The Times - UK (2020-11-26)

50 1GM Thursday November 26 2020 | the times

BusinessMarkets

5

news in brief

Brexit ‘being ignored’

More than two in five small

British exporters to the European

Union have done nothing to

prepare for Brexit, according to a

study. Research commissioned by

Aldermore, the bank, found that

43 per cent of small and

medium-sized enterprises that

export to the EU have made no

preparations for the end of the

transition period on December 31.

Almost half said that they had

been focused instead on the

impact of Covid-19. Opinium

Research polled 1,003 businesses

between October 23 and

November 4.

Brewin beats forecasts

Brewin Dolphin, the wealth

manager, has cut through a year

of unprecedented disruption and

beaten expectations, with

adjusted profit before tax rising

by 4.3 per cent to £78.2 million.

Stimulus measures and the hope

of a vaccine improved sentiment,

offsetting steep outflows

triggered by the sell-off earlier in

the year. Total funds increased

from £45 billion to £47.6 billion.

The FTSE 250 company manages

funds worth £41 billion. Its shares

fell 13½p, 4.6 per cent, to 279p

Insolvency rule relaxed

A relaxation of insolvency rules

designed to help business owners

to trade through the pandemic

has been reinstated. The rules

mean directors must stop trading

if their company is insolvent or

risks being so in the near future.

The original suspension ran to

September 30 to encourage

business owners to keep their

companies alive. It will now run

until April 30 next year. The

suspension does not affect

directors’ wider liabilities, for

instance on fraudulent trading.

Rotork in reverse

Investors gave short shrift to

Rotork yesterday despite the

industrial flow control equipment

manufacturer reporting a

“resilient” performance in the

first ten months of 2020. Shares

in the Bath-based group closed

down by 5¼p, or 1.6 per cent, at

312¾p even though its revenue

was at 97 per cent of the 2019

level on a constant currency

basis, an improvement on the

9.6 per cent year-on-year decline

during the first half of the

financial year.

$2.4 billion net debt and, eventually,

reward long-suffering shareholders.

Production, which stands at about

75,000 barrels per day so far this

year, is expected to fall in 2021, but

Tullow aims to boost it thereafter

and to sustain it at about 70,000

barrels per day. If the oil price

averages $45 next year and $55

thereafter, it reckons that, post-

investment, it will generate $4 billion

of free cashflow this decade for debt

service and shareholder returns.

This year Tullow’s debt situation

looked so precarious that it had to

warn about it future. The sale of its

Ugandan assets and cost-cutting

have helped to ease the pressure, but

debt maturities loom next year and

back to its favourite business of

exploring.

No more. After disappointing

discoveries and production, as well

as another oil price crash, brought

the company to its knees, Tullow has

launched a new strategy that

relegates exploration to a fringe

activity. Under Rahul Dhir, 54, its

new chief executive, Tullow will

focus instead on maximising its

existing oilfields in west Africa,

working on “short-cycle, high-return

opportunities within our current

producing asset base”. Ninety per

cent of its capital expenditure will be

devoted to optimising these assets.

It aims to generate enough cash

that it can gradually reduce its

F

or those who enjoy the

swashbuckling excitement of

drilling for oil in far-flung

corners of the globe, Tullow Oil used

to be the name to watch (Emily

Gosden writes). In its heyday at the

start of the decade, it spent its time

striking black gold in new frontiers

and drawing up plans for blockbuster

developments.

Even after oil prices crashed in

the middle of the decade, Tullow

stuck to its raison d’être, raising cash

so that it could pay off debt and get

Tempus

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

Rolling with the punches in pandemic

L

ike all retailers, Greggs is,

presumably, waiting with

baited breath for the end of

the second lockdown in

England next week (Miles

Costello writes). While the latest set

of restrictions on trading haven’t

been as onerous as the first, trading

at the previously booming bakery

chain has been seriously disrupted.

Even when shops in England are

permitted to trade freely from

December 2, a complex set of tiered

restrictions will further complicate

life for the business.

From an investment perspective,

trading in the near term has to be

uncertain. The shares might have

recovered somewhat since the latest

update in September, but they

remain way off their pre-Covid highs.

Greggs was founded as a delivery

business on Tyneside by John Gregg,

who opened his first shop in

Gosforth in 1951. The retailer, a

constituent of the FTSE 250 with a

market value of close to £1.9 billion,

trades from more than 2,000 stores

nationwide, selling salads and

healthier foods alongside its

signature sausage rolls.

Over the year to December 28,

when the world had barely heard of

the coronavirus, Greggs reported a

near-one-third increase in pre-tax

profit to £108.3 million on a double-

digit rise in revenues to almost

£1.17 billion. It was even considering

the possibility of paying a special

dividend at the half-year stage.

How life has changed. In July,

having had to shut its estate in late

March, it reported the first pre-tax

loss — of £65.2 million — in its

history as a listed company. The idea

of a special payout was abandoned

and the interim dividend was

scrapped as Greggs drew on the

government’s cheap financing

scheme and furloughed thousands of

its 25,000-strong workforce.

However, the company was able to

reopen its stores in July and trading

began to recover, such that by the

end of September like-for-like sales

had returned to more than two

thirds their level over the same

month the previous year.

Greggs restarted its stores opening

programme, aiming to open a net 20

new outlets by the end of this year,

and stepped up its online presence,

agreeing a delivery deal with Just Eat

Takeaway. The chain’s ability to

adapt swiftly will have helped to

support trading during the second

Not to everyone’s taste

Share price

2016 2017 2018 2019 2020

Figures are for the 26 weeks to June 27

and 29 respectively

Source: Refinitiv

Total sales

First half 2020

First half 2019

Like-for-like sales

First half 2020

First half 2019

Pre-tax profit/loss

First half 2020

First half 2019

Dividend

First half 2020

First half 2019

£300.6m

£546.4m

-49%

+10.5%

-£65.2m

+£36.7m

Zero

11.9p

£25

20

15

10

5

lockdown, which mean that its shops

are open for takeaway and delivery

only. Nevertheless, sales are bound

to be sharply down against the same

period last year.

Under the three-tier restrictions

that will be in force until the spring,

Greggs will be allowed to open as

normal, but banded curbs on

socialising are likely to drag trading

lower. Over the year, analysts at

Jefferies are forecasting that

revenues will drop by almost 35 per

cent to £761.8 million and that the

chain will suffer an overall loss

before tax of £86.3 million. While the

broker expects a recovery, it doesn’t

believe that profits will return to last

year’s levels until 2022, at which

point it thinks that dividends will

resume, at about 40p a share for the

year.

Greggs will get through this. The

retailer has shown its ability to defy

the bleakness of the economic

backdrop. Its high street shops seem

capable of bouncing back quickly,

although city centre locations and

travel hubs such as bus and train

stations look likely to struggle while

much of the nation’s workforce

continues to work from home.

In spite of their falls, the

company’s shares — off 46p, or 2.5 er

cent, to £17.99 yesterday — are not

cheap. Based on Jefferies’ forecasts,

they trade at a multiple of 43 times

next year’s earnings for a prospective

yield in 2022 of 2.2 per cent. That

doesn’t look tempting for a buyer, but

those already in should sit tight and

await the recovery.

ADVICE Hold

WHY Despite their recent

weakness, the shares look

dear and the prospect of

dividends again looks distant

in 2022, putting refinancing risks on

the horizon.

Crude prices may be rebounding,

but macroeconomic uncertainties

persist and oil producers are unloved

in an increasingly climate-conscious

world. Tullow also has to win back

trust and prove that it can deliver its

promised production. Even if it can

navigate all these challenges, the

new strategy, however sensible, offers

little by way of excitement.

ADVICE Avoid

WHY Significant debts and

uninspiring prospects

greggs

Market value

£1.87bn

Prospective yield

2.2% PE ratio 43x

tullow oil

Production

75,000 barrels

per day

Net debt $2.4bn

Commodities

ICIS pricing (London 7.30pm)

Crude Oils ($/barrel FOB)

Brent Physical 47.46 +0.54

BFOE(Feb) 48.67 +0.75

BFOE(Jan) 48.62 +0.75

WTI(Feb) 45.71 +0.80

WTI(Jan) 45.91 +0.80

Products ($/MT)

Spot CIF NW Europe (prompt delivery)

Premium Unld 381.00 383.00 +6.00

Gasoil EEC 387.25 389.25 +0.50

3.5 Fuel Oil 265.50 266.50 -0.50

Naphtha 396.00 400.00 -3.00

ICE Futures

Gas Oil

Dec 395.50-395.25 Mar 405.50-405.25

Jan 398.75-398.50 Apr 407.75-407.50

Feb 402.25-402.00 Volume: 681628

Brent (9.00pm)

Jan 48.74-48.73 Apr 48.66-48.62

Feb 48.66-48.65 May 48.65-48.62

Mar 48.65-48.64 Volume: 2130688

LIFFE

Cocoa

Dec 1844-1829 Mar 1701-1597

Mar 1831-1828 May 1696-1550

May 1764-1757 Jul 1640-1630

Jul 1749-1714

Sep 1703-1690

Dec 1700-1698 Volume: 92401

RobustaCoffee

Jan 1366-1364 Sep 1408-1412

Mar 1375-1370 Nov 1468-1350

May 1399-1377

Jul 1397-1387 Volume: 12365

White Sugar (FOB)

Reuters Oct 384.40-381.00

Dec 384.50-371.80

Mar 401.80-401.40 Mar 387.60-373.70

May 398.50-394.30 May 384.20-364.90

Aug 389.40-389.00 Volume: 52490

PRICES

Major indices

New York
Dow Jones 29872.47 (-173.77)
Nasdaq Composite 12094.40 (+57.62)
S&P 500 3629.65 (-5.76)

Tokyo
Nikkei 225 26296.86 (+131.27)

Hong Kong
Hang Seng 26669.75 (+81.55)

Amsterdam
AEX Index 606.39 (-1.07)

Sydney
AO 6888.20 (+32.70)

Frankfurt
DAX 13289.80 (-2.64)

Singapore
Straits 2869.55 (-22.08)

Brussels
BEL20 3702.84 (-21.38)

Paris
CAC-40 5571.29 (+12.87)

Zurich

SMI Index 10488.27 (-3.32)

DJ EURO Stoxx 50 3511.90 (+3.92)

London

FTSE 100 6391.09 (-41.08)

FTSE 250 19569.39 (-220.17)

FTSE 350 3635.25 (-26.54)

FTSE Eurotop 100 2858.68 (-1.01)

FTSE All-Shares 3607.81 (-25.54)

FTSE Non Financials 4344.92 n/a

techMARK 100 5923.19 (-34.59)

Bargains n/a

US$ 1.3383 (+0.0022)

Euro 1.1232 (+0.0002)

£:SDR 0.98 (+0.00)

Exchange Index 78.96 (+0.14)

Bank of England official close (4pm)

CPI 109.05 Oct (2015 = 100)

RPI 294.30 Oct (Jan 1987 = 100)

RPIX 290.10 Jun (Jan 1987 = 100)

Morningstar Long Commodity 519.44 (+5.36)

Morningstar Long/Short Commod 3778.38 (-6.56)

London Financial Futures

Period Open High Low Sett Vol Open Int

Long Gilt Dec 20 134.85 135.19 134.72 135.08 379954 183383

MAR 21 133.90 134.28 133.81 134.17 239579 355431

3-Mth Sterling Dec 20 99.950 99.955 99.945 99.950 32884 481652

Mar 21 99.965 99.965 99.955 99.960 49455 714048

Jun 21 99.980 99.985 99.975 99.980 33516 852725

Sep 21 100.00 100.00 99.985 99.995 42177 564132

Dec 21 99.995 100.00 99.980 99.995 39807 486067

3-Mth Euribor Dec 20 100.53 100.53 100.53 100.53 14377 480217

Mar 21 100.53 100.54 100.53 100.54 31156 341637

Jun 21 100.54 100.54 100.54 100.54 27164 367372

Sep 21 100.54 100.55 100.54 100.55 28180 336798

DEC 21 100.55 100.56 100.55 100.55 36199 368725

3-Mth Euroswiss Dec 20 100.78 100.78 100.77 100.77 298 50638

Mar 21 100.78 100.78 100.77 100.77 1112 42410

Jun 21 100.78 100.78 100.77 100.77 1259 27836

Sep 21 100.77 100.78 100.76 100.77 532 20307

FTSE100 Dec 20 6445.0 6472.5 6359.0 6373.0 88476 766053

MAR 21 6391.0 6391.0 6351.0 6332.5 4 5287

FTSEurofirst 80 Dec 20 4809.0

MAR 21 4793.0

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