The Times - UK (2020-08-28)

46 1GM Friday August 28 2020 | the times

BusinessMarkets

news in brief

Amigo vote called

The founder of Amigo has called

a shareholder vote to have

himself installed as chief

executive of the troubled

guarantor loans business. It

marks the latest twist in James

Benamor’s feud with the Amigo

board, which led to the exit of

Stephan Wilcke, its chairman,

and Hamish Paton, who had a

brief spell as boss until last

month. Glen Crawford, a former

Amigo chief executive, was

reappointed to the role in July.

Mr Benamor, 43, wants Mr

Crawford to shift roles and lead

Amigo’s UK-regulated subsidiary.

Truck numbers are up

The country’s struggling

automotive industry has

produced some good news at last.

The number of vans and

commercial vehicles rolling off

assembly lines in July — mainly

at the Vauxhall plant in Luton

owned by PSA, the French group

— rose year-on-year by 3 per

cent. The 5,234 made in the

month does leave the industry

playing catch-up after the

lockdown: production in the year

to date is 21 per cent down on the

first seven months of last year.

Burrito chain rescue

Chilango has been sold out of

administration after lockdown

finished off the struggling

business. The burrito chain told

investors yesterday that RSM, the

administrator, had sold the

company to RD Capital Partners,

an investment group, according

to City AM. The rescue deal

secures ten of Chilango’s eleven

restaurants and preserves about

130 jobs. The company had

crowdsourced £5.8 million from

1,500 small investors through so-

called burrito bonds.

Grafton shines in DIY

A surge in DIY spending in

Ireland eased the pain of

lockdown for Grafton Group. The

Irish builders’ merchant said that

Woodie’s, its DIY retailer, had

outperformed in the six months

to the end of June, despite being

closed for 51 trading days, and

had driven a rise in daily average

group revenue since then of

almost 4 per cent. Overall group

adjusted operating profit tumbled

by 61 per cent to £39.4 million in

the half-year. Shares in Grafton

rose 29½p, or 4 per cent, to 776p.

of scale during the pandemic. Its

revenues grew by 44 per cent to

€1 billion in the first half as the

company processed 257 million

orders. It declared an adjusted

headline profit of €177 million, but its

loss before tax widened from

€7 million to €121 million.

The company makes most of its

revenues from connecting

consumers with takeaway operators,

which pay it a commission and

handle deliveries. Increasingly,

though, Just Eat Takeaway.com is

having to build its own distribution

network to compete with the likes of

Deliveroo. Hiring a fleet of riders

threatens to crush returns, especially

in the United States, where it will be

the London-listed Just Eat

Takeaway.com into the world’s

largest food delivery company

outside China.

Shareholders will need to approve

the takeover in October, but they’re

unlikely to block the billionaire’s

path. He has delivered tasty returns

in the past.

Mr Groen founded Takeaway.com

as a student in the Netherlands in

2000, received his first external

funding in 2012 and floated his

company on the Amsterdam stock

exchange in 2016. Since then, he has

swallowed a dozen rivals before

agreeing the £6 billion Just Eat

merger.

The company showed the benefits

J

itse Groen is not going to let a

pandemic stand in the way of his

global ambitions (Simon Duke

writes).

A month after lockdown, the

Dutch food delivery tycoon finally

got his hands on Just Eat after

getting the green light from Britain’s

competition watchdog.

Three months later, when his

Takeaway.com was only beginning to

digest its UK rival, Mr Groen, 42,

pounced on America’s Grubhub. The

$7.3 billion all-paper deal will turn

Tempus

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

Banking on fatter mortgage margins

R

emember self-cert

mortgages, the home

loans that allowed

applicants to self-certify

their incomes? Also

known as liars’ loans, they led to a

lot of fraud, defaults and

repossessions when banks imploded

12 years ago (Patrick Hosking writes).

Now we have self-cert mortgage

holidays. Borrowers don’t have to

provide any evidence that they are in

difficulties before being allowed to

pause their payments. Many are

taking advantage of these holidays to

defer relatively cheap mortgage

repayments and are using the cash

saved to pay off expensive credit card

debts instead.

This makes judging the important

question of stress among mortgage

borrowers hard to gauge — and that

is crucial for One Savings Bank,

which has an £18.5 billion book of

buy-to-let and other specialist

mortgages.

Borrowers asked for payment

holidays on £5.2 billion of those

home loans at the start of the

pandemic, which sounds alarming.

Most of them, however, have

reverted to the normal payment

timetable. Borrowers with

£930 million outstanding have asked

for a further extension.

One Savings has taken a relatively

conservative approach in its half-

year results to June, setting aside

£54.4 million for loan defaults, up

from £8.6 million the previous year.

It’s impossible to say whether that

will end up being too little or too

much. Everything depends on the

virus and the economy and whether

the millions of renters will still have

jobs when furloughing ends in

October. In coming to its

impairment estimate, One Savings

has taken as its base case the

Moody’s forecast that unemployment

rises to 7.7 per cent and house prices

fall by 14.3 per cent this year.

These are difficult times for banks,

not simply because of default risk but

because of the squeeze on margins,

the effect of rock-bottom interest

rates and ringfencing rules that have

encouraged large banks to park spare

cash in capital-light home loans.

One Savings’ net interest margin

narrowed from 2.7 percentage points

to 2.5 percentage points on an

underlying basis, which assumes that

it owned Charter Court Financial

Services, its merger partner,

throughout both periods. On this

same basis, the group suffered a

14 per cent fall in pre-tax profits to

One to watch

Share price

Source: Refinitiv

H1 2019 H1 2020

270 basis points

Net interest margin

250 basis points

-20 basis

points

H1 2019 H1 2020

Cost to income ratio

29%

26%

-3%

H1 2019 H1 2020

Profit before tax

£183m

£156m

-14%

2014 15 16 17 18 19 2020

500p

400

300

200

100

0

£156.3 million, which Andy Golding,

its boss, described as resilient.

It has been a bumpy but profitable

ride for the Chatham-based One

Savings since it was created out of

the old Kent Reliance Building

Society and was floated in 2014.

Tempus made it a “buy” at the time

of the flotation at 170p. Its shares are

now at 301½p, having risen by 40¾p,

or 15.7 per cent, yesterday.

Plus-points are that the bank is

well-managed with good control of

expenses The cost-income ratio is

one of the best in the business at

26 per cent. It operates at the more

sophisticated end of the mortgage

market, where margins are fatter.

Minuses are that profits from buy-to-

let loans are much less reliable.

Landlords under pressure will walk

away from their liabilities, when

owner-occupiers will do anything

not to have their homes repossessed.

The buy-to-let sector is quiet. New

loan originations in the period were

down from £3.1 billion to £2.1 billion

and loan applications today remain

40 per cent lower than they were

before the pandemic. One Savings

dropped its dividend when larger

banks were forced to preserve cash

by the Bank of England in March.

This helped to strengthen the core

capital ratio to a robust 17.4 per cent.

On present numbers, it looks well

placed to resume payouts next year.

Most of the worst predictions for

landlords and the housing market

are in the share price. The shares

trade on only seven times

prospective full-year profits.

ADVICE Buy

WHY Shares are priced for

housing market slump

competing with Doordash, Uber Eats

and Postmates.

The global food delivery industry

is consolidating; meagre profit

margins leave room for only one or

maybe two operators in any

individual market. There is no reason

to think that when the shakeout

concludes Just Eat Takeaway.com

won’t be among the survivors, but

returns are unlikely to be as high as

the present £13 billion implies.

ADVICE Avoid

WHY Returns from food

delivery are unappetising

one savings bank

Underlying pre-

tax pft £156.3m

Gross new

lending £2.1bn

JUST EAT

H1 revenue €1bn

(up 44%)

Pre-tax loss

€121m

Commodities

ICIS pricing (London 7.30pm)

Crude Oils ($/barrel FOB)

Brent Physical 45.20 -0.61

BFOE(Oct) 45.09 -0.58

BFOE(Nov) 45.70 -0.56

WTI(Oct) 43.04 -0.35

WTI(Nov) 43.31 -0.38

Products ($/MT)

Spot CIF NW Europe (prompt delivery)

Premium Unld 384.00 385.00 -7.00

Gasoil EEC 356.50 358.50 -11.00

3.5 Fuel Oil 249.75 251.00 -7.25

Naphtha 383.00 384.00 -13.00

ICE Futures

Gas Oil

Sep 363.75-363.50 Dec 379.75-379.50

Oct 370.25-370.00 Jan 385.00-384.50

Nov 375.75-375.50 Volume: 737290

Brent (9.00pm)

Oct 45.08-45.05 Jan 46.38-46.36

Nov 45.60-45.59 Feb unq

Dec 46.01-46.00 Volume: 1646981

LIFFE

Cocoa

Sep 1702-1700 Dec unq

Dec 1732-1729 Mar unq

Mar unq May unq

May unq

Jul unq

Sep unq Volume: 75284

RobustaCoffee

Sep 1520-1472 May unq

Nov 1402-1401 Jul unq

Jan 1414-1410

Mar unq Volume: 13936

White Sugar (FOB)

Reuters May unq

Aug unq

Oct 361.90-361.70 Oct unq

Dec 369.00-367.10 Dec unq

Mar unq Volume: 47557

PRICES

Major indices

New York
Dow Jones 28492.27 (+160.35)
Nasdaq Composite 11625.34 (-39.72)
S&P 500 3484.55 (+5.82)

Tokyo
Nikkei 225 23208.86 (-82.00)

Hong Kong
Hang Seng 25281.15 (-210.64)

Amsterdam
AEX Index 562.41 (-3.82)

Sydney
AO 6310.60 (+16.10)

Frankfurt
DAX 13096.36 (-93.79)

Singapore
Straits 2519.81 (-22.27)

Brussels
BEL20 3370.25 (-30.13)

Paris
CAC-40 5015.97 (-32.46)

Zurich

SMI Index 10240.46 (-69.19)

DJ Euro Stoxx 50 3331.04 (-25.72)

London

FTSE 100 5999.99 (-45.61)

FTSE 250 17762.03 (+8.46)

FTSE 350 3392.28 (-20.99)

FTSE Eurotop 100 2712.51 (-16.54)

FTSE All-Shares 3357.92 (-19.81)

FTSE Non Financials 4076.60 (-25.88)

techMARK 100 5812.33 (+59.77)

Bargains n/a

US$ 1.3213 (-0.0002)

Euro 1.1172 (+0.0012)

£:SDR 0.98 (+0.00)

Exchange Index 78.55 (+0.40)

Bank of England official close (4pm)

CPI 109.07 Jul (2015 = 100)

RPI 294.20 Jul (Jan 1987 = 100)

RPIX 290.10 Jun (Jan 1987 = 100)

Morningstar Long Commodity 496.42 (+1.48)

Morningstar Long/Short Commod3870.73 (+12.15)

London Financial Futures

Period Open High Low Sett Vol Open Int

Long Gilt Sep 20 136.25 136.55 135.55 135.63 25504 40238

Dec 20 135.28 135.60 134.59 134.69 209022 500049

3-Mth Sterling Sep 20 99.920 99.920 99.915 99.915 76710 456018

Dec 20 99.895 99.905 99.885 99.890 77347 507956

Mar 21

Jun 21

Sep 21

3-Mth Euribor Sep 20 100.48 100.48 100.48 100.48 32329 483409

Dec 20 100.47 100.48 100.47 100.47 47893 457342

Mar 21

Jun 21

Sep 21

3-Mth Euroswiss Sep 20 100.73 100.73 100.72 100.72 1024 46557

Dec 20 100.72 100.73 100.72 100.72 1075 39604

Mar 21

Jun 21

FTSE100 Sep 20 6040.5 6059.5 5984.0 6007.0 69346 773699

Dec 20 6017.0 6020.0 5975.0 5976.0 131 9419

FTSEurofirst 80 Sep 20 4514.0

Dec 20 4508.0

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