46 2GM Friday March 18 2022 | the times
BusinessMarkets
news in brief
Crypto asset warning
Consumers risk losing all their
money invested in crypto assets
and could fall prey to scams, the
European Union’s securities,
banking and insurance watchdogs
said. “Consumers face the very
real possibility of losing all their
invested money if they buy these
assets,” they noted. Regulators
are worried that consumers are
buying from 17,000 crypto assets
without being aware of the risks.
Consumers should also note the
environmental impact of high
energy consumption for
producing some crypto assets, the
statement said.Amazon buys MGM
Amazon has completed its
$8.5 billion deal to buy MGM, the
film-maker behind the Rocky and
James Bond franchises, as it looks
to draw more customers to its
video streaming service. The
announcement came after a
deadline passed for the US
Federal Trade Commission to
challenge the deal. MGM bolsters
Amazon Prime Video’s offering
with more than 4,000 film titles,
including the Oscar-nominated
Licorice Pizza, and an extensive
library of television programmes.GameStop falls to loss
The computer games retailer
GameStop has reported a net
loss for the fourth quarter, as it
absorbed high costs from supply
constraints and also raised
spending to pivot its largely
bricks-and-mortar business
towards e-commerce. The
retailer’s shares, which were at
the heart of the 2021 meme
stocks trading frenzy, fell by
7.1 per cent to $81.49 after the
company posted a net loss of
$147.5 million compared with a
profit of $80.5 million, a year ago.Ted Baker’s new outfit
An American private equity firm
is weighing a potential takeover
bid for Ted Baker, the UK fashion
chain. Sycamore Partners is
working with advisers to examine
a potential offer for the London-
listed firm, Sky News reported.
Ted Baker, which has a market
value of about £205 million, saw
its share price surge by 8.9 per
cent to 98¾p towards the close of
trading yesterday. Sycamore
specialises in retail investments
and previously owned the
footwear label Kurt Geiger.Commodities
ICIS pricing (London 7.30pm)Crude Oils ($/barrel FOB)
Brent Physical 113.59 +8.73
BFOE(Apr) 106.79 +8.62
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WTI(Apr) 101.65 +8.06
WTI(May) 99.38 +7.79Products ($/MT)Spot CIF NW Europe (prompt delivery)
Premium Unld 1017.00 1019.00 +56.00
Gasoil EEC 1064.00 1066.00 +137.00
3.5 Fuel Oil 565.00 571.00 +2.00
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Gas Oil
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May 107.01-106.87 Aug 101.60-94.80
Jun 103.93-103.82 Sep 98.96-95.68
July 101.94-98.40 Volume: 1829525LIFFE
Cocoa
Mar 1815-1621 May 1728-1710
May 1695-1692 Jul 1725-1716
Jul 1728-1724 Sep 1750-1708
Sep 1750-1708
Dec 1742-1724
Mar 1740-1715 Volume: 100221RobustaCoffee
May 2142-2141 Jan 2102-2000
Jul 2117-2110 Mar 2099-1995
Sep 2105-2050
Nov 2099-2000 Volume: 10477White Sugar (FOB)
Reuters Dec 505.30-501.80
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Oct 506.20-504.70 Volume: 56623PRICES
Major indices
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Bargains n/a
US$ 1.3156 (+0.0018)
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Exchange Index 81.44 (-0.02)
Bank of England official close (4pm)
CPI 114.90 Jan (2015 = 100)
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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 22 119.97 119.97 119.66 119.64 340 19009
Jun 22 121.21 122.33 120.92 121.80 223995 662143
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 22 100.32 100.37 100.31 100.36 90474 480060
Sep 22 100.12 100.17 100.11 100.16 63945 448815
Dec 22 99.850 99.920 99.845 99.910 79655 435496
Mar 23 99.505 99.590 99.495 99.570 59079 397877
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 7420.0 7258.5 7377.5 92877 82950
Jun 22 7234.5 7366.5 7206.0 7323.5 83134 561929
FTSEurofirst 80 Mar 22 5389.0
Jun 22 5352.0© 2022 Tradeweb Markets LLC. All rights reserved.
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investment advice. Tradeweb is not responsible for any loss or damage that might result
from the use of this information.selling medicine dispensation
software to pharmacies and hospitals
and partnering with smaller third-
party technology providers, is the
growth engine for the group. The
latter, which involves selling software
that integrates with the Emis systems
to its NHS and private customers,
carries little cost for the group and
gives a natural kick to margins.
Adjusted operating profit for the
enterprise division grew a fifth last
year, accounting for 40 per cent of
the group total, on the back of a
17 per cent revenue rise. That’s bang
in line with a target to grow the top
line at a double-digit rate each year.
Growing market share and offering
a broader stable of products to80 per cent of the group’s revenue is
recurring as its larger health division
sells software to the NHS.
Hitting a medium-term goal of an
adjusted operating margin of 30 per
cent could drive its valuation higher.
Progress on that score has been
impressive: the margin last year
came in at 25.9 per cent, up from
22.1 per cent in 2018, when
management set out plans to kick-
start revenue growth and improve
margins.
How might it do that? Cost
efficiencies are a starting point,
which includes refreshing its existing
software systems with new
technology. But expanding its
enterprise division, which focuses onT
he perceived safety of highly
recurring revenue streams has
afforded software as a service
(SaaS) companies high market
ratings. You might think the
healthcare software supplier Emis is
one of those, with the shares having
outperformed the FTSE All-Share
more than three times over during
the past three years.
But while a forward earnings
multiple of 21 might look generous, it
is not against what has been on offer
over the past three years. RoughlyEmma Powell Tempus
Buy, sell or hold: today’s best share tipsM&S confronting a range of problems
C
ontents of the in-trays
assigned to Katie
Bickerstaffe and Stuart
Machin, who are set to
take up the co-chief
executive roles at Marks & Spencer
in May, should be predictable
enough. Arresting the decline in the
clothing and home business,
overhauling the store estate and
limiting the damage likely to be
inflicted by inflation on the margin
are top of the pile in restoring the
company in the eyes of the investors.
Shares are still priced about 60 per
cent below where they were when
current boss Steve Rowe took over in
April 2016, despite a rally last year.
Scepticism remains over whether the
new management team will be able
to surmount those challenges. An
enterprise value of just five times
forward earnings before interest,
taxes, depreciation and amortisation
(ebitda) is almost the cheapest
market rating over the past decade.
But the seeds of recovery show
signs of taking root. Efforts to stem
the decline in clothing and home
business have been helped by a
growing contribution from online
sales. In the six months to October
online sales accounted for 34 per
cent of the division’s total, a jump
from 18.5 per cent four years earlier,
and edging closer to a target of
40 per cent. But it has also cut backon the number of ranges it stocks.
Flatlining retailers often buy wide as
they attempt to cast many lines in
the hope of hooking customers in.
For its womenswear range alone,
M&S buys roughly 25 per cent fewer
options than it did four years ago.
The benefits are the ability to gainbetter terms with manufacturers in
exchange for buying greater volume
and less stock ending up in clearance
sales. Full-price clothing and home
sales were up 45 per cent in the third
quarter, with those from items sent
to the sales rack down 21 per cent.
Those twin effects are starting to
be felt on the top line of that
business. Like-for-like sales grew
3.2 per cent over the 13 weeks to the
start of January against the same
period in 2019, the strongest rate of
underlying growth in years. The
much higher profit margins on
clothing and home sales compared
with food give added urgency to
make that stick.
But clothing sales in store continueCutting its cloth
Share priceSource: RefinitivDivision revenue growth by quarter2021 2022Q2 Q3 Q4 Q1050100150200250300p Two-year comparisonFood Clothing and home-4.2%2021 Q4*2022 Q12022 Q22022 Q3-4.4%
-31.5%9.4%11.5%
2%12.4%
3.2%*One year comparisonto slide. Square-footage that is not
bringing sales growth is a bigger drag
when you consider the retailer’s large
rent bill. Full-line stores, those that
sell clothing and food, accounted for
about 41 per cent of its £2.1 billion in
lease liabilities at the last count. The
plan is to cut clothing and home
selling space and raise the proportion
of floor space dedicated to food, and
to reduce its UK full-line stores from
253 to 180 over the longer-term.
Long unexpired leases complicate
efforts to cut rents, even if hard-up
landlords are willing to make deals.
The average lease commitment for
the clothing rival Next is about five
years, for M&S’s more costly, full-line
stores the average unexpired lease
stands at about 18 years, if
exceptional cases are excluded.
Then there is inflation. In food,
rises in the cost of ingredients and
packaging will inevitably be passed
through via price rises, but including
the full impact of higher energy costs
associated with running stores and
wage inflation is harder. There is also
the question of if premium price
points might be harder to stomach
for consumers feeling the squeeze.
Navigating inflation without
hurting revenue growth for its food
business adds a layer of jeopardy to
Bickerstaffe and Machin hitting
adjusted profit forecasts, set at £504
million for the 12 months to March,
closing in on the pre-pandemic level.
For all the risks, the paltry
valuation attached to the group
means the market has set a low bar
for the double act to surpass.ADVICE Buy
WHY The cheap valuation of
the shares accounts for the
challenges of inflation and
the turnaround of the
clothing businesscustomers are the main avenues for
revenue growth there. That included
acquiring the training system
software provider FourteenFish.
Analysts at the house broker Numis
raised its earnings forecast for this
year by 3 per cent off the back of the
deal to 58.8p a share, which is also
6 per cent ahead of last year. Emis
deserves more credit from the
market.ADVICE Buy
WHY Sustained growth in
margins could prompt a
re-rating in the sharesmarks & spencer
Market cap
£3.24 billionQ3 sales growth
18.5%emis
Market cap
£785 millionOperating margin
(adjusted) 25.9%