The Times - UK (2020-08-06)

42 2GM Thursday August 6 2020 | the times

Business

news in brief

Workers test positive

One of the country`s largest

supermarket suppliers has

confirmed some of its staff have

tested positive for coronavirus.

Bakkavor Desserts in Newark,

Nottingham, which is part of the

£373 million London-listed

Bakkavor Group, confirmed a

small number of its 1,600 staff

tested positive for Covid-19. The

company supplies products to

stores such as Tesco, Sainsbury’s,

M&S and Waitrose. The

company said it was working with

Public Health England. The

shares closed down 1¾p, or 2.6 per

cent, at 64½p.

Southern Easyjet flight

A former senior executive at

Virgin Atlantic is to become the

new senior independent director

of Easyjet. Julie Southern, 60,

Virgin’s former chief commercial

officer, is replacing Charles

Gurassa, 64, another aviation

veteran, who, it has already been

announced, is stepping down as

Easyjet’s senior independent

director. Moni Mannings, 57, a

former City lawyer, is joining

Easyjet’s board. The company’s

shares closed up 36½p, or 6.45 per

cent, at 587¼p.

Leicester appeal

The barrister running an

independent review into Boohoo’s

supply chain in Leicester, amid o

allegations of unacceptable

working conditions at factories

operated by some of its suppliers

and sub-contractors, has issued a

public call for evidence. Alison

Levitt, QC, said that she would

like to hear from members of the

public who have information in

relation her inquiries. The review

has set up a confidential website,

called http://www.LevittQCboohoo-

Independentreview.com.

CNN rival ‘cancelled’

Comcast is shelving its planned

international news channel to

rival CNN, after the coronavirus

outbreak wrecked the case for

uniting its NBC and Sky brands.

The summer launch was to have

been the American telecoms

group’s first attempt to bring

together its transatlantic news

divisions since it acquired Sky in

2018, the Financial Times said.

Bosses told staff hired for NBC

Sky World News that its US

parent company could no longer

back the London-based project.

hope that spell is a calm before the

storm as there is no one in the trade

who won’t tell you that the big sales

month, when the September

registration plate changes, is crucial

and will be pivotal. Yet even then,

good month or not, consumers soon

will be looking once more at the

uncertainties that Brexit will bring.

On top of these economic ills,

during which manufacturers’

pressures are shaving even more

from the dealers’ wafer-thin margins,

is an industry in structural turmoil,

with every business model, based

around old-fashioned chains of shiny

showrooms, under review. There is

the technological revolution of

electrification; vehicles increasingly

past few years of depressed

consumer confidence, shares in the

dealers are down 54 per cent.

On a five-year horizon, the stocks

— Pendragon, Lookers, Marshalls,

Vertu and Cambria — are down by

60 per cent. Track back ten years

and the stocks are trading 34 per

cent below par, and that is from a

time in 2010 when the motor trade

was deeply mired in the last global

recession.

The dealers have lost about three

months’ business this year because of

the coronavirus outbreak and they

are now emerging, blinking from

economic hibernation, into what is

traditionally one of the slowest

trading periods of the year. They

M

otor retailing stocks look

cheap, but then they always

seem to look cheap (Robert

Lea writes).

Shares in the five quoted car

dealers are, on average, trading down

30 per cent year-on-year, much of

which is accounted for by the big

market sell-off and, in this sector in

particular, because of the pandemic

lockdowns.

Since the decision to leave the

European Union in the Brexit

referendum, which precipitated these

Tempus

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

Zhevago saga casts shadow on miner

F

errexpo cheered investors

with a solid set of half-year

results yesterday and an

extra dividend payment

(Emily Gosden writes). The

FTSE 250 company, which produces

iron ore pellets from two mines in

Ukraine, said that it would pay an

interim dividend of 6.6 cents per

share, on top of another dividend of

the same value declared in June,

doubling its interim payout

compared with a year ago.

It reported strong production, up

5 per cent to 5.6 million tonnes, and

sales volumes up 22 per cent to

6.1 million tonnes. Production costs

fell by 11 per cent, helped by lower

commodity prices and the higher

volumes. Iron ore prices were

buoyant in the first half, in line with

a year earlier, although Ferrexpo said

that this had been offset by weaker

demand for pellets, leading to a 13 per

cent decline in average prices.

Steve Lucas, chairman, said that it

had “continued its investment for

growth and aims to double output

from operations in Ukraine over the

medium term”. Disruption from the

pandemic was minimal and, in the

second half, “a recovery in steel

demand outside China, which should

be constructive for pellet premiums”

was expected.

Shares in the miner surged by

13 per cent, or 23½p, to 205p after the

update, which ordinarily might look

like a tempting investment

proposition. However, this is not any

ordinary company when it comes to

corporate governance.

Ferrexpo, which was listed in

London in 2007, is 50.3-per cent

owned by Kostyantin Zhevago, a

Ukrainian billionaire who was its

chief executive until last year. Mr

Zhevago, 46, was an elected

politician in Ukraine for two

decades, losing his seat last summer

and with it his immunity from

prosecution.

Prosecutors began an investigation

over alleged embezzlement from

Finance & Credit Bank, a Ukrainian

lender that he used to control. The

bank was declared insolvent in 2015

while holding $174 million of

Ferrexpo funds, which the company

is still trying to recoup.

Mr Zhevago, who denies any

wrongdoing, stood aside as Ferrexpo

chief executive in October. However,

he was placed on an international

wanted list in December. He remains

a director of the company and

apparently is still expected to return

Red flags

Share price

Q4Q1 Q2 Q3Q4Q1 Q2 Q3

Source: Refinitiv

First six months

Pellet production

Average iron ore price (benchmark 62% grade)

Average cash cost of production

2019

2020

5.4m tonnes

5.6m tonnes

$91.4/tonne

$91.1/tonne

$46/tonne

$41/tonne

300p

250

200

150

100

50

0

2019 2020

as chief executive at some point.

Ukrainian courts have frozen

movement of 50.3 per cent of shares

in Ferrexpo Poltava Mining, one of

Ferrexpo’s main subsidiaries. One

court order in January was cancelled

by the court of appeal at the start of

June, only for another to be imposed

weeks later, which Ferrexpo believes

can be similarly challenged.

The obvious concern for

shareholders is the risk that some or

all its shares might be confiscated if

Mr Zhevago is convicted.

Last year Ferrexpo became

embroiled in another scandal over a

charity called Blooming Land, to

which it had donated $110 million

since 2013.

It started an investigation after

Deloitte, its auditor, raised concerns

about how the money was being

spent. Deloitte was also unable to

agree with Ferrexpo’s conclusion that

Mr Zhevago did not control

Blooming Land, which was funded

solely by Ferrexpo and another

company ultimately controlled by

Mr Zhevago.

It is thought that Ukrainian

authorities have been investigating

whether the charity was used for

money laundering and tax evasion.

Ferrexpo’s own independent review

concluded that some funds may have

been misappropriated, but was

satisfied that none of its directors

were involved. It is not clear what

has become of the funds.

Matters relating to Ferrexpo’s

majority shareholder should raise red

flags for investors.

ADVICE Avoid

WHY Corporate governance

concerns outweigh solid

operational performance

are not owned by motorists; fewer

young people are bothering to learn

to drive; and sales are shifting online.

Then, more recently, all those fears

about dodgy dealers have proved

well-founded, with the Financial

Conduct Authority discovering

widespread instances of sharp

practices around credit interest

rates.

The car-dealing stocks may remain

cheap for a while yet.

ADVICE Avoid

WHY Difficult to find a single

reason to invest in the sector

ferrexpo

First-half

revenue $776m

Profits after tax

$250m

automotive retailers

New car sales

2019 2.3m

New car sales

2020 1.6m (est)

Commodities

ICIS pricing (London 7.30pm)

Crude Oils ($/barrel FOB)

Brent Physical 45.36 +0.25

BFOE(Oct) 45.27 +0.74

BFOE(Nov) 45.69 +0.73

WTI(Oct) 42.43 +0.52

WTI(Nov) 42.76 +0.55

Products ($/MT)

Spot CIF NW Europe (prompt delivery)

Premium Unld 369.00 370.00 +17.00

Gasoil EEC 385.00 387.00 +17.25

3.5 Fuel Oil 249.00 251.50 +5.00

Naphtha 386.00 388.00 +15.00

ICE Futures

Gas Oil

Aug 377.75-377.25 Nov 388.50-388.25

Sep 380.25-380.00 Dec 391.25-391.00

Oct 385.00-384.75 Volume: 740952

Brent (9.00pm)

Oct 45.16-45.14 Jan 46.28-46.23

Nov 45.54-45.53 Feb unq

Dec 45.92-45.91 Volume: 1657139

LIFFE

Cocoa

Sep 1681-1680 Dec unq

Dec 1683-1679 Mar unq

Mar unq May unq

May unq

Jul unq

Sep unq Volume: 78104

RobustaCoffee

Sep 1390-1388 May unq

Nov 1372-1369 Jul unq

Jan 1393-1378

Mar unq Volume: 54265

White Sugar (FOB)

Reuters May unq

Aug unq

Oct 370.00-369.80 Oct unq

Dec 370.00-369.10 Dec unq

Mar unq Volume: 43121

PRICES

Major indices

New York
Dow Jones 27201.52 (+373.05)
Nasdaq Composite 10998.40 (+57.23)
S&P 500 3327.77 (+21.26)

Tokyo
Nikkei 225 22514.85 (-58.81)

Hong Kong
Hang Seng 25102.54 (+155.91)

Amsterdam
AEX Index 563.05 (+5.11)

Sydney
AO 6135.90 (-30.60)

Frankfurt
DAX 12660.25 (+59.38)

Singapore
Straits 2532.69 (+16.99)

Brussels
BEL20 3330.49 (+9.78)

Paris
CAC-40 4933.34 (+43.82)

Zurich

SMI Index 10097.97 (-64.07)

DJ Euro Stoxx 50 3268.38 (+14.09)

London

FTSE 100 6104.72 (+68.72)

FTSE 250 17638.30 (+330.60)

FTSE 350 3437.00 (+43.10)

FTSE Eurotop 100 2685.08 (+3.31)

FTSE All-Shares 3398.94 (+42.64)

FTSE Non Financials 4141.69 (+54.99)

techMARK 100 5647.10 (+80.29)

Bargains n/a

US$ 1.3113 (+0.0030)

Euro 1.1051 (-0.0020)

£:SDR 0.98 (+0.00)

Exchange Index 78.10 (+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 481.98 (+3.65)

Morningstar Long/Short Commod3940.90 (+24.87)

London Financial Futures

Period Open High Low Sett Vol Open Int

Long Gilt Sep 20 138.73 138.78 138.03 138.13 210289 518322

Dec 20 137.76 137.76 137.07 137.13 837 27

3-Mth Sterling Sep 20 99.910 99.915 99.905 99.915 70150 469567

Dec 20 99.925 99.930 99.920 99.925 51297 522322

Mar 21

Jun 21

Sep 21

3-Mth Euribor Sep 20 100.47 100.47 100.46 100.46 48522 473691

Dec 20 100.47 100.47 100.46 100.46 44218 427716

Mar 21

Jun 21

Sep 21

3-Mth Euroswiss Sep 20 100.72 100.72 100.71 100.72 3622 44886

Dec 20 100.74 100.74 100.72 100.73 1728 35853

Mar 21

Jun 21

FTSE100 Sep 20 6004.5 6075.0 5986.5 6063.5 72892 740536

Dec 20 5999.5 6030.0 5999.5 6032.0 5 5124

FTSEurofirst 80 Sep 20 4421.0

Dec 20 4415.5

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