 20 5951.0 5951.0 5941.0 5911.5 19 5117

FTSEurofirst 80 Sep 20 4334.5

Dec 20 4329.0

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