The Times - UK (2020-10-15)

the times | Thursday October 15 2020 1GM 41

Business

Revenue at Pearson fell by a tenth in the

third quarter as a surge in demand for

online learning tools failed to offset

weakness in its North American uni-

versity and international divisions.

The world’s largest education

publisher said that turnover at its US

college business had tumbled by 15 per

cent between July and September

because of a decline in enrolments and

a further slide in textbook sales.

Its international division was hit hard

by economic lockdowns in markets

such as Australia and India, with reve-

nue sinking by 26 per cent over the

period.

Sales in its professional business fell

by 3 per cent, a marked improvement

on a 45 per cent slump over the previ-

ous three months, as it gradually

reopened centres where it assesses stu-

dents for professional qualifications.

In contrast, digital learning sales rose

by 32 per cent as schools and universi-

ties used more of its digital tools to

teach students remotely. Pearson,

A strong performance from distributing

personal protective equipment to busi-

nesses has propelled Bunzl to new peaks.

The FTSE 100 provider of workplace

supplies, which it neither makes nor

retails directly to consumers, has

consolidated its place as one of the big

winners of the coronavirus pandemic

as it met demand for masks and shields,

rubber or latex gloves, hand sanitisers

and disinfectants.

In its latest update to the market,

Bunzl said that its underlying revenues

in the third quarter had increased by

8 per cent, with nearly a fifth of that

accounted for by PPE (personal protec-

tive equipment) and other goods to pre-

vent the spread of Covid-19.

The news sent Bunzl shares to new

highs. After The Times had reported in

August that pandemic protective goods

were fast pushing a near annualised

£1 billion boost in sales for Bunzl, its

share price recovery accelerated to

claw back all the losses in the stock

market collapse soon after the outbreak

hit the West in February and March.

The shares closed up 50p, or almost

2 per cent, at £26.03, nearly 25 per cent

ahead of the peak the stock reached at

Christmas last year.

Bunzl is a global company with a

near-£10 billion annual turnover whose

stock-in-trade is providing workplaces,

hospitality establishments and retailers

with toilet rolls and cleaning kits, dis-

Bunzl reaps rewards

of demand for PPE

Robert Lea posable cutlery and cups, till rolls and

plastic bags, as well as safetywear for

factories and construction sites.

In a scheduled trading update, it told

investors: “Underlying revenue in-

creased strongly... reflecting the con-

tinued growth in the sale of Covid-19-

related products. Within the under-

lying revenue growth of 8 per cent,

sales of the top eight Covid-19-related

products, which are primarily own-

brand, contributed 17.5 per cent of

growth.

“The 2020 performance year-to-date

has been driven by strong sales of

Covid-19-related products, from a

combination of smaller orders and the

more exceptional larger orders.”

While the flip-side of the pandemic

has been the closure or much lower

trading of its pub, hotel, restaurant and

café customers, PPE and related equip-

ment comes with a much higher

margin because of the demand. Bunzl

said that Covid-19 product-related

growth had more than offset a 9.5 per

cent fall in demand for its other staple

goods.

Analysts were purring at the per-

formance, predicting a rise in earnings

well into double figures this year. Last

year the company made a pre-tax profit

of £578 million and JP Morgan Cazen-

ove, the broker, is expecting that to rise

to £652 million, with an increased divi-

dend of about 52p a share.

Jefferies, another broker, put a £30-a-

share target on the stock.

One of the world’s largest hedge funds

has taken a large stake in International

Airlines Group, the owner of British

Airways.

Marshall Wace became one of the

first big investment groups to bet on a

sector that has been hit hard by the

Covid-19 pandemic.

The London-based money manager,

which has about $48 billion in assets,

disclosed a 3 per cent holding yesterday,

according to the Financial Times.

and boosting its focus

on homeware. It

recently launched a

partnership with

Deliveroo and claimed

that online orders had

risen by a fifth since

severing ties with

Ocado last month.

Buying Mindful

Chef, which is

expected to fetch

about £50 million, may

have raised eyebrows

when John Lewis has

been cutting staff

numbers to save costs.

Mindful Chef was

set up five years ago

and has enjoyed an

explosion of orders

during the pandemic,

with sales trebling to

£50 million this year.

The sale process, run

by KPMG, is expected

to conclude shortly.

Mindful Chef

competes with the

likes of Hello Fresh

and Gousto, as well as

Morrisons and Marks

& Spencer, but the

business claims to

appeal to a different

customer base owing

to its healthier range

of gluten-free and

dairy-free ready meals

and smoothies. This

month it reported a

345 per cent increase

in vegan meal orders

placed since the

lockdown began.

The broadcaster

Fearne Cotton is one

of the ambassadors

for Mindful Chef’s

recipe boxes

Digital sales rise fails to soften pandemic blow

which has struggled with the shift to

digital learning, reported a 10 per cent

fall in underlying revenues over the

period, after a 28 per cent drop in the

prior quarter.

John Fallon, who is standing down

tomorrow after almost eight years as

chief executive, said that the company’s

digital performance had been “very

strong” in the third quarter. Trends had

improved since the height of the

Covid-19 outbreak and Mr Fallon,

58, predicted that full-year results

would be in line with market expec-

tations. He said that Pearson would

“emerge stronger from the pan-

demic”.

Pearson is in the midst of a

punishing transformation from a

print-dominated publisher to a

provider of digital products and

services. During Mr Fallon’s time,

the company has sold the Finan-

cial Times newspaper, Penguin

books, a stake in The Economist

magazine and other assets. How-

ever, Mr Fallon has repeatedly

downgraded profit forecasts owing

to the rapid decline of its American uni-

versity textbook business.

Under Mr Fallon’s tenure, Pearson

has more than halved in value and he

said that he “owned and was account-

able for the share price performance

and... various profit warnings”. How-

ever, he said that he had “earned the

right” to ask “what might have hap-

pened” if he had not cut costs, invested

in its digital businesses and strength-

ened the balance sheet by selling busi-

nesses.

Mr Fallon will be replaced by

Andy Bird, 56, a former Disney execu-

tive, whose $9 million signing-on pack-

age has angered investors.

Pearson said that it had enjoyed

“good growth” in digital and subscrip-

tion packages in the United States in

the autumn, leading to a “faster de-

cline” of print sales. Mr Fallon said

early indications from US colleges

suggested that enrolments had fallen

by 5 per cent year-on-year this autumn

as students deferred their places.

Shares in Pearson fell by 5¼p, or

0.9 per cent, to 564½p yesterday.

Pearson has

been affected

by the fall in

enrolments at

US colleges

such as Boston

University, left,

with turnover

falling 15 per

cent as textbook

sales continued

to fall during the

ng pandemic

P b b e U s U w

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Simon Duke

Marshall Wace and IAG declined to

comment on the trade.

Hedge funds have been looking at

sectors hit hard by the coronavirus fall-

out in recent months as they hunt for

bargains in the wake of plunging share

prices. IAG’s shares have tumbled by

60 per cent since February, but they

closed up ¾p, or 0.7 per cent, at 98¼p

last night.

The airlines company, which also

owns Aer Lingus and Iberia, launched a

discounted €2.75 billion rights issue last

month to ease the pain of second-

quarter losses. Some hedge funds built

up short positions against IAG ahead of

its rights issue, which are likely to have

proved profitable as the shares fell.

On Monday, IAG installed a new

boss at BA, its largest airline, replacing

Álex Cruz with Sean Doyle, previously

the head of Aer Lingus.

The International Air Transport

Association, the industry trade body,

warned this week that forecasts for in-

dustry losses of more than $80 billion

this year were too conservative and it

called for more government support.

Robert Miller

60%

The fall in IAG’s

share price since

the end of February.

The group is valued

at £4.9 billion

Source: IAG

Marshall Wace gets on board with BA owner

Pearson share price

Source: Refinitiv

1,500

1,000

500

0

p

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