58 Thursday November 11 2021 | the times
BusinessMarkets
5
news in brief
Wendy’s out of relish
Wendy’s has curbed expectations
for its annual profits as the
American fast-food chain
grapples with labour shortages
and rising costs. Wendy’s, which
opened the first of up to 400
burger restaurants in Britain this
summer, spoke of a “challenging”
environment. Total revenue rose
4 per cent to $470.3 million in the
quarter to October 3, while net
income increased 3.6 per cent to
$41.2 million. Wendy’s also raised
its share buyback plan to
$300 million, as part of which it
will launch a $125 million
programme in this quarter.Vodacom’s Egypt deal
South Africa’s Vodacom said that
it would buy a 55 per cent stake
in the Egyptian division of
Vodafone for $2.74 billion as it
looks to consolidate its presence
on the continent. Vodacom had
been vying with MTN, its African
rival, for market share as
consumers and businesses
demand higher speeds and better
connectivity after the pandemic.
The deal expands Vodacom’s
reach to 37,000 network sites,
making it one of Africa’s largest
tower owners.Utility firm penalised
An energy supplier run by
Andrew Lindsay, the Olympic
rowing champion, has agreed to
pay £1.5 million into a redress
fund after the regulator found
that it had failed to offer enough
help to customers in debt. Utility
Warehouse, the trading name of
Telecom Plus, had failed to treat
customers fairly, resulting in
“some... being disadvantaged
and facing increased financial
hardship”, Ofgem said. The issues
took place between 2013 and
2019.Credit more universal
Thousands of higher-rate
taxpayers will be eligible for
universal credit as a result of the
chancellor’s budget changes last
month, according to the Institute
for Fiscal Studies. Rishi Sunak’s
changes to the taper rate — at
which earners have the benefit
withdrawn — will make 600,000
more people eligible for the
credit. The report says “a lone
parent with two children and
monthly rent of £750 can now
earn up to £51,900 before losing
all universal credit entitlement”.Commodities
ICIS pricing (London 7.30pm)Crude Oils ($/barrel FOB)
Brent Physical 82.80 -2.75
BFOE(Jan) 82.77 -2.14
BFOE(Feb) 81.68 -2.01
WTI(Jan) 80.06 -2.50
WTI(Feb) 78.74 -2.31Products ($/MT)Spot CIF NW Europe (prompt delivery)
Premium Unld 770.00 772.00 -1.00
Gasoil EEC 724.00 726.00 -2.00
3.5 Fuel Oil 422.00 422.00 -4.00
Naphtha 760.00 762.00 -1.00ICE Futures
Gas Oil
Nov 737.00-717.00 Feb 696.25-695.75
Dec 711.25-711.00 Mar 689.75-688.75
Jan 703.00-702.50 Volume: 787924Brent (9.00pm)
Jan 82.67-82.65 Apr 80.90-79.22
Feb 81.57-81.55 May 79.60-78.85
Mar 80.58-80.54 Volume: 1934553LIFFECocoa
Dec 1699-1668 Mar 1711-1700
Mar 1704-1702 May 1704-1699
May 1713-1705 Jul 1707-1694
Jul 1850-1712
Sep 1724-1700
Dec 1722-1699 Volume: 78571RobustaCoffee
Nov 2295-2211 Sep 2137-2010
Jan 2225-2224 Nov 2145-2075
May 2154-2150
Jul 2196-2136 Volume: 11346White Sugar (FOB)
Reuters Aug 505.90-499.90
Oct 498.90-492.90
Dec 509.70-507.40 Dec 496.30-492.40
Mar 506.70-506.40 Mar 494.10-482.50
May 510.90-505.10 Volume: 58084PRICES
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SMI Index 12401.40 (+33.88)
DJ Euro Stoxx 50 4348.82 (+4.19)London
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Bank of England official close (4pm)
CPI 112.42 Sep (2015 = 100)
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Morningstar Long Commodity 677.16 (+5.72)
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Period Open High Low Sett Vol Open Int
Long Gilt Dec 21 126.90 127.10 126.14 126.25 349155 839353
Mar 22 126.04 126.04 125.53 125.26 7241 78821
3-Mth Sterling Dec 21 99.745 99.750 99.735 99.740 30840 538291
Mar 22 99.330 99.330 99.270 99.285 30844 331737
Jun 22 99.060 99.060 98.990 99.005 30407 243415
Sep 22 98.900 98.900 98.780 98.795 42345 339563
Dec 22 98.820 98.820 98.695 98.710 52975 505221
3-Mth Euribor Dec 21 100.56 100.57 100.56 100.56 32245 436738
Mar 22 100.52 100.53 100.51 100.52 56063 312319
Jun 22 100.46 100.47 100.44 100.45 55882 310575
Sep 22 100.41 100.41 100.37 100.37 70555 414354
Dec 21 100.34 100.34 100.27 100.28 80322 471365
3-Mth Euroswiss Dec 21 100.78 100.79 100.78 100.79 892 50348
Mar 22 100.73 100.73 100.72 100.73 1503 35557
Jun 22 100.70 100.70 100.69 100.70 1498 32620
Sep 22 100.64 100.64 100.61 100.62 2134 31762
FTSE100 Dec 21 7253.0 7318.5 7237.0 7306.0 83813 625569
Mar 22 7188.0 7249.0 7185.0 7237.5 12 744
FTSEurofirst 80 Dec 21 5983.0
Mar 22 5965.5© 2021 Tradeweb Markets LLC. All rights reserved.
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investment advice. Tradeweb is not responsible for any loss or damage that might result
from the use of this information.but Peel Hunt, the broker, thinks that
should rise faster this year with the
company wanting to keep ahead of
the pay floor. Tim Martin, the
founder, has played down staff
shortage issues, stating that the
company may have had “isolated
difficulties in staycation areas in the
summer and during the pingdemic”
and that generally there had been a
“reasonable” level of job applications.
These are not the only pressures
facing the budget pubs group. Higher
price points and more freehold
properties mean that rivals generate
higher margins than Wetherspoon,
which even before the pandemic
stood at 7.3 per cent before
exceptional items. Hope for somethe pub among the group’s bedrock
of older punters has weighed on
sales, which in the 15 weeks to early
this month were just under 9 per
cent lower than they were at the
same time in 2019.
Towns and cities generally have
held up better than the suburbs, but
in London, which accounts for about
14 per cent of the group’s estate, sales
were down by just over 17 per cent
during its first quarter. The PR
generated this week by cutting prices
on some products could lift customer
numbers or hurt profit margins.
There’s also the risk of wage
inflation. On average, Wetherspoon
employees above the age of 18 are
paid above the minimum living wage,T
he cheap and cheerful allure
of fare served up at
JD Wetherspoon’s pubs isn’t an
attribute shared by the FTSE 250
group’s share price. At almost 18
times earnings forecast for 2023, the
business is valued at a premium to
its rivals, credited for generating
strong returns and funding a rapidly
expanding estate in its relatively
short history.
Yet worries over the pace of
recovery have taken the sheen off
the shares. Reticence to get back intoEmma Powell Tempus
Buy, sell or hold: today’s best share tipsNew course delivers a smoother ride
S
eparating fluke from
substance is the key
challenge in determining the
longevity of so-called
pandemic winners. Take
Halfords, for example: investors have
grown circumspect about the chain
since the summer, wary of rising
supply chain and inflationary
pressures. Its shares have fallen by
more than a quarter from a five-year
peak hit in July. Yet an increase in
underlying profit guidance for this
year to between £80 million and
£90 million, from at least £75 million
expected in June, has helped the
credibility of its shift towards higher-
margin services and business-to-
business sales.
The retailer’s services business
encapsulates garages, mobile service
vans, commercial fleet services and
in-store bike and vehicle repairs.
Revenue from that segment has risen
by three quarters on a two-year
basis, via a mix of acquisitions of
independent garages in what is a
highly fragmented market and some
underlying growth. It now accounts
for a third of the group total, up from
24 per cent over the whole of 2019
and against a target of generating
50 per cent of revenue from the
services business.
The rationale for that shift is
threefold. First, services purchases
are driven more by need than fancyand are less weather-dependent than
retail. Second, customers tend to be
more sticky, for instance bringing
their car back for an MOT the
following year, and so revenues tend
to be easier to predict. And, third,
transacting locally means revenues
are less at the mercy of currency
fluctuations than pure retail.
The retail business has beenmoulded into a leaner shape, too, as
shop closures and renegotiated rents
helped to reduce the rent bill. During
the first half of this year, 28 retail
lease renewals on better terms
translated into a 25 per cent cut on
rents for those stores. Lease liabilities
had fallen to £324 million at the end
of September, down almost 15 per
cent on the same time last year.
Eschewing new store openings
means one less outlet for capital
expenditure, which, together with a
highly cash-generative business
model, historically has meant good
things for income investors. The
dividend was scrapped last year, but
was reinstated with an interim
payment of 3p a share, which isDriving returns
Source: RefinitivJan Apr Jul Octev2020 2021Halfords share price Like-for-like revenue2022*2021202020192018Retail
Autocentres200250300350400450500p2.8%
36.1%14.6%
9.7%-2.7%
18.8%0.8%
2.6%2.3%
0.2%
*First half of 2022forecast to come in at 11p a share for
the full year by Peel Hunt, the house
broker. At the present share price,
that equates to a decent potential
yield of 3.4 per cent.
Excluding the skew of last year’s
lockdowns, retail like-for-like
revenue was ahead by almost a fifth
on a two-year basis, although that
was from an anaemic rate of
underlying revenue growth in both
motor and cycling businesses before
the pandemic. The question is
whether that heightened sales
growth can be sustained in the
longer term. Some trends that have
boosted sales, such as a sharp
increase in staycation products and
the boon of having essential retailer
status, may fall away. There’s also the
cost of increasing motor retail sales
in a mature market, which has partly
resulted from lowering overall prices
rather than predominantly trying to
compete with promotions.
Cycling sales growth has eased, as
well, partly because of supply chain
constraints. Admittedly, the company
has said that such pressures have
started to ease.
The extent to which better pre-tax
profit guidance will translate into
upgrades for next year is limited by
the cost of cutting prices and the
£9 million boost from business rates
relief, which will fall away next year.
Analysts at Peel Hunt raised their
pre-tax profit forecasts for this year
by 10 per cent to the midpoint of the
new guidance, but see it falling back
to £81 million next year. Halfords,
though, is on the right track.ADVICE Hold
WHY An increase in service
revenue could generate a
higher rate of growth at the
group levelanalysts also rests on the pub
operator’s ability eventually to
increase its prices again. Peel Hunt
estimates that a 2 per cent increase
in sales prices next year would
translate into a 25 per cent boost to
pre-tax profits, based upon forecast
revenue of £1.9 billion. That remains
to be seen. There may be better value
ways to play the post-pandemic re-
opening trend.ADVICE Avoid
WHY Sluggish sales and the
risk of a rise in costs could
lead to more downgradeshalfords
Market cap
£555 millionHalf-year growth
8.7 per centjd wetherspoon
Market cap
£1.33 billionQ1 revenue fall
8.9 per cent