44 1GM Wednesday October 14 2020 | the times
BusinessMarkets
news in brief
Diversity demand
Accounting firms have been told
to do more to increase diversity
in their top ranks after the
industry regulator found that
only 6.7 per cent of partners at
the biggest groups were from
black, Asian and minority ethnic
backgrounds. The Financial
Reporting Council said that data
collected from 20 accounting
firms about gender, ethnic and
disability diversity among their
workforces last year showed a
lack of inclusion at senior levels.
Women accounted for less than
20 per cent of partners at the
biggest accounting businesses.Connection weakens
Shares in French Connection lost
more than a fifth in value after
the ailing fashion chain unveiled
a half-year loss of £12.2 million,
compared with one of £3.6 million
last year. Sales tumbled by 53 per
cent to £23.9 million on the back
of store closures and stock
writedowns. The retailer said that
Covid-19 had cost it £22 million of
lost sales, but £15 million of
financing from Hilco, secured in
July, meant that it was “well
positioned” to navigate the
uncertain trading climate.Stay home until March
Amazon has told UK employees
not to return to the office until
March next year. The online
retailer had given guidance to its
global workforce that they can
continue to work from home until
January 8, but last week it
extended its recommendation to
UK staff after recent
announcements from the
government. Amazon has 27,500
employees in the UK, although
most work in warehouses that
have stayed open to fulfil a boom
in online orders.737 Max orders lost
Boeing delivered 11 aircraft to
customers last month, less than
half the number from the same
month last year. The aircraft
maker said that it had lost
orders for two 737 Max jets from
BOC Aviation, a leasing
company, and a third from an
unidentified customer last month.
The 737 Max was grounded in
March last year after two crashes
killed a total of 346 people. In the
past year 1,006 Max orders have
been cancelled, or removed from
its backlog.$28 billion and pre-pandemic pre-tax
profits of $2.1 billion. Having grown
by the acquisition of smaller regional
outfits, it is split roughly 36 per cent
in American construction, 36 per
cent in European construction and
28 per cent in building materials in
the United States and Europe. Its
profit margins are in the 15 per cent
region, which compares
conspicuously with the wafer-thin
margins that the companies actually
doing the construction exist on.
At its half-year results — at which
it paid a dividend — the numbers
were at previous-year levels and it
expected the third quarter to be a
similar story, even if the final quarter
was a little cloudier. However, sinceweather and the outlook for the
world’s health. To their ranks you
can add CRH.
Originally an Irish construction
materials company, it has become a
pan-North American and pan-
European player. And although
perhaps not resonating with the
public in the way that some
companies do, it is Ireland’s biggest
business, making more money —
even in the good times — than
Ryanair or Guinness. It is the
product of a merger in the distant
20th century between Cement and
Roadstone. In the UK it is best
known as the owner of Tarmac.
The company has become a
behemoth with annual turnover ofG
iven the state of the global
economy as countries
continue to struggle with the
pandemic, there is a curious array of
multinational FTSE 100 industrial
stocks that haven’t merely recovered
quickly from the initial coronavirus
market crash but have pushed on to
new heights (Robert Lea writes).
Typically, they are not household
names. Halma, Spirax-Sarco and
Croda are three whose products and
output are deemed crucial to global
trading whatever the economicTempus
Buy, sell or hold: today’s best share tips
Fulfilment will be key for new boss
O
nly days into his new job,
Ken Murphy presented
his first set of result as
boss of Tesco last week
— and they weren’t a
bad way to start (Ashley Armstrong
writes). Britain’s biggest retailer has
been encouragingly resilient through
the coronavirus pandemic. The
question now is: what will he do
next?
Whatever it is, he will have to go
some to match the dramatic early
efforts of Dave Lewis, his
predecessor. Shortly after his arrival,
Mr Lewis, 55, had to set about
reviving the supermarkets group
after an accounting scandal, selling
off assets, including its interests in
South Korea, and ditching
distractions such as Giraffe, the
restaurant chain, and Dobbies, the
garden centres business.
After firefighting for the first three
years of his tenure, the last three
were focused on the battle with the
discounters, striking a deal with
Booker, the wholesaler, and —
shortly before he left — there were
early signs that Tesco was starting to
flex its technology muscle.
In short, Mr Murphy, 53, has been
handed a stable business in what are
historically unstable times. Tesco is
well capitalised, with £2 billion of
cash on the balance sheet. Despite an
expected £725 million of costsrelating to Covid-19, including the
hiring 40,000 of extra staff, most of
these costs have translated into
higher sales. Fuel and clothing sales
have fallen during the pandemic, but
bigger grocery baskets, helped by the
return of the big weekly food shop,
have more than offset this.
Tesco also has more than doubled
the number of online orders it serves
from 650,000 to 1.5 million a week asdigital growth has soared by 68.7 per
cent. A fifth of these orders are click-
and-collect, which helps to boost the
profitability of online orders.
Mr Murphy has signalled that the
launch of Tesco’s so-called urban
fulfilment centres (the first of which
has opened in West Bromwich in the
West Midlands) will be a game-
changer. The centres, built at the
back of its larger Extra stores, are
semi-automatic, with conveyor belts
of groceries bringing products to
pickers rather than workers running
around the aisles to track down
items for a customers’ order. The
new boss said that he believed online
growth was “here to stay”, so it was
crucial for the company to ensureStaying power
Share price
Source: RefinitivUK Republic of Ireland
Total retail Tesco Bank
Sales
Sales
Growth
Growth
Growth
Large stores FoodConvenience Clothing
Online General
goodsOperating profit
Operating profit
£24.33bn
£26.26bn
7.7 % £1.19bn
£-155m1.4% 9.2%
7.6 % -17.2%
68.7% -0.3%
-31.4%
£386m
£1.9bn
8.5% £1.13bn
-1.5% £59m20162017 201820192020
100
150
200
250
300p
that it could find a way to serve
online profitably, without simply
increasing delivery fees. In which
case he may explore licensing Tesco’s
picking technology, taking a leaf
from Ocado’s book, which could
propel the share price.
The supermarket said last week
that it expected retail operating
profits to be “at least” the same as
the £2.3 billion of last year and it is
ploughing ahead with a progressive
dividend policy. Investors will be
getting a £5 billion special dividend
— equivalent to around 51p per share
— as part of its commitment to
return cash from the impending sale
of its Thai and Malaysian businesses.
Rather than bringing about any
revolution, Mr Murphy said last
week that he was very happy with
Tesco’s present direction. He ruled
out selling Tesco Bank or
retrenching or expanding abroad or
changing its existing pricing strategy.
Yet for all the plaudits heaped on Mr
Lewis for pulling the supermarket
away from its accounting black hole,
the share price has stagnated and at
222½p yesterday is little above when
he first took the helm. “Right now
the organisation isn’t focused on
change, it’s focused on delivery,” Mr
Murphy told analysts last week.
The new Tesco boss has enough to
keep him busy in the next couple of
months as he will be focused on
Christmas, navigating Brexit and
then returning a bumper special
dividend. After that, though, he’ll
have to come up with a more
exciting way to boost the share price.ADVICE Buy
WHY Market undervalues
special dividend and strength
of the business
bouncing back by mid-summer, the
shares have been sashaying sideways,
which has surprised some in the City
who believe that a post-US election
infrastructure spending splurge is
guaranteed, irrespective of who is
voted into the White House.
The stock, down 51p, or 1.7 per
cent, yesterday at £29.86, is trading
on less than 15 times prospective
earnings and is expected to yield
more than 3 per cent.ADVICE Buy
WHY One of the stocks
shrugging off the pandemic
tesco
H1 sales £26.7 bn
H1 pre-tax profit£551 million
H1 dividend 3.2pcrh
Employees
79,000Countries where
it operates 30Commodities
ICIS pricing (London 7.30pm)Crude Oils ($/barrel FOB)Brent Physical 41.16 +0.85
BFOE(Jan) 43.00 +0.70
BFOE(Dec) 42.53 +0.73
WTI(Jan) 40.85 +0.74
WTI(Dec) 40.49 +0.76Products ($/MT)Spot CIF NW Europe (prompt delivery)Premium Unld 353.00 354.00 +6.00
Gasoil EEC 337.25 339.25 +0.25
3.5 Fuel Oil 229.00 230.00 +6.00
Naphtha 386.00 388.00 +7.00ICE FuturesGas OilNov 340.00-339.75 Feb unq
Dec 343.75-343.50 Mar unq
Jan 348.50-348.25 Volume: 646851Brent (9.00pm)Dec 42.46-42.45 Mar unq
Jan 42.91-42.90 Apr unq
Feb unq Volume: 1533913LIFFECocoaDec 1643-1642 Mar unq
Mar unq May unq
May unq Jul unq
Jul unq
Sep unq
Dec unq Volume: 69444RobustaCoffeeNov 1226-1224 Jul unq
Jan 1254-1253 Sep unq
Mar unq
May unq Volume: 24441White Sugar (FOB)Reuters Aug unq
Oct unq
Dec 386.90-386.70 Dec unq
Mar unq Mar unq
May unq Volume: 44903PRICES
Major indices
New York
Dow Jones 28679.81 (-157.71)
Nasdaq Composite 11863.90 (-12.36)
S&P 500 3511.93 (-22.29)
Tokyo
Nikkei 225 23601.78 (+43.09)
Hong Kong
Hang Seng 24649.68 (+530.55)
Amsterdam
AEX Index 572.47 (+0.16)
Sydney
AO 6400.20 (+57.10)
Frankfurt
DAX 13018.99 (-119.42)
Singapore
Straits 2567.65 (+15.23)
Brussels
BEL20 3320.47 (-64.89)
Paris
CAC-40 4947.61 (-31.68)
Zurich
SMI Index 10336.36 (-27.74)
DJ EURO Stoxx 50 3279.19 (-18.93)London
FTSE 100 5969.71 (-31.67)
FTSE 250 17891.01 (-276.70)
FTSE 350 3382.53 (-24.06)
FTSE Eurotop 100 2686.60 (-13.28)
FTSE All-Shares 3350.92 (-23.62)
FTSE Non Financials 4089.50 (-17.89)
techMARK 100 5817.20 (-83.89)
Bargains n/a
US$ 1.2939 (-0.0123)
Euro 1.1019 (-0.0036)
£:SDR 0.98 (+0.00)
Exchange Index 77.78 (+0.52)
Bank of England official close (4pm)
CPI 108.61 Aug (2015 = 100)
RPI 293.30 Aug (Jan 1987 = 100)
RPIX 290.10 Jun (Jan 1987 = 100)
Morningstar Long Commodity 494.09 (-6.68)
Morningstar Long/Short Commod 3736.30 (-0.13)London Financial Futures
Period Open High Low Sett Vol Open Int
Long Gilt Dec 20 135.54 135.99 135.50 135.91 264368 528285
MAR 21
3-Mth Sterling Dec 20 99.935 99.945 99.935 99.945 115621 585608
Mar 21
Jun 21
Sep 21
Dec 21
3-Mth Euribor Dec 20 100.52 100.52 100.52 100.52 39640 544985
Mar 21
Jun 21
Sep 21
DEC 21
3-Mth Euroswiss Dec 20 100.78 100.78 100.77 100.77 595 49112
Mar 21
Jun 21
Sep 21
FTSE100 Dec 20 5994.5 6002.0 5922.0 5936.0 91705 759459
MAR 21
FTSEurofirst 80 Dec 20 4473.0
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