the times | Thursday December 3 2020 1GM 45Business
You shop, we drop
cashback claim
E
very lottle helps. And even
by corona standards,
£585 million is a lot of
money. So, Tesco should
be applauded for finally
coming to its senses and handing
back Rishi Sunak’s ill-judged
business rates freebie. It’s a U-turn
all right, but a highly welcome one.
Even better, it signalled the end of
the supermarkets’ cake-and-eat-it
diet: swallowing cash the chancellor
should never have given them in the
first place and effectively using it to
fund shareholder dividends. Tesco
chairman John Allan insists
competitive advantage “didn’t come
into our minds” when making the
move, just the motivation to “do the
right thing”. But it forced the hand
of Morrisons, last night saying it
would repay £274 million and
pretending it had been thinking of it
all along. How can Sainsbury’s,
Asda, Aldi, Lidl, Iceland and covid
winner B&M not follow suit?
Being a corporate freeloader is no
great look, not least at Christmas.
And who wants to be last to cough
up? Assuming they all do, that’s
£2 billion-plus for our skint nation.
All the same, Tesco’s change of
heart needs teasing out. Amusingly,
it was greeted with three pages of
codswallop from Shore Capital
analyst Clive Black, labelling the
decision “a hostile move for
shareholders” and a “dangerous
precedent”. In fact, Tesco shares fell
2 per cent to 224½p: not alarming.
Investors got it quicker than him.
The chancellor’s rush-job rates
relief was meant for retailers shut by
the pandemic, not ones open
throughout and raking it in. Yes,
Tesco has had extra corona costs:
£725 million this year it reckons.
But, as with the other supermarkets,
they’ve been offset by soaring sales,
partly at the expense of the locked
down eating out market. In April, as
pointed out here, the board was
breezily proving it had no need of
Mr Sunak’s largesse by paying a
£635 million dividend. Back then, it
claimed it was based on pre-
pandemic trading. It could hardly
say that of October’s payout,
shamelessly jacked up by a fifth.
Again, Mr Allan justified hanging
on to the money. So, what’s changed
in two months? Well, he says, clarity
over the impact of the crisis on the
group — Morrisons had a similar
line — and the realisation that
“although we are not making out
like bandits, we are doing really well
in comparison to a lot of other
businesses”. He says there was “no
political pressure from the
government”, though there was
from a “blue-collar Tory” group led
by MP Esther McVey.
Neither did he feel that keeping
the loot compromised his job as CBI
vice-president or his “levelling up”
efforts as chairman of the Covid
Recovery Commission — even if
others might. His take on that? “I’m
not schizophrenic.” And nor was the
board’s move influenced by the
switch of chief executive from Dave
Lewis to Ken Murphy, he says.
But he admits the press helped
swing opinion, while Howden
Joinery returned its rates relief.
And, as Mr Allan puts it: “The
arguments for holding on to the
money were becoming weaker andweaker. And if you close your ears
to what people are saying and
hunker down and never be prepared
to change that’s not very wise.” His
hope is Mr Sunak uses “the money
to support businesses and
communities that need it more”.
At last, then, a socially responsible
call — and the freedom for Tesco
and Morrisons to pay any dividend
they like without brickbats. So, over
to the other supermarkets. Just now
you can really taste the difference.Jam tomorrow
W
hat a day for Ashley
Almanza, the G4S boss
(report, page 48). He’s
spent seven years bringing the
group to a “critical inflection point”.
And guess what? It wasn’t even real.
No, this is what a real one looks like:
a £3.68 billion cash bid from
Gardaworld at 235p a share.
Finally, a point around which to
inflect. The offer’s the highest price
put on the shares since September
2018 — even if it was the cue for
them romping up 7 per cent to 246p
on G4S’s reminder that Gardaworld
isn’t the only game in town. G4S is
still “in discussions” with America’s
Allied Universal: an outfit that has
until next Wednesday to come back
with a firm offer better than its 210p
mooted bid or walk away.
Maybe Mr Almanza will secure a
higher offer from Allied. If not, he’ll
need more than inflectioneering to
see off Gardaworld, whose boss
Stéphan Crétier wants to own G4S
so much he keeps declaring it
several guard dogs short of the full
kennel. Yesterday he was rude about
it over 31 pages — cashflow horror
shows, endless accounting one-offs
— before rounding off with a
graphic comparing the certainty of
today’s bid to a pot of jam, helpfully
labelled “jam”. But he’s also squared
off the pension trustees and
dropped the acceptances threshold
to a straight majority. Lots to inflect
about here.Alchemist Phil
A
nother rewiring job at the
Countrywide house. And at
least the ex-bookie Philip
Bowcock has made a better job of it
than former boss Peter Long. He’s
rejected the 250p-a-share cash bid
from rival estate agent Connells and
got a second proposal from buyout
firm Alchemy (report, page 49).
True, rewiring the Mars space
probe would be less complex. It now
involves £70 million of Alchemy
underwriting and share transactions
at three different prices: none of
them the present 241p share price.
There’s a tender offer at a Connells-
matching 250p, a firm placing to
Alchemy at 225p and an open offer
at 100p. And already kingmaker
investor Hosking Partners has
spotted that the sequence of these
transactions skews the maths and
deliverability. It all falls over too if
Alchemy fails to take control or if
the debt holders kick off. A higher
Connells cash bid would be easier.
But at least it’s no Bowcock-up.[email protected]business commentary Alistair Osborne
Tesco to
give back
rates relief
millions
Continued from page 43
a special dividend for this year and
acknowledged that it had “weathered
the significant financial challenges of
Covid-19 very well”.
David Potts, 63, chief executive, said:
“We are grateful for the government’s
swift action at the start of the pan-
demic, which enabled the whole sector
to face squarely into the challenges and
disruption caused by Covid-19.”
Other companies in the industry,
including J Sainsbury, refused to
commit to paying back business rates
relief yesterday, while Waitrose and
Marks & Spencer ruled it out because of
the hit to their clothing and home busi-
nesses from lockdown.
The British Retail Consortium, the
industry trade body, said: “The decision
to repay business rates relief is one for
individual companies to consider for
themselves.”
Esther McVey, Conservative MP for
Tatton, who has fronted a political
campaign for supermarkets to repay
the taxpayer support, yesterday called
on all of Tesco’s rivals to follow its lead.
“Come on supermarkets, all onboard,
send the money back,” she tweeted.
A Tesco insider said that the grocer
had viewed the payment of a dividend
and business rates relief as two separate
issues.
Tesco said that it had faced addi-
tional costs of £725 million, while Dave
Lewis, its former boss, said in April that
“every penny of rates relief received”
had gone on “ensuring that Tesco is
able to support Britain’s shoppers”.
Mr Lewis, 55, said yesterday: “As a
customer, a shareholder and former
chief executive, I fully understand the
decision the board has made and am
supportive of it.”Repay or not repay, that is the question
sainsbury’s
Britain’s second largest supermarket
chain has enjoyed about £500 million
in rates relief, putting it under the most
pressure to follow Tesco’s lead (Tom
Ball writes). It did not respond to
requests for comment on whether or
not it would repay the money.
Sainsbury’s was censured last month
when it said it would pay a £230 million
dividend. Simon Roberts, 49, the chief
executive, said at the time that Britain’s
pensioners relied on the payout and he
highlighted £290 million of additional
costs linked to the pandemic.
Analysts at Barclays said that pre-tax
profit would drop from £650 million to
£200 million if it paid back the money.john lewis partnership
The owner of 335 Waitrose shops and
42 John Lewis stores said that it would
not repay £51 million in rates relief.
“We are incredibly grateful for this
vital support because we have lost sig-
nificant sales while our John Lewis
shops have been closed and have in-
vested heavily to keep our partners and
customers safe,” a spokeswoman said.
“Government support remains crucial
to help us navigate the crisis.” The com-
pany will not pay a partnership bonus
to staff this year.
John Lewis said in its half-year
results statement that the tax break had
helped the company to offset £50 mil-
lion of additional pandemic-related
costs, such as safety equipment.
Like-for-like sales at Waitrose were
up by almost 10 per cent on last year inthe six months to July 25. However, the
John Lewis non-food stores suffered
from £200 million in lost sales.asda
The third largest supermarket chain
is also the third biggest beneficiary of
rates relief, with an entitlement worth
£297 million. The company did not
respond to requests for comment.
Like-for-like sales rose by 2.7 per cent
year-on-year in the three months to
September, but lagged its rivals.
Walmart, Asda’s American owner,
has agreed to sell the chain to EG
Group, owned by the billionaire Issa
brothers, and TDR Capital, the private
equity firm, for £6.8 billion. The deal is
expected to to completed next year.m&s
The company said that it did not intend
to repay its rates relief. A spokeswoman
said that the tax break had “enabled us
to support our colleagues and our sup-
pliers, whilst continuing to serve our
customers in what have been incredibly
challenging circumstance”.
A bruising year for M&S pushed it to
its first loss in 94 years as a public com-
pany. Most of M&S’s clothing and home
store space has been closed for much of
the year, as have many of its cafés.
M&S announced early in the pan-
demic that it would pay a dividend.b&m
The discounter declined to comment
on whether or not it planned to repay
£38 million in rates relief. The companyhas returned £3.7 million of furlough
money after recent “strong” results.
One of the pandemic winners, B&M
achieved underlying sales growth of
23 per cent in the six months to Sep-
tember.
Last month the company paid out a
£250 million special dividend on top of
a £43 million interim dividend that was
59 per cent higher than in 2019. Simon
Arora, 51, the billionaire chief executive
of B&M, received £44 million.
Barclays analysts estimated that
B&M’s pre-tax profit would fall from
£462 million to £382 million if it repaid
the relief money.aldi
Aldi’s rates relief is worth £109 million,
according to an analysis by Altus
Group. The German discounter, which
has 900 shops in the UK, did not
respond to requests for comment.
Aldi was snapping at the heels of the
Big Four before the pandemic, but its
market share has dropped since. Still, it
announced £300 million of additional
investment this year and next and plans
to open 100 new shops.lidl
Lidl, which has about 800 shops in the
UK, is entitled to £108 million in rates
relief. The company did not respond to
questions on whether it would repay
the money. Like its compatriot Aldi,
Lidl has not fared as well as the more
established supermarkets during the
pandemic, in part because of its com-
paratively small online presence.public anger
£585m
Tesco business
rates relief£725m
Cost of Covid-19
to Tesco£900m
Dividend paid
by Tesco