The Times - UK (2022-01-26)

44 Wednesday January 26 2022 | the times

BusinessMarkets

news in brief

Credit Suisse in the red

Credit Suisse warned that it may

have fallen into the red in the

final quarter of last year after a

business slowdown and a jump in

legal costs. It said that it would

take a SwFr500 million

(£404 million) hit in the fourth

quarter to cover legal settlements,

adding to an impairment charge

of SwFr1.6 billion. The warning

capped a brutal year for Credit

Suisse, hit by the collapse of

Greensill Capital and heavy

losses from the demise of

Archegos Capital. Last week Sir

António Horta-Osório resigned

as its chairman.

General Electric shock

General Electric reported a fall in

quarterly revenues as the

industrial conglomerate counted

the cost of global supply chain

disruptions. Its share price fell by

6 per cent to close at $91.12 after it

warned that the problems were

most acute at its healthcare unit,

but also had hit its onshore wind

business. Larry Culp, the chief

executive, told investors that the

company was raising prices and

trying to keep a lid on costs, but

he said that inflation would

remain a challenge all year.

Covid-19 booster

Johnson & Johnson expects to

generate as much as $3.5 billion

from the sale of its Covid-19

vaccine this year in a sign that

the healthcare company’s

production problems are easing.

Last year it generated $2.4 billion

from coronavirus jabs after

delivery delays and volatile orders

of the vaccine led to it missing its

$2.5 billion target. Overall, the

group forecast annual sales in a

range of $98.9 billion to

$100.4 billion — above previous

expectations of $97.79 billion.

Offshore warning

The total of fundraisings last year

by British biotechnology and life

sciences companies was the

highest on record, boosted by

overseas investment and a focus

on the industry because of the

pandemic. However, despite the

rise of more than 60 per cent to

£4.5 billion, the BioIndustry

Association and Clarivate, a data

company, warned that “value

creation” from British science and

innovation was being “offshored”

because of a shortfall in domestic

investment.

Commodities

ICIS pricing (London 7.30pm)

Crude Oils ($/barrel FOB)

Brent Physical 89.52 +1.86

BFOE(Mar) 88.25 +1.93

BFOE(Apr) 87.29 +1.75

WTI(Mar) 85.60 +2.29

WTI(Apr) 84.37 +1.96

Products ($/MT)

Spot CIF NW Europe (prompt delivery)

Premium Unld 790.00 791.00 +16.00

Gasoil EEC 763.50 765.50 +8.25

3.5 Fuel Oil 483.00 487.00 -2.00

Naphtha 774.00 776.00 +14.00

ICE Futures

Gas Oil

Feb 768.00-767.50 May 737.50-736.75

Mar 758.75-758.50 Jun 729.50-729.00

Apr 747.50-747.00 Volume: 685216

Brent (9.00pm)

Mar 88.13-88.11 Jun 85.29-85.26

Apr 87.13-87.11 July 84.75-83.10

May 86.18-86.16 Volume: 1969306

LIFFE

Cocoa

Mar 1692-1690 May 1723-1691

May 1729-1727 Jul 1723-1686

Jul 1739-1738 Sep 1736-1726

Sep 1736-1726

Dec 1739-1730

Mar 1721-1718 Volume: 70781

RobustaCoffee

Jan 2314-2315 Nov 2191-2152

May 2201-2200 Jan 2184-2095

Jul 2198-2189

Sep 2197-2152 Volume: 9647

White Sugar (FOB)

Reuters Oct 486.50-482.30

Dec 487.20-471.30

Mar 503.40-503.00 Mar 487.20-482.00

May 496.40-494.90 May 477.20-474.40

Aug 491.20-487.90 Volume: 53907

PRICES

Major indices

New York
Dow Jones 34297.73 (-66.77)
Nasdaq Composite 13539.30 (-315.83)
S&P 500 4356.45 (-53.68)

Tokyo
Nikkei 225 27131.34 (-457.03)

Hong Kong
Hang Seng 24243.61 (-412.85)

Amsterdam
AEX Index 739.86 (+1.20)

Sydney
AO 7248.10 (-193.40)

Frankfurt
DAX 15123.87 (+112.74)

Singapore
Straits 3247.76 (-35.59)

Brussels
BEL20 4029.86 (+36.21)

Paris
CAC-40 6837.96 (+50.17)

Zurich

SMI Index 11945.69 (+64.39)

DJ Euro Stoxx 50 4078.26 (+23.90)

London

FTSE 100 7371.46 (+74.31)

FTSE 250 21645.71 (+193.21)

FTSE 350 4164.76 (+41.20)

FTSE Eurotop 100 3431.52 (+29.35)

FTSE All-Shares 4139.47 (+40.31)

FTSE Non Financials 4975.57 (+35.85)

techMARK 100 6387.52 (-1.20)

Bargains n/a

US$ 1.3508 (+0.0021)

Euro 1.1959 (+0.0049)

£:SDR 0.98 (+0.00)

Exchange Index 82.36 (-0.32)

Bank of England official close (4pm)

CPI 115.05 Dec (2015 = 100)

RPI 317.70 Dec (Jan 1987 = 100)

RPIX 290.10 Jun (Jan 1987 = 100)

Morningstar Long Commodity 677.16 (+5.72)

Morningstar Long/Short Commod4703.45 (+27.75)

London Financial Futures

Period Open High Low Sett Vol Open Int

Long Gilt Mar 22 123.43 123.45 123.03 123.31 213735 801277

Jun 22 125.77 125.77 125.77 125.80 1 299

3-Mth Sterling Mar 22 99.320 99.320 99.285 99.301 3457 269264

Jun 22 99.025 99.045 99.015 99.026 10377 232459

Sep 22 98.885 98.890 98.860 98.866 3885 301735

Dec 22 98.820 98.825 98.790 98.806 7310 347378

Mar 23 98.785 98.795 98.755 98.771 8310 229855

3-Mth Euribor Mar 22 100.53 100.54 100.53 100.54 43737 389994

Jun 22 100.48 100.48 100.48 100.48 47608 492240

Sep 22 100.41 100.41 100.40 100.41 45955 501246

Dec 22 100.31 100.32 100.31 100.31 83209 527563

Mar 23 100.16 100.17 100.15 100.16 68013 443980

3-Mth Euroswiss Mar 22 100.73 100.73 100.73 100.73 677 31949

Jun 22 100.71 100.72 100.70 100.71 925 29152

Sep 22 100.68 100.68 100.67 100.68 710 31355

Dec 22 100.61 100.62 100.59 100.62 488 22748

FTSE100 Mar 22 7287.0 7331.5 7247.0 7318.5 120969 607729

Jun 22 7180.0 7180.0 7120.5 7183.5 5 236

FTSEurofirst 80 Mar 22 5644.0

Jun 22 5627.0

© 2022 Tradeweb Markets LLC. All rights reserved.

The Tradeweb FTSE Gilt Closing Prices information contained

herein is proprietary to Tradeweb; may not be copied or

re-distributed; is not warranted to be accurate, complete or timely; and does not constitute

investment advice. Tradeweb is not responsible for any loss or damage that might result

from the use of this information.

respectively, in the five years to 2020.

Last year was the 17th consecutive

year of growth in the latter.

That track record has not gone

unnoticed. Over the past five years

the shares have risen almost fourfold,

but a forward earnings multiple of 17

does not look demanding against its

history.

Despite increased investment in

stock to cope with higher demand,

net cash stood at £241 million at the

end of last year, above the

£184 million expected by Jefferies,

the broker. That means there is scope

for special returns at some point over

the next 12 to 18 months, analysts

think, which typically take the form

of share buybacks. Ample cash also

and government organisations,

ranging from Lloyds Banking Group

to Facebook to the Ministry of

Defence. Sales have been helped by

customers increasing investment in

hardware and services as they

prepared staff to work from home

during the pandemic, but the

catalysts for revenue growth stretch

further back.

Providing technology products

together with services gives it a

competitive advantage, according to

Mike Norris, its boss. More rapid

growth in IT spending by companies

and government has spurred

compound annual growth of 12 per

cent and 19 per cent in revenue and

adjusted earnings per share,

C

logged up supply chains are

rarely cause for celebration for

corporate management teams,

but for Computacenter a rush in

customers — acutely conscious of

delivery delays — trying to secure

products led to a jump in its order

book, prompting it to upgrade its

profit guidance for last year and

boosting revenue visibility for the

first half of this one.

The company supplies, installs and

maintains technology systems for a

range of multinational businesses

Emma Powell Tempus

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

Train of thought does not augur well

N

ick Train losing patience

may be one of the

ultimate bear signals. The

star fund manager and

co-founder of Lindsell

Train, a famously low churner of

stocks and formerly Pearson’s largest

shareholder, has cut his holding in

the world’s largest education

specialist in half. Retail investors take

note.

Pearson has been a slow learner in

its attempts to reposition away from

the structurally declining market for

new print textbooks. Under John

Fallon, its former boss, it issued

seven profit warnings in as many

years, a bruising from which the

shares have yet to recover. The

appointment in 2020 of Andy Bird,

the former chairman of Disney’s

international division, ushered in an

organisational restructure and a

focus on distributing educational

materials directly to consumers,

rather than predominantly via

schools and colleges.

The turnaround case is far from

proven and the shares don’t look

particularly compelling value, either,

at almost 16 times forecast earnings

next year, a touch above the average

multiple over the past five years.

Exposure to print textbooks

remains the thorn in the side. The

rise of Amazon has eroded revenues

for what was once Pearson’s core

business. The higher price of print

materials versus digital meant that

although print and bundles — which

combine print textbooks and access

to online home working platforms —

accounted for only 17 per cent of the

American higher education college

courseware units sold last year, there

was an outsized impact on revenue.

Underlying revenue for higher

education, the second largest

division by sales, declined by 5 per

cent.

Pearson wants to recapture the

secondary market. Bird’s bright idea?

Pearson Plus, a Netflix-style online

subscription service that gives

students access to one ebook for

$9.99 a month or the whole Pearson

library for $14.99 a month. At the

end of December the service had

2.75 million registered users, but only

133,000 were paying specifically to

use Pearson Plus. The remainder

were already users of other Pearson

products, such as the MyLab and

Mastering online homework

Learning curve

Source: Refinitiv

Share price

Apr

2021

Jul Oct Jan

2022

550

600

650

700

750

800

850

900p

Assessment and qualifications

Sales by division (£ million)

H1 2021 H1 2020

Virtual learning

Higher education

English language learning

Workforce skills

Businesses under strategic review

353

314

358

391

89

78

112

110

574

484

111

115

platform, who have opted to access

content via the new subscription

service instead of the existing route.

It’s that direct-to-consumer

distribution route that the company

thinks will help to insulate it from

any decline in American college

enrolments as it hopes to capture

demand from those entering the

workplace and looking to increase

their skills. Analysts at UBS disagree,

downgrading the stock to a “sell”,

arguing that there is risk to digital

courseware revenues “if the US

labour market remains tight, student

loan interest rates continue to rise

and the federal government does not

enact support for tuition fees”.

Bulls will point to Pearson’s profit

guidance upgrade this month.

Underlying revenue for the

assessment and qualifications

division, now the largest segment,

grew by 18 per cent last year and

virtual learning revenues were up by

11 per cent. But the former was

against a weak comparator during

the previous year when many exams

were cancelled and the latter

benefited as students turned to

online lessons. Underlying revenue

growth slowed for both during the

fourth quarter, at only 2 per cent for

assessments and was flat for virtual

learning.

Is this just the start of Train’s

selling activity? He declined to

comment on the rationale for the

sale. Pearson that said it continued

“to engage with all its shareholders”,

but it could struggle to earn a higher

grade from the market.

ADVICE Avoid

WHY The decline in

courseware sales and tougher

annual comparatives

elsewhere could prevent the

shares re-rating this year

leaves plenty of room for more

acquisitions, which could lead to

expansion in the United States.

There’s the risk that some demand

has been pulled forward by

customers ordering earlier in an

effort to counter product delays.

Jefferies expects a 3 per cent rise in

earnings this year, a slowdown on

growth of more than a fifth during

the last. But the shares’ valuation

doesn’t look overly optimistic.

ADVICE Buy

WHY Shares look inexpensive

compared with peers

pearson

Market cap

£4.56bn

Underlying sales

growth 8%

computacenter

Market cap

£3.23bn

Revenue growth

23%