the times | Friday May 27 2022 41
Business
What Serco lost after the Test and
Trace programme wound down, it has
more than gained in ministers’ failure
to control immigration.
The government contractor told the
City to upgrade its forecasts for the year
because it is likely to make profits of
£225 million against previous estimates
of £195 million.
Analysts had fretted about the loss of
hundreds of millions of pounds of
revenues and an estimated £60 million
of profits from Serco’s role in adminis-
tering Test and Trace, as well as from
the loss of a contract to look after the
Atomic Weapons Establishment.
However, in an unscheduled trading
update, Serco said it had more than
made up those shortfalls in the work it
does housing migrants for the govern-
ment — and the greater the number of
people in the system, the more it earns.
It is also earning more money admin-
istering the Department for Work and
Pensions’ “restart” scheme designed to
get people who are on universal credit
off benefits and into work.
Serco said that it would also get a
£10 million windfall from the weakness
of the pound on the foreign exchange
and the enhanced value of its earnings
from firms in the US defence industry
and benefits system.
That sent Serco’s shares to levels notincreasingly about localisation and just
in case.”
The competition for space has driven
rents higher, with LondonMetric’s
rental income climbing 8 per cent to
£133.1 million last year.
Regardless of what Amazon does,
Jones expects demand to remain
strong. Amazon, which took a quarter
of all UK warehouse space in 2020 and
2021, warned this month that it would
slow its expansion plans.
Jones said it would be “naive” to dis-
miss the impact of Amazon’s retreat,
but expects it will hurt American own-
ers of “big box warehouses” harder.
In the year to the end of March,
LondonMetric reported a profit of
£93.5 million, up 9 per cent from
£85.6 million.
Sebastian Isola, a real estate analyst
at Peel Hunt, said the results were “out-
standing”. Shares rose 10.8p, or 4.35 per
cent, to 259p yesterday.Auto Trader
stays in driving
seat as used-car
market thrives
Robert Lea Industrial Editor but said the fundamentals of the car
trading market remained the same. “Car
buyers do not treat it as a discretionary
spend,” he said. Even if people have less
disposable income, there are always
people either trading down to lower-
priced models or cashing in and selling a
second or third vehicle, he added.
Auto Trader makes its money from
the nearly 14,000 retail forecourts that
it charges to advertise their wares. It
does not make money on the value of
the transaction, which is where dealers
have been making record profits
recently, so the online marketplace is
dependent on making money on the
volumes on its website, irrespective of
the age or size of the car being adver-
tised for sale.
Coe conceded that the emerging eco-
nomic crisis would be overlaid by the
as-yet unknown effects of far-reaching
structural changes in the industry.
These changes include: the electrifi-
cation of vehicles, which as Coe con-
cedes is still baffling many consumers
over whether they are getting value for
money and whether the necessary
public charging infrastructure is in
place; the short supply of new cars into
the wider marketplace because of semi-
conductor shortages and general dis-
ruption to the supply chain; manufac-
turers changing their selling models
and increasingly going directly to con-
sumers; and the increase of online sales
channels, not least with the rise of the
likes of Cazoo and Cinch.
Numis, the stockbroker, said that it
was upgrading its forecasts for the
group. “It is a strong set of 2022 results
that have come in ahead of both our
and consensus estimates,” it said.
“Management confirms a good start to
the current financial year. We increase
our full earnings per share [estimate]
27.6p from 25.8p.” Auto Trader made
25.61p for 2021-22. Numis reckons the
shares are worth 780p each.
L
osses more than
halved at Ted
Baker as a return
to the office and
a boom in
weddings revived sales of
tailored clothing (Ashley
Armstrong writes).
The fashion brand saidthat sales had risen by
20.5 per cent to
£428.2 million from
£355.3 million in the year
to January 29, while
losses narrowed from
£107.7 million to
£44.1 million during that
period. Shares closed at139p, up by 0.29 per cent
or 0.4p.
Ted Baker this week
selected a preferred buyer
to perform extended due
diligence after putting
itself up for sale in April.
It took the step of
carrying out a formal
sales process after
receiving an approach
from Sycamore Partners,
an American private
equity firm, which has
said it is no longer in the
running to buy the brand.
Ted Baker said sales in
its first quarter to the end
of April had continued to
have momentum, rising
20 per cent compared
with last year, helped by
the return of weddings,
holidays and people
wanting new work outfits.
However, sales were
still 37 per cent lower
than pre-pandemic levels
and there are concerns
that the cost-of-living
crisis could dent demand.
The firm said that it
had reduced discounting
across the business,
which had improved its
margins, and it continued
to have a strong balance
sheet with £80 million
worth of bank facilities.
Rachel Osborne, chief
executive, said: “While
we remain mindful of
what is a challenging
macro environment, we
are well positioned for
growth.”
She added that the
overhaul of its website
and its well-established
distribution channels
“give us confidence in
Ted Baker’s future”.
Analysts at Peel Hunt
said that while results
were in line with
expectations, the
company’s ability to turn
a profit and “questions
over brand recovery
represented an execution
risk” of which the market
wants to see evidence.Wo r k a n d
weddings a
good fit for
Ted Baker
Ted Baker is back in favour
with the fashion-conscious,
although there are fears
that the cost-of-living crisis
could dent a rise in salesTED BAKERLondonMetric capitalises as
firms keep business local
Tom HowardMigrant crisis keeps Serco on track
seen in eight years — since the arrival of
its chief executive Rupert Soames, who
was charged with halting the decline in
the company’s stock price and refinanc-
ing its overloaded balance sheet.
Serco, once an outsourcing darling of
the FTSE 100, fell into disrepute after
being found guilty of defrauding the
taxpayer and lying to the Ministry of
Justice about how many prisoners
bound for court it was handling.
Yesterday the stock closed almost
10 per cent higher, 15p to the good at
168p, valuing the company at in excess
of £2 billion once more.
Soames said Serco was well protected
against inflationary pressures because
its government contracts are index-
linked. “We are a pretty good defensive
stock and we are growing,” he said.
A Peel Hunt analyst said it was
“testimony to the effectiveness of Ser-
co’s business-to-government platform”.
It is expected that Serco’s revenue for
2022 could match the £4.4 billion in
2020 and that profits will be just shy of
last year’s £229 million.Robert Lea
The value of LondonMetric’s portfolio
of warehouses swelled by £1 billion last
year as British companies returned
their operations to the UK amid disrup-
tion to supply chains.
The landlord’s portfolio jumped in
value by 38 per cent to £3.6 billion in the
year to the end of March. Even
stripping out the impact of its new in-
vestments, it rose by £600 million.
The disruption caused by the pan-
demic and the war in Ukraine has
forced British companies to search for
space at home. Combined with the rise
in online shopping, there is increased
competition for warehouses in the UK.
CBRE, the property agent, believes
warehouse vacancies have dropped to a
“critically low” level at 1.5 per cent.
“Previously we talked about glo-
balisation and just in time,” Andrew
Jones, chief executive, said. “Today it’sSerco has replaced revenues lost from
Test and Trace with housing migrantsAuto Trader, the online car market-
place, believes it will shrug off the cost-
of-living crisis because previous peri-
ods of recession or high inflation have
tended not to affect the volume of used
cars bought and sold.
The company reported a 65 per cent
rise in income in the year to the end of
March, to £432 million, which is 17 per
cent ahead of where it was in the last
year before the pandemic.
After taking out the costs of its work-
force, which is only 900-strong, though
many of them are high-earning soft-
ware engineers, much of the money
that comes through Auto Trader’s trad-
ing portals falls to the bottom line and
the company reported a near-doubling
in pre-tax profits to £301 million. That is
nearly 20 per cent higher than where it
was pre-pandemic.
It has returned £237 million to share-
holders over the past year, more than
£163 million in share buybacks and
more than £73 million in dividends. The
dividend for the past year is rising from
5p a share to 8.2p.
All of this helped to boost the share
price after the sell-off in the technology
and media sector in recent months.
Having fallen from a high of 740p at the
turn of the year, the stock put on 8p to
574p, extending a rally in the past week
to 7 per cent.
Nathan Coe, Auto Trader’s chief
executive, said the group was “not in
denial of and not immune” from the
cost-of-living crisis in the UK economy,
£432m
Auto Trader income for the past year,
17 per cent up on the year before Covid
Source: company reports