38 2GM Friday August 7 2020 | the times
Business
Glencore has scrapped its dividend
after falling to a $2.6 billion first-half
net loss despite a bumper performance
from its trading division.
The commodities group said that it
would be “inappropriate” to proceed
with the proposed $2.6 billion payout
Rise in profits not due to
Covid work, insists Serco
Robert Lea Industrial EditorSerco, one of the private sector contrac-
tors working on the government
response to Covid-19, has reported a
53 per cent increase in half-year profits.
The company said yesterday the
virus had a “dramatic” impact on some
contracts but that new contract wins
had been offset by declines in other
work, meaning the pandemic had “little
effect” on profits overall.
Serco is helping to run the much
maligned test-and-trace programme as
well as the pop-up Nightingale hospi-
tals. Revenue was boosted by 5 per cent
by Covid-19 work, with a £130 million
gain from new and existing contracts
offset by a hit of more than £50 million
to its leisure, rail, air traffic control and
driving licence services worldwide.
The company said the increase in
profits in the first six months of 2020
was due to contracts won last year andprevious initiatives. Revenues were
lifted by turning its loss-making con-
tracts housing asylum-seekers profita-
ble, gains from buying a US navy engi-
neering support company, and the un-
winding of loss-making contracts from
before the arrival of Rupert Soames as
chief executive in 2014.
There is still no sign of a return of the
dividend, which was pulled six years
ago. Serco shares were down yesterday
by 25¾p, or 15.2 per cent, at 143¾p.
First-half revenues leapt 24 per cent
to £1.8 billion and underlying trading
profits went from £50 million a year ago
to £77 million. Serco expects profits of
between £135 million and £150 million
on revenues of £3.7 billion.
Mr Soames, 61, said: “There is a wide
range of possible outcomes for the year
and prudence would dictate that we
continue to take advantage of govern-
ment liquidity support, probably into
the fourth quarter.”Glencore cancels dividend
after recording $2.6bn loss
Emily Gosden Energy Editor for the year given the continued uncer-
tain outlook because of the pandemic
and the need to reduce debt. Shares fell
15¾p, or 8.1 per cent, to 180¼p yesterday.
Glencore’s trading arm reported a
record half-year adjusted profit of
$2 billion, boosted by its oil traders who
were “able to capitalise on the excep-
tional market conditions during the
half” as crude prices plunged, Ivan
Glasenberg, chief executive, said.
Its mining operations were also able
to continue “relatively normally” but it
was hit by a collapse in prices for coal.
Adjusted earnings in its energy prod-
ucts division, which mostly produces
coal as well as some oil, collapsed by
65 per cent to $700 million, whileadjusted earnings in its metals division
fell by 16 per cent to $2.2 billion.
The $2.6 billion group net loss, which
compares with a $226 million profit in
the same period last year, was driven by
impairments totalling $3.2 billion post-
tax. The impairments reflected lower
price assumptions for coal, oil and zinc
owing to the uncertainty caused by the
pandemic, and reassessments of the
future of its mines. The company
booked the biggest impairment charges
on its Mopani copper mine in Zambia,
where it wants to mothball operations.
Glencore, which is based in
Switzerland, mines coal, copper, zinc
and cobalt and is one of the world’s
biggest commodities traders.
It had already postponed a decision
on the dividend in March because of
Covid-19. The decision not to pay a
dividend this year is only the second
time since listing in London in 2011. Mr
Glasenberg said it would wait and see
how the pandemic evolved before
reviewing its payments next year.
Mr Glasenberg, 63, who has run
Glencore since 2002, had hinted he
could stand down this year, once the
senior managers beneath him had been
replaced. “There’s not many of us old
generation left, we are working on it
and it will happen at the right time,” he
said. The pandemic had affected travel
arrangements but did not have a “major
impact” on the process, he said.
Brent crude oil prices fell from more
than $65 a barrel at the start of the year
to less than $20 a barrel in April as the
pandemic destroyed demand, while the
US benchmark price went negative for
the first time in history.
Mr Glasenberg said Glencore had
benefited from the “countercyclical
earnings power” of its large-scale
marketing and trading business. As
more cash was deployed in the trading
business, however, Glencore’s net debt
levels rose by more than $2 billion to
$19.7 billion, well above its target range
of $10 billion to $16 billion.
Mr Glasenberg said: “The board has
concluded that it would be inappropri-
ate to make a distribution to sharehold-
ers in 2020, instead prioritising the
acceleration of net debt reduction to
within our target range.”M
eggitt, the aerospace
supply chain group, has
conceded that it may
need to raise money
(Robert Lea writes).
Reports that the Coventry-based
company was considering a shareMeggitt eyes
new cash to
avoid a crash