46 Tuesday March 15 2022 | the times
BusinessMarkets
news in brief
Firing up Bodycote
Bodycote announced a 7.1 per
cent rise in full-year revenue to
£615.8 million and margins that
were up by 15.4 per cent, as the
thermal processing services
company benefited from the
recovery in industrial markets
and the completion of a
restructuring programme. Its
operating margin rose from
12.6 per cent last year and
operating profit rose to
£94.8 million from £75.3 million.
Net debt was £52 million and
declared a final dividend of 13.8p
per share. Bodycote shares closed
up 15p, or 2.3 per cent, at 675p.Early Learning at M&S
Marks & Spencer is to open Early
Learning Centre outlets in ten of
its British stores. They will be
open from the end of the month,
including at stores in Liverpool,
Birmingham and the Bluewater
shopping centre in Kent. The
shops will have interactive play
tables with toys and free activity
sheets for children to use. The
Early Learning Centre brand,
which specialises in educational
play for young children, was
tested on the M&S website at the
end of 2020.Greek sale at HSBC
HSBC has agreed to sell its
branch business in Greece to
Pancreta Bank as it focuses more
on Asia, its biggest market. The
bank, which axed its lossmaking
American retail unit last year as
part of a restructuring, said that
the deal in Greece, where it has
operated since 1981 and has assets
of €2 billion, was expected to be
finalised next year. All 320 staff
would transfer to Pancreta as
part of the sale, which is subject
to consultation with unions and
regulators, HSBC said.Finablr administration
PKF GM has been appointed as
the administrator of Finablr, the
holding company behind foreign
exchange brands including
Travelex. Stephen Goderski, joint
administrator, said: “Finablr’s
financial difficulties are well-
publicised and our initial focus
will be on understanding the
asset position and what can be
realised.” Finablr was built by
Bavaguthu Raghuram Shetty,
who became embroiled in alleged
fraud after it found $1 billion of
undisclosed debt in 2020.Commodities
ICIS pricing (London 7.30pm)Crude Oils ($/barrel FOB)
Brent Physical 112.17 -8.74
BFOE(Apr) 107.04 -5.76
BFOE(May) 103.53 -5.71
WTI(Apr) 101.18 -5.12
WTI(May) 98.44 -4.76Products ($/MT)Spot CIF NW Europe (prompt delivery)
Premium Unld 1021.00 1023.00 -53.00
Gasoil EEC 881.00 883.00 -48.00
3.5 Fuel Oil 585.00 585.00 -35.00
Naphtha 952.00 954.00 -55.00ICE Futures
Gas Oil
Mar 1143.00-747.00 Jun 899.25-890.00
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May 105.79-105.93 Aug 98.55-96.50
Jun 102.73-102.65 Sep 96.85-94.00
July 100.58-98.00 Volume: 1943989LIFFECocoa
Mar 1815-1771 May 1780-1720
May 1788-1785 Jul 1790-1741
Jul 1825-1782 Sep 1805-1797
Sep 1805-1797
Dec 1792-1783
Mar 1788-1771 Volume: 62596RobustaCoffee
May 2114-2110 Jan 2070-1995
Jul 2085-2073 Mar 2075-1995
Sep 2085-2060
Nov 2085-2000 Volume: 11337White Sugar (FOB)
Reuters Dec 512.50-510.30
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Aug 518.90-517.70 Aug 488.70-485.60
Oct 512.90-511.70 Volume: 54918PRICES
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Bank of England official close (4pm)
CPI 114.90 Jan (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 Mar 22 120.18 120.26 120.11 119.89 227 19246
Jun 22 122.13 122.17 121.34 121.40 158249 660408
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 22 100.50 100.50 100.50 100.50 11646 333553
Jun 22 100.35 100.35 100.33 100.34 93704 442966
Sep 22 100.14 100.16 100.12 100.13 77181 419904
Dec 22 99.880 99.910 99.860 99.865 79094 414239
Mar 23 99.540 99.575 99.515 99.520 79392 386603
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 7191.0 7218.5 7134.5 7192.5 414264 568555
Jun 22 7145.5 7164.5 7084.5 7140.5 338667 69656
FTSEurofirst 80 Mar 22 5170.5
Jun 22 5154.0© 2021 Tradeweb Markets LLC. All rights reserved.
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from the use of this information.the energy transition and rampant
demand for semiconductors for use
in consumer electronics. It also has
been shifting its order bias towards
bigger-budgeted commercial
customers over academic institutions
and trying to design products around
what those clients might want.
The result? More consistent
orders, 13 per cent higher than the
2019 level during the first half of the
year, and steady growth in operating
margin, which hit 18 per cent against
the pre-pandemic level of 15.5 per
cent. That has afforded a forward
earnings multiple of almost 24, at the
top end of the peer group and against
a multiple of 16 attached to Spectris.
Supply chain disruption is onesell products to many of the same
customers but with slightly differing
applications, which would have
presented cross-selling opportunities.
Shares in Oxford Instruments
never got near the £31-a share price
on the table from Spectris after it
confirmed the approach. Scepticism
that a deal could get over the line
was understandable, not merely
because of the market volatility
sparked by the conflict in Ukraine.
Spectris is barred for six months
from coming back with another offer,
but there’s the chance another player
could steal its thunder. Oxford
Instruments has accentuated its
exposure to some long-term
structural growth trends, includingT
urbulent markets meant that
the takeout of Oxford
Instruments by Spectris never
stood a chance — but the speed and
magnitude of the share price fall that
greeted news the larger rival and
would-be bidder had dropped its
approach misses the fact that
another offer could be flushed out.
Oxford Instruments specialises in
designing and making scientific tools
that allow for materials to be
analysed at the atomic level. A tie-up
with Spectris would be logical. BothEmma Powell Tempus
Buy, sell or hold: today’s best share tipsPhoenix to burn even more brightly
E
ven if global political
turmoil has cast doubt over
the pace at which interest
rates will rise, the direction
of travel is assured. For
dividend-paying companies, it means
a higher bar to surpass to gain
“income stock” status.
Cue Phoenix, an insurer judged
primarily on its ability to keep paying
out a beefy cash return, with a step-
up in its dividend policy. Payments
now will grow over time, no longer
reliant solely on it snapping up open
or closed books of business. That has
started with a 3 per cent boost to the
final dividend, its first organic
increase, amounting to a total payout
of 48.9p a share and a yield of 7.7 per
cent, based on the present share
price.
What’s changed? Workplace
pensions and savings operations
gained as part of its deal to acquire
Standard Life Aberdeen’s insurance
businesses are doing more to pull
their weight. Cash from writing new
business gives the group, whose
history lies in buying up and
consolidating closed books, more
breathing room in funding its
generous dividend.
Long-term cash to be generated by
businesses open to new customers
came in at £1.2 billion and overtook
the decline from its closed business
for the first time. The bulk of thatcame from a rebound in work
underwriting the liabilities of
pension schemes, an area in growing
demand from companies seeking to
remove risk from balance sheets. It’s
easier to “move the needle” here,
according to Andy Briggs, the chief
executive, but Phoenix is also
gaining traction in workplace
pensions. In 2020 it gainedmanagement of a single scheme, but
last year that grew to 41.
Insurers running closed books
have to work hard to keep churning
out cash. Those books throw off cash
as policies mature and capital held
by the insurer against said policies
unwinds. Yet natural shrinkage in the
size of those books, roughly
£800 million a year for Phoenix’s
heritage operations, means that
business needs to be replaced via
M&A. A gradual run-off also means
that the unit cost of administering
those books gradually rises. For
insurers, that means finding ways of
cutting costs and making the most
efficient use of the capital they are
required to hold against policies andTaking flight
Share priceSource: Refinitiv
Apr2021
Jul Oct Jan2022
500550600650700750800p22 00Cash generation
2019202020212022 (guidance)Dividend per share
2019202020212022 (analyst forecast)£0.71bn£1.71bn46.8p47.5p48.9p49.7p£1.72bn£1.3bn-£1.4bngenerating a better return. Phoenix
has proved deft at both.
The insurer’s Standard Life
Aberdeen deal cut its reliance on
snapping up more closed books and
gave it the operating efficiencies that
can accompany greater scale.
Synergies from integrating that
acquisition, along with its purchase
of ReAssure, a former subsidiary of
Swiss Re, the Swiss reinsurance
group, generated £400 million of
cash last year. Some of those benefits
will not repeat this year.
Management has ponyed towards
cash generation of between
£1.3 billion and £1.4 billion, below a
record level of £1.7 billion. But
Phoenix has a habit of beating
targets and guidance typically has
been conservative.
How sustainable is the increased
dividend? Some companies paying
high dividends have done so at the
expense of balance sheet security
and earnings-boosting investment,
but that doesn’t seem to be the case
at Phoenix. It reckons its subsidiaries
can churn out £4 billion of cash
between this year and 2024 from
policies in force, in addition to
£1 billion in cash held at a group
level. After taking account of debt
and operating expenses and the
£500 million annual cost of the
dividend, that still leaves £1.7 billion
over the next three years for
spending on growth. That also does
not include cash spawned from any
acquisitions. The odds of Phoenix
raising those targets again are
stacked in shareholders’ favour.ADVICE Buy
WHY There is a secure
dividend on offer, which
represents an attractive yield
at the current share pricecaveat and revenue growth might
struggle to keep pace with double-
digit order growth this year,
according to Peel Hunt. Yet the
broker also reckons that a net cash
pile and a turnaround plan already in
train mean that the business would
be easily digestible for a large
American conglomerate, even if one
takes time to break cover.
It’s likely investors won’t be won
over cheaply, either.ADVICE Hold
WHY Another bid may come
and send the shares higherphoenix
Dividend yield
7.7 %Cash generation
£1.7bnoxford instruments
Market cap
£1.16bn Adjustedoperating
margin 18%