46 2GM Wednesday February 23 2022 | the times
BusinessMarkets
news in brief
Good news for Galactic
Virgin Galactic, the space tourism
company founded by Sir Richard
Branson, has posted a smaller-
than-expected quarterly loss and
said its cash position had
improved, sending its shares
2.9 per cent higher in late trading
in New York to $8.11. The firm
reported revenue of $141,000,
below expectations of $331,000,
and held about $931 million in
cash at the end of December,
compared with $679 million a
year earlier. The figure excludes
$425 million raised last month
through a debt offering to help
fund its commercial service.Angling Direct sales up
Angling Direct said it expects to
report a 7.2 per cent jump in sales
for the 12 months to the end of
January at its full year results in
May. Sales hit £72.5 million as it
enjoyed a strong recovery in store
business following the end of
Covid-19 restrictions. As a result,
online sales dropped 4.3 per cent
to £33.8 million, although these
were up 33.9 per cent on a two-
year basis. Andy Torrance, chief
executive, said: “We have
delivered against our operational
and strategic objectives.”Wire rod imports
The Trade Remedies Authority
has proposed that existing
measures on imports of iron and
steel wire rod be maintained.
The independent body said
that it would mean Britain’s wire
rod industry would continue to
be protected from dumped
wire rod from China. Wire rod
in the UK is predominantly
used in construction, tyre
reinforcement and steel springs
in vehicles. The British market is
estimated to be worth more than
£740 million a year.Airbus superalloys deal
A consortium backed by Airbus
and Safran has agreed to buy
superalloys supplier Aubert &
Duval from mining group Eramet
after the French government
stepped in to protect its strategic
interests in the maker of fighter
jet and submarine parts. The deal,
expected to complete this year,
gives the loss-making A&D
business an enterprise value of
€95 million. On Sunday, the
French government, a
shareholder, paved the way for a
sale by issuing a “golden share”.Commodities
ICIS pricing (London 7.30pm)Crude Oils ($/barrel FOB)
Brent Physical 99.83 +0.96
BFOE(Mar) 96.95 +1.45
BFOE(Apr) 93.98 +0.86
WTI(Mar) 91.91 +1.70
WTI(Apr) 90.39 +1.79Products ($/MT)Spot CIF NW Europe (prompt delivery)
Premium Unld 896.00 897.00 -2.00
Gasoil EEC 833.75 835.75 +16.00
3.5 Fuel Oil 505.50 506.50 -4.50
Naphtha 865.00 867.00 +16.00ICE Futures
Gas Oil
Mar 827.50-827.25 Jun 780.75-780.25
Apr 809.25-809.00 Jul 782.00-760.00
May 794.00-793.75 Volume: 735733Brent (9.00pm)
Apr 96.40-96.38 July 89.72-89.69
May 93.32-93.30 Aug 89.34-88.54
Jun 91.25-91.20 Volume: 2246083LIFFECocoa
Mar 1681-1663 May 1740-1735
May 1720-1719 Jul 1737-1730
Jul 1750-1749 Sep 1763-1753
Sep 1763-1753
Dec 1759-1756
Mar 1753-1750 Volume: 75581RobustaCoffee
May 2257-2253 Jan 2234-2095
Jul 2238-2232 Mar 2213-2141
Sep 2225-2215
Nov 2250-2152 Volume: 17950White Sugar (FOB)
Reuters Dec 484.00-477.70
Mar 483.30-481.40
May 494.40-494.10 May 478.00-474.40
Aug 484.90-483.20 Aug 469.80-468.00
Oct 479.60-478.10 Volume: 59930PRICES
Major indices
New York
Dow Jones 33596.61 (-482.57)
Nasdaq Composite 13381.52 (-166.55)
S&P 500 4304.76 (-44.11)
Tokyo
Nikkei 225 26449.61 (-461.26)
Hong Kong
Hang Seng 23520.00 (-650.07)
Amsterdam
AEX Index 731.96 (+2.23)
Sydney
AO 7422.20 (-84.80)
Frankfurt
DAX 14693.00 (-38.12)
Singapore
Straits 3400.58 (-35.78)
Brussels
BEL20 3959.15 (-9.98)
Paris
CAC-40 6787.60 (-0.74)
Zurich
SMI Index 11959.39 (+67.51)
DJ Euro Stoxx 50 3985.47 (-0.24)London
FTSE 100 7494.21 (+9.88)
FTSE 250 20993.33 (-103.86)
FTSE 350 4201.80 (+1.32)
FTSE Eurotop 100 3421.25 (-0.18)
FTSE All-Shares 4172.35 (+0.26)
FTSE Non Financials 5040.10 (+2.74)
techMARK 100 6164.06 (+58.65)
Bargains n/a
US$ 1.3589 (-0.0002)
Euro 1.1995 (-0.0023)
£:SDR 0.98 (+0.00)
Exchange Index 83.15 (+0.14)
Bank of England official close (4pm)
CPI 114.90 Jan (2015 = 100)
RPI 317.70 Jan (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 22 121.64 121.75 120.55 120.77 934993 747364
Jun 22 123.34 123.51 122.10 122.41 604669 74062
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 22 100.51 100.52 100.51 100.51 39415 348979
Jun 22 100.42 100.42 100.40 100.40 107003 507275
Sep 22 100.22 100.24 100.19 100.20 125335 493408
Dec 22 99.980 100.02 99.935 99.960 136484 510605
Mar 23 99.700 99.725 99.625 99.655 98651 409083
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 7384.5 7478.0 7304.0 7441.0 120799 587950
Jun 22 7290.0 7407.0 7290.0 7389.0 48 3091
FTSEurofirst 80 Mar 22 5528.5
Jun 22 5511.5© 2021 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.How does management think it
will reach that target?
One, by paying down debt, which
stood at £64.2 million at the end of
December, or roughly 3.3 times
adjusted earnings before interest,
taxes, depreciation and amortisation
for the 12 months to the end of
September last year.
Two, by bringing down the level of
capital expenditure from the
heightened level to which it has
climbed in recent years.
There were hints of the potential
from new products reaching
commercialisation stage in the first
quarter. Revenue for the three
months to the end of December was
up by more than a third against theper cent stake in 2019, among its
major shareholders didn’t help.
Underinvestment in research and
development has left it playing
catch-up. That, together with cash
spent on expanding production
capacity and the associated cost of
servicing a higher debt bill,
contributed towards a pre-tax loss of
£9.2 million last year.
That was slimmer than the year
before and management has pegged
last year as the peak in spending on
R&D. It is reaching for a target of
being solidly cash generative and
profitable next year, at which point
analysts have forecast a pre-tax
profit of £4.5 million, against a loss of
a similar magnitude this year.I
t’s no surprise that investors are
reluctant to get behind animal
health specialist Benchmark
Holdings, since it has failed to show
a pre-tax profit since it was admitted
to London’s junior market in 2013.
Shares in the Aim-traded group,
which specialises in nutrition and
genetics and develops products for
food producers to improve animal
health, yield and quality, are still
priced below the 2013 initial listing
price. Admittedly, naming Neil
Woodford, who sold down his 12.5Emma Powell Tempus
Buy, sell or hold: today’s best share tipsHotel group is sitting comfortably
T
ravel stocks are usually
among the first casualties
of geopolitical tensions. But
investors holding stock in
Intercontinental Hotels
Group looked past activity on the
Ukrainian border and fixed their
sights upon a sharper-than-expected
recovery in occupancy levels.
Unveiling operating profits for last
year that were ahead of consensus
and reinstating the dividend earlier
than expected, at 85.9 cents a share,
fuelled a further bounce in the hotel
operator’s shares. A recovery in
occupancy and rates led by the
Americas and the UK boosted
revenue per available room last year
to 70 per cent of the pre-pandemic
level, up from 47.5 per cent in 2020.
The shares have regained almost
all of their losses over the past two
years and at just over 19 times
forecast earnings for 2023, when
revenue per available room is set to
be fully recovered, trade at a multiple
broadly in line with the 2019 range.
IHG shares rarely come cheap for
good reason. Operating its brands,
which include Holiday Inn and
Crowne Plaza, under a franchised
model keeps the business capital
light, a saving grace in market
downturns. It earns between 5 and
6 per cent of revenue generated by
the hotel, in exchange for the use of
its brand, technology and marketingservices. Owning and leasing a few
properties means the benefits of
increasing scale are amplified, too.
Fee margins expanded by over a 100
basis points a year over the decade
until the pandemic, to reach 54.1 per
cent in 2019. But taking fulladvantage of the benefits of
operational gearing will require the
hotel group to improve the rate of
new openings. But the removal of
poorer quality hotels from the estate,
predominantly under the Holiday
Inn and Crowne Plaza brands,
outpaced openings, meaning the
number of hotels in operation
declined by 0.6 per cent on a net
basis last year and only 0.3 per cent
in 2020. Chief executive Keith Barr is
hoping to improve that rate to
roughly 4 per cent this year and
5 per cent during the next.
Slower underlying growth in the
size of its hotel estate is reflected in
the discount attached to IHG versus
US rivals Marriott International andRoom to grow
Source: RefinitivRevenue per available room
versus 2019 (%)Share price
£54525048464442
Apr2021 2022
Jul Oct Jan2021 2020
AmericasEMEAAGreater China-20%
-48.5%-52%
-64.8%-29%
-40.5%Hilton Worldwide, whose shares
trade at forward earnings multiples
in the mid-20s. The premium
attached to US companies versus
their UK counterparts might have
played a part. But bringing the net
growth rate of its hotel footprint
back in line with pre-pandemic levels
should address that valuation gap.
What are IHG’s chances of
achieving that? Tougher conditions
can spur a flight of smaller
independents towards the security of
larger chains. Conversions of existing
hotels to IHG brands represented
25 per cent of openings last year, up
from 20 per cent in 2020.
Analysts forecast operating profit
of $756 million this year, against
$865 million in 2019. Differing
speeds at which countries have
reopened mean that Europe, the
Middle East and Africa division has
further to go in terms of recouping
revenue. But the extent that business
travel will revive remains uncertain.
The balance sheet looks sturdy
enough. A relaxation in banking
covenants was secured for this year
but the leverage interest cover ratios
are back within the original limits,
while cash and undrawn debt stands
at $2.6 billion, against a $400 million
minimum liquidity requirement
remains in place. Adjusted free
cashflow came in at $571 million last
year. Improved traveller numbers
should lead to a reduction in the
leverage ratio.
IHG has weathered the pandemic
well, but that’s already fully reflected
in the share price.ADVICE Hold
WHY The group’s recovery
potential is already accounted
for in the shares’ valuation,
which doesn’t represent an
attractive entry point for new
investorssame time in the prior year, helped
by sales of its recently launched sea
lice veterinary medicinal treatment
Ectosan Vet and water purification
system CleanTreat.
Benchmark is making progress,
albeit slowly, but a forward earnings
multiple of 42 against 2023 earnings
forecasts doesn’t look particularly
appealing.ADVICE Avoid
WHY Slow progress on
earnings and a high forward
earnings multiple puts shares
at risk of treading waterIntercontinental Hotels Group
Market cap:
£8.99 billionRevenue:
$1.39 billionbenchmark holdings
1st quarter pre-tax
loss: £3.7 millionMarket cap:
£383 million