The Times - UK (2020-08-01)

48 2GM Saturday August 1 2020 | the times

Business

Gang of four

Revenue -2% Net Income -30% Share price reaction -3% Market capitalisation $1 trillion

Revenue +11% Net Income +12% Share price reaction +10% Market acapitalisation $1.8 trillion

per cent in the period to $88.9 billion and its profits doubled to $5.2 billion, even after investing $4 billion in its distribution network and warehouse to make the Covid secure. Analysts at Jefferies, the Wall Street broker, said the turnover figure was “just crazy”, noting

that Amazon generated more revenue in the second quarter than in the fourth, which includes the lucrative Thanks- giving and Christmas holidays. Apple defied gloomy Wall Street forecasts with strong iPhone sales, helping it post record third-quarter results. The company reported revenue of $59.69 billion and profit of $2.58 per share in the three months to June 2

1

House prices rose by 1.7 per cent last month, the biggest monthly increase the building society Nationwide has recorded since August 2009. The average price of a home in Britain is now £220,936, 1.5 per cent higher than it was a year ago. Page 4

2

Ford is introducing a new generation of vans that will switch to electric power automatically on entering city centres, using technology designed to improve air quality. The system will be introduced in new Transit vans sold in the autumn, with owners also able to retrofit it to existing vehicles. Page 18

3

Willie Walsh, the chief executive of IAG, which owns British Airways, has said that the airline is facing an “unprecedented crisis” as it revealed plans to raise €2.75 billion to bolster its finances and reported a record loss. IAG slumped to an operating loss of €4 billion in the first half of this year, which compares with a profit of €1.1 billion a year earlier. Page 47

4

Sterling has enjoyed its biggest monthly rise against dollar for a decade after investors sold the greenback because of concerns about the economic outlook for the US. The pound gained almost 6 per cent against the dollar in July, nearing $1.32 at one point yesterday before settling in evening trading at $1.31. Page 47

5

Microsoft is in talks to buy TikTok, a hugely popular video sharing app, as President Trump considers whether to force Bytedance, the app’s Chinese owners, to sell their most prized asset amid investigations into security risks for its users. Page 47

6

The biggest dividend left in the FTSE is hanging in the balance with BP expected to reveal next week that it has plunged to one of its worst ever losses after the collapse in oil prices. Page 50

7

The disruption to televised sport during the lockdown and reduced demand from small business customers hit quarterly profits and revenue at BT, which fell by 7 per cent in the three months to June 30, its first quarter. Page 50

8

Hundreds of thousands of jobs are at risk as the furlough scheme begins to be wound down from today, the government has been warned by the Resolution Foundation, a think tank. Page 51

9

HSBC is under scrutiny over whether it has been using its top of the range systems for tracking customers to look at ties they may have to the pro- democracy movement in Hong Kong. Page 49

10

A multibillion-pound provision for expected losses as more people lose their jobs and business activity weakens led to Natwest group producing a £770 million loss for the first half of the year. The bank followed Lloyds and Barclays in painting a gloomier picture than before about the economy. Page 50

Need to know US tech giants throw

their weight around

with $5trn valuation

America’s big four internet giants saw their combined market value top $5 trillion for the first time yesterday after they mostly delivered “blowout” profits for the latest quarter. The results from Apple, Amazon, Facebook and the Google owner Al- phabet late on Thursday underlined their vast earning power in the face of a collapse in economic output. Shares in Amazon closed 4 per cent higher, Apple gained 10 per cent and Facebook rose 8 per cent. Alphabet fell back 3 per cent after quarterly sales fell for the first time in its 16 years as a public company. The surge in the stock prices of Amazon, Facebook and Amazon sent the tech-heavy Nasdaq to near record highs and set the S&P 500 on course for its fourth straight monthly gain. Jubilant investors pushed the collec- tive market value of the big four through the $5 trillion barrier. But for critics, the bumper profits will strength- en arguments that they should be more tightly regulated to prevent them from extracting ever greater profits from their roles as digital gatekeepers. The day before delivering their stellar earnings, the chief executives of the four spent five hours battling policymakers in Washington, who accused them of abusing their dominant positions to squash rivals. The grilling coincided with grim figures showing that the US economy shrank by 9.5 per cent in the second quarter. In stark contrast, Amazon, Apple, Facebook and Google increased profits by delivering essential goods and ser- vices and entertainment to housebound consumers. Amazon’s revenues rose 40

Earnings

fuel drive

for reform

Analysis

S

ilicon Valley’s top executives spent most of Wednesday rebutting accusations that they wield too much power. It took less 24 hours for their claims to be undercut (Simon Duke writes). Apple, Amazon and Facebook shredded Wall Street forecasts with second-quarter results that underlined their ability to mine profits in fair economic conditions and foul. Yes, Google delivered its first ever quarterly revenue decline. Yet it

was still able to report underlying profits of $7 billion. Apple, the iPhone maker, is an even more formidable money-making machine. Housebound consumers loaded up with new Apple gadgets, generating enough cashflow for the company to return $21 billion to stockholders between April and June. That’s enough to buy the online grocer Ocado or the defence group BAE Systems. Amazon was not to be outdone. The ecommerce giant doubled its profits to more than $5 billion even after spending $4 billion to hire more staff and make its warehouses safer. The bumper earnings will add fuel to the debate over Silicon Valley. Are the big tech companies, as they argue, all- American heroes who are being rightly rewarded for their

creativity and daring? Or are they the robber barons of the 21st century, who gouge profits from customers and can squash a rival with a tweak to their algorithm? Tim Cook, Apple’s chief executive, left, acknowledged that its outsized earnings stood in “stark relief ” to the pain suffered by so many “during a time of real economic adversity”. There wasn’t a flicker of contrition from Mark Zuckerberg: Facebook’s founder argued that curbs on his company would reduce choice for advertisers and hurt the economy. Even if Democratic policymakers achieve their aim of further regulation, there is no consensus on how to limit the powers and level the playing field for upstarts. Until there is agreement, the big four will continue to churn out monopoly profits.

despite Covid-19 forcing it to shut many of its stores worldwide. Tim Cook, Apple chief executive, admitted that the results stood in “stark relief during a time of real economic adversity for businesses large and small, and certainly for families”. Analysts at Baird, the broker, raised their annual revenue target for Apple by $10 billion to $275 billion, predicting

Jaguar Land Rover is planning further cuts after taking a £1.1 billion hit from factory shutdowns and posting a £413 million loss as coronavirus “signifi- cantly impacted” trading. Britain’s biggest carmaker has increased its savings target by £1 billion this year, saying that it is reacting “with resilience and agility” to the crisis en- gulfing the global automotive sector. Retail sales of its vehicles fell 42.4 per cent to 74,067 in the second quarter. By June, as lockdown restrictions eased, they stayed down 24.9 per cent. Sir Ralf Speth, chief executive, said that the carmaker “will pass this test” as it grapples with a string of challenges thrown up by the pandemic. Other than its Castle Bromwich plant, where work is due to “gradually” resume from August 10, all of the company’s production sites have restarted and 98 per cent of its retailers are at least partially open. Results for the three months to June

30 highlighted the impact of Covid-19 in the spring, with losses down £18 million to £413 million before tax on revenue of £2.9 billion. The company boosted the annual target of its Charge+ savings pro- gramme from £1.5 billion to £2.5 billion, in a move likely to raise apprehension over the potential effect on jobs. Jaguar Land Rover, owned by the Indian conglomerate Tata, sold more than half a million vehicles in 127 markets last year. The company employs 40,000 staff around the world. It is under pressure, however, having racked up years of multibillion-pound losses, let about 7,500 workers go in the past two years and, even before the Covid-19 downturn, suffered declines in production at its British factories. The West Midlands-based carmaker said this week that Thierry Bolloré, 57, the former boss of Renault, would take over as chief executive in September as Sir Ralf, 64, becomes non-executive vice-chairman of the business.

Callum Jones Trade Correspondent

Softbank in

talks over

sale of Arm

to US rival

Softbank is in advanced talks to sell Arm to one of America’s largest semi- conductor makers just four years after buying the British chip designer for £24 billion. Nvidia, a designer of graphic chips valued at $260 billion, recently ap- proached the Japanese group with an offer to acquire Britain’s most valuable technology company, according to reports yesterday. The talks are close to completing a cash-and-share deal in which Softbank would take a minority stake in the California-based Nvidia. Even though Arm’s profit margins

Simon Duke

6 Byron became the latest restaurant group to go through an insolvency procedure yesterday, with the loss of hundreds of jobs (Dominic Walsh writes). The upmarket burger chain was put through a pre-pack administration resulting in the sale of 20 of its 51 outlets to Calveton UK, an investment firm. Of the 1,202 employees, only 551 will be kept on by the new owner. The other 31 restaurants will remain permanently closed with their 651 employees made redundant. Will Wright, partner at KPMG and joint administrator, said the impact of the pandemic on Byron had been “profound”, adding: “After exploring a number of options to safeguard the future of the business and following a competitive sales process, this transaction ensures Byron will continue to have a presence on our high streets.”

Jaguar to cut after crashing to a loss

Simon Duke Technology Business Editor

The Times - UK (2020-08-01)

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