the times | Thursday August 6 2020 2GM 35Business
at £16 billion, double the combined
worth of Wm Morrison and J Sains-
bury. Even so, Ocado continues to be
the smallest of the grocers, with a 1.7 per
cent market share, according to Kantar,
the market reseach group.
Clive Black, an analyst at ShoreCapital, the broker suggested that if the
retail joint venture accounted for only
30 per cent of Ocado’s value, then
M&S’s holding would be worth
£2.25 billion, higher than its market
capitalisation. “Something doesn’t
seem to add up here,” he said. “MaybeUber has moved one step closer to its
ambition of helping to provide trans-
port wherever its customers are after
buying a platform that will link users to
taxi firms in areas it does not operate in.
The ride-hailing group is acquiring
Autocab, a British company that pro-
vides software to private hire and taxi
operators that allows them to share
workloads, as well as an app called iGo.
The iGo network allows users to
connect with a local taxi firm and is
used by 52 per cent of the private hire
and taxi market in the UK, from Oxford
to Doncaster to Swansea.
The acquisition of Autocab will mean
that when Uber customers open their
app in places the company does notFootasylum decision
verges on madness
F
or insights into Britain’s
Competition and Markets
Authority, few people trot
off to the Footasylum store
in Wolverhampton. More
fool them. Among the street-cred
garb is the latest proof that the
regulator really doesn’t need more
powers (report, page 41).
In June, its chairman Lord Tyrie
quit after the government turned
down his pleas for extra regulatory
clout. One issue? More leeway to
levy fines. To judge by the hoo-ha
over a £300,000 penalty relating to
one Footasylum shop, the CMA’s
struggling with the powers it’s got.
It’s just stung the company’s
present owner JD Sports and its
controlling investor Pentland. It’s a
trifling sum for a FTSE 100 retailer
valued at £6 billion. Yet you can see
why the JD boss Peter Cowgill
“strongly disagrees” with the CMA’s
decision to pick his pocket.
The backdrop is a far bigger wacko
decision: the CMA ruling in May to
block JD’s £90 million takeover of
the loss-making, 70-store
Footasylum, a business it’s been
ordered to sell. It was the result of an
inquiry started in May last year,
after the deal’s completion in April- JD has been “legally obliged”
to operate the companies as
“separate businesses” with “separate
management teams”. The CMA also
insisted on a “monitoring trustee” to
ensure “compliance” with its “initial
enforcement order”.
The Wolverhampton problem?
Footasylum’s managers exercised a
break clause in the lease to close the
store from April 2020. It told the
trustee of its decision last October,
receiving the advice that shutting
shops was “a sensitive area” and it
should notify the CMA. Footasylum
failed to do so, since arguing among
other things that exercising break
clauses “fell within the ordinary
course of business” anyway.
Whatever, JD couldn’t have
known anything about it. So, as it
points out, the “alleged breach”
relates to “an independent decision
made by Footasylum management
without JD’s knowledge or
involvement”. So why is it getting
fined, a record one, too, for a single
breach of an enforcement order?
True, JD is the present owner of
Footasylum. And the CMA says it’s
ultimately responsible for ensuring
compliance by subsidiaries. Neither
was Footasylum a direct addressee
of the enforcement order. But the
CMA can’t have it both ways. Either
Footasylum is being run
independently or it isn’t. JD is
considering an appeal to go with its
bigger one over the CMA’s even
dafter verdict to block it buying
Footasylum: an outfit floated at 164p
in 2017 and taken out at 82½p.
Happily, the Wolverhampton store
is still open. And there’s plenty you
can criticise JD for, not least its Go
Outdoors pre-pack administration.
But none of this reinforces the
CMA’s reputation for competence:
one that’s also taken a kick over its
decision to nod through Amazon
buying 16 per cent of Deliveroo after
suddenly changing its entire
rationale for clearing the deal. No
surprise, then, that ministers gave his
lordship’s cries for extra powers the
boot.
Against the odds
S
urreal times: a bookie that
returns the punters’ money. Has
William Hill forgotten how its
business model works?
Still, turns out it’s the moolah
from the furlough scheme:
£24.5 million. So hats off to the
board, chaired by Roger Devlin, for
setting the sort of example that’ll
flummox the industry’s critics. As he
puts it, Hill was “extremely grateful”
for the scheme during the lockdown,
enabling it to protect 7,000 jobs in its
betting shops. But with sport back
on the telly and some high street
footfall, it was “inappropriate to avail
ourselves of Her Majesty’s largesse”.
Hill has also since raised
£224 million via a placing at 128p and
had a £202 million VAT refund. So it
doesn’t need taxpayer help (report,
page 40).
Others are also returning furlough
cash: housebuilder Barratt has
vowed to repay £27 million; Games
Workshop, Bunzl and The Spectator,
smaller sums. Yet it’s what you’d
expect from Mr Devlin, also
chairman of Barratt’s rival,
Persimmon. There he got a QC to
investigate its shoddy workmanship
and published her damning report.
William Hill is not through the
corona pain. Half-year figures, with
adjusted operating profits down
85 per cent to £11.8 million, came
with 119 shop closures on top of last
year’s 700 — though few job losses.
Merging retail and online operations
should help. And it reckons the tie-
up of its US casino partner Eldorado
Resorts and Caesars Entertainment
is “a terrific opportunity”. Its shares
rose 9 per cent to 127½p. No doubt
it’ll have chances to win the
furlough money back.Safe as warehouses
C
all this a property landlord:
adjusted profits up 6.5 per cent
to £140 million; net asset value
per share 2.7 per cent up at 716p;
average rent renewals 10.4 per cent
higher; and 99 per cent of the rent
collected, barring £10 million
“reprofiled”. Yes, Segro, the
warehouse owner, valued at
£11.7 billion after the half-year figures
sent the shares up 2.5 per cent to
987½p (report, page 41). Add the
readies from a £680 million placing
to shares trading on an earnings
multiple of 42 times and the group
has tons of acquisition firepower. Of
course, it wouldn’t be interested in
buying Hammerson, valued at
£460 million and expected to unveil
today a cash-call dwarfing that. But
some of its shopping centres would
be more successful as warehouses.Merck slow to clear
H
arry Manilow one day,
Debbie Barry the next. Merck
Mercuriadis, the founder of
Hipgnosis Songs, has an eclectic
taste in music — and blondes. But
he’s buying up stuff so fast that, one
way or another, you fear he could
muddle things up.[email protected]business commentary Alistair Osborne
takes M&S food online
Ocado share of
online food marketMarket capitalisation£1.92bn £16.04bn
£6.03bnSales
M&S Food
Ocado Retail £1.61bn3.20%Share of food market
M&S
Ocado 1.70%Online as % of overall food marketM&S Food
operating profit£236.7m
Ocado Retail
ebitdaSources: Company data,
Kantar, NielsenOcadoM&S£35m
2019 7% 2020 14%15.7%M&S’s stake in Ocado Retail is under-
valued; maybe Ocado Group is over-
valued.”
Ocado has been a lockdown winner
as online groceries have doubled from
7 per cent of the food market to 14 per
cent since March as shoppers avoided
stores. Indeed, when the lockdown was
announced, the jump in visits to
Ocado’s website was so great that its
systems thought it was facing a cyber-
attack. “For six to eight weeks it was
frantic,” Mr Steiner said. “It was all
hours, falling asleep on the mobile and
waking up with it still in your hand. I
had no idea what day of the week it
was.”
It quickly emerged that even though
Ocado had spent 20 years billing itself
as the future of food retailing, its robotic
warehouses lacked the flexibility to add
scale rapidly. As a result, it did not have
the capacity to deal with the surge in
demand and had to close its website to
customers briefly.
Ms Smith said of the decision to shut
the website: “We didn’t want it to be a
‘free-for-all’. We are a tiny, tiny business
and we didn’t want our customers to be
squeezed out in the melee for slots. We
wanted to serve our loyal shoppers and
those who needed our help.”
Ocado increased its weekly delivery
capacity of 350,000 by 40 per cent, but
this seemed paltry in the context of
Tesco boosting its orders to 1.3 million a
week.
However, Britain’s biggest retailer
has admitted that it struggles to make a
profit from its food deliveries and might
be able to do so only if it increases deliv-
ery charges. Tesco is also expected to
reduce its number of food deliveries
substantially once the country emerges
from the pandemic.
In contrast, Ocado’s retail business
boosted revenues by 40 per cent at the
same time as increasing underlying
earnings by 87 per cent. This suggests
it was able to increase its grocery
business profitably, even if the
group sank to a loss on the back of
technology costs for overseas clients.
The business also has plans to build
another three robotic warehouses in
the UK to double its capacity to handle
M&S food orders.
As a result, M&S is evangelical about
the tie-up being the only profitable
route to selling food online. Or, as Mr
Norman put it: “If you had to sell Ocado
Retail now, you would get a lot more
than what we paid for it last year. This
is a big strategic move, even if our share-
holders haven’t noticed yet.”tomorrow
Can Ocado save M&S?Uber snaps up British cab software firm
operate, they will be linked with local
taxi operators through the iGo network.
Autocab is a family owned business
in Manchester that was founded in 1991
by Safa Alkateb, its chief executive. It
has 170 employees and also operates in
19 countries outside the UK. Uber,
which is headquartered in San Francis-
co, is the world’s largest taxi-hailing
company, operating in six continents.
The acquisition is a huge expansion
in Britain for Uber. The Californian
company operates in 26 towns and
cities in the UK, while the iGo app is
available in 320 localities.
Jamie Heywood, Uber’s general
manager for northern and eastern
Europe, said: “Autocab has worked with
taxi and private hire operators around
the world for more than 30 years and
Uber has a lot to learn from their expe-rience. We look forward to working
with the Autocab team to help local
operators grow and provide drivers
with genuine earnings opportunities.”
Uber has not divulged how much it
paid for the company or whether it will
take a cut of the local taxi firms’ fares,
but a source said that the company
would “need to ensure that everyone
benefits”.
Mr Alkateb, 52, said: “Working with
Uber, we can scale up our ambitions,
providing hundreds of thousands of
additional trips for our customers, and
help to cement the place of licenced
operators in their local community.”
Uber said Autocab would remain
independent, with its own board
focused “exclusively on providing
technology to the taxi and private hire
industry around the world”.Tom Knowles
Technology Correspondent