the times | Tuesday May 24 2022 2GM 35
Business
BEN BIRCHALL/PAminutes, now covers 40 per cent of the
British population and the group is con-
tinuing with plans to open 80 new
shops in the UK and Ireland this year
and its first Screwfix store in France.
In the UK and Ireland, like-for-like
sales were 15.8 per cent higher, with
B&Q down by 18.3 per cent as its
weather-related products, including
items such as fencing and garden
products, fell by 28 per cent. In France
like-for-like sales fell by 3.7 per cent as
the company lifted its forecast for
operational income this year from
between $1.43 billion and $1.45 billion
to between $1.48 billion and $1.5 billion.
Zoom Video Communications, based
in San Jose, California, runs one of the
world’s biggest video conferencing soft-
ware platforms. Demand for Zoom
surged two years ago at the onset of the
pandemic, when daily meeting partici-
pants on its service surged from ten mil-
lion in December 2019 to as many as 300
million. Its share price also rose rapidly
but as lockdowns were lifted its shares
fell back, losing almost three quarters of
their value over the past year.
Zoom finished its first quarter with
198,900 corporate customers, up 24 per
cent on the same period in 2021.
6 Shares in Snap dropped by almost a
third last night after the social media
group abruptly withdrew forecasts for
the current quarter. “The macroeco-
nomic environment has deteriorated
further and faster than anticipated,” it
told investors in a filing, adding that
revenue and profits would fall “below
the low end” of guidance provided last
month. The company’s stock fell 30.1
per cent, or $6.77, to $15.70 during out-
of-hours trading.
T
hreats to Britain’s net zero
targets come in many
forms. But could this be the
most dangerous yet: the
endless hot air from
politicians over a windfall tax?
Rarely does an hour go by without
another blast. In the pro camp are
Labour and the Lib Dems, keen to
whack a levy on the beastly North
Sea oil and gas producers. As for the
Tories, they’re split, with Boris
Johnson in the unlikely role of
advocating more restraint than Rishi
Sunak — so far, at least. The
chancellor’s latest kite-flying? Some
intricate taper affair, where the tax
goes up and down depending on
how many windmills, or similarly
green gizmos, a company commits to
build. Meantime, a Tory debate
rages over whether a temporary tax
would be “unconservative”: concerns
that didn’t deter Margaret Thatcher
or George Osborne.
The bit missing from all this?
That, even if the government hits
UK oil and gas with a windfall tax,
it’ll raise diddly squat — at least in
the context of a cost-of-living crisis,
largely founded on soaring energy
bills. North Sea profits presently
attract 30 per cent corporation tax
plus a 10 per cent supplementary
charge: enough, on Office for Budget
Responsibility forecasts, to rake in
£7.8 billion this year. Labour wants
the total tax rate lifted to 50 per cent,
topping up the sum raised by £1.95
billion. True, that figure may prove
an undershoot. But even double that
barely makes a dent.
The energy price cap, effectively
setting the cost of bills for 28 million
households, rose by 54 per cent to
£1,971 a year in April. That’s an
annual increase of £693 a pop or
getting on for £20 billion across all
households. In October, the cap
could go up again by another £800
— another £22 billion or so. Yes, a
windfall tax would make a small
contribution. But politicians should
stop pretending it’s a panacea.
Sunak’s already had to come up
with February’s £9.1 billion energy
support package for consumers —
plus his dog’s breakfast of a spring
statement, which was so badly
targeted that the richest people in
the land (like him and his wife)
shared in a fuel duty cut. But even if
he now pulls in £4 billion, say, from a
windfall tax, he’d still be a long way
from easing the pain of October’s
jump in bills.
And the risk is that any short-term
benefit from a tax is outweighed by
raising the long-term costs of
investing in green energy projects in
Britain. True, the companies haven’t
exactly helped their case lately. BP
boss Bernard Looney has likened the
group he runs to a “cash machine”,
produced $6.15 billion of share
buybacks in two years and said
there’s no UK project, among a
mooted £18 billion-worth by 2030,
that he “wouldn’t do” even if there
was a windfall tax.
Centrica boss Chris O’Shea has
compared a levy to burning “the
furniture to stay warm”. And even if
Shell boss Ben van Beurden is
promising up to £25 billion of UK
spending over a decade, there are
better times for him to be getting a
26 per cent pay rise to €7.38 million.
Even so, oil and gas is a cyclicalindustry. It was only in 2020 that
companies were making vast losses.
Investors, including millions of UK
pensioners, need a return on their
capital. And even if Deirdre Michie
is talking her book, the boss of the
Offshore Energies UK trade body is
right that “random” taxes “drive up
the cost of borrowing for new
projects”. Is it worth doing that just
to raise a relatively small sum?
That’s the taxing debate politicians
should be having.Simple choice
T
he M&C Saatchi mantra,
“brutal simplicity of thought”,
seems a bit lost on Vin Murria.
The ad group’s deputy chairwoman
signed off on Friday night with a “no
increase” update: recognition it
seemed that even she realised the
game was up. And no shock, either,
given she’d just seen her hostile bid
for Saatchi, via the AdvancedAdvT
listed cash shell she chairs,
gazumped by a recommended
£310 million offer from digital
marketing outfit Next Fifteen.
Maybe Murria had a bad weekend
— because she’s now back to say
she’s considering her “options”, while
illustrating the value of her own bid
via a ridiculous table with no less
than 33 different entries. She says
Next Fifteen is a “credible buyer” but
the “offer price does not reflect the
value of foregoing control and the
significant synergies” available to the
bidder. She has the clout to make
trouble, too, as she owns 12.5 per
cent of Saatchi shares, with AdvT
holding 9.8 per cent more. So
enough in practice to block the Next
Fifteen bid, made via a scheme of
arrangement requiring 75 per cent
investor support.
Murria’s angling for a bump in the
bid price. But her hand looks weak.
Next Fifteen’s largely paper bid only
contains 40p a share cash, so Saatchi
investors will share in the synergies
anyway. And now at 257p versus
AdvT’s 220p and a Saatchi share
price of 216p, its bid is well ahead of
Murria’s. Next Fifteen can skirt
round her, too, by changing its bid to
a conventional offer requiring only
majority support. Murria cleverly
bought her stake in 2020 when
Saatchi shares were around 40p, so
she’s nicely quids in. She can afford
to beat a graceful retreat.Closed village
D
avos isn’t the same without
the snow. What do the
delegates do all day, now the
skiing’s off? Wildflower walks in the
mountains? Yodelling practice? Cow
herding workshops?
Whatever, it must beat listening to
the latest from the World Economic
Forum. It’s “embarking on an
ambitious new journey” to “harness
the power of the metaverse to grow
and diversify participation in
advancing the global public interest”.
How exactly is a bit unclear, though
it involves building a “global
collaboration village”. Only elite
avatars with the priciest white
badges will be allowed in, of course.[email protected]business commentary Alistair Osborne
sistance for partners to transition to
new opportunities outside of Star-
bucks”.
The company’s decision to liquidate
its Russian business is different to the
approach of some foreign companies.
McDonald’s and Renault announced
sales to local partners last week.
McDonald’s departure has been the
most high-profile. The burger chain
sold the business to Alexander Govor,
its Siberian franchise partner. Govor
will acquire the entire portfolio of res-
taurants and will operate them under a
new brand. Neither McDonald’s nor
Govor would disclose the terms of the
transaction, although the American
company had said previously that it
would take a non-cash hit of as much as
$1.4 billion after a sale.
Whereas McDonald’s owned most of
its 850 Russian stores, Starbucks uses a
franchise partner, limiting its financial
exposure to the Russian exit.Starbucks has followed McDonald’s in
declaring its intention to quit the
Russian market, bringing to an end a 15-
year presence.
The giant coffee chain, which sus-
pended all its business activity in Russia
in March, said it had decided “to exit
and no longer have a brand presence in
the market”.
Kevin Johnson, 61, chief executive of
Starbucks, previously has condemned
the attacks on Ukraine by Russia as
“unprovoked, unjust and horrific”.
Starbucks does not have any cafés in
Ukraine, but in Russia it has 130 outlets
that are wholly owned and operated by
Alshaya Group, of Kuwait, a licensed
partner, which has 2,000 so-called
“green apron partners”. It said that it
would continue to support the 2,000
workers in Russia, including paying
them for six months and providing “as-Dominic WalshStarbucks joins McDonald’s
in ending links with Russia
Dividends’
rise matches
inflation
Patrick Hosking Financial EditorDividend payments surged to a new
record in the latest quarter and are
forecast to keep pace with inflation this
year, according to a study of the world’s
biggest listed companies.
Payouts by the 1,200 biggest listed
companies worldwide rose by 11 per
cent to $302.5 billion in the three
months to March, according to the
latest Janus Henderson survey. They
were on track to grow by an underlying
7.1 per cent for the full year to reach
$1.54 trillion. That would keep them
just ahead in real terms of the 6.5 per
cent increase expected for global
inflation this year, though not in
Britain, where inflation is forecast to
rise above 10 per cent.
The surge represents a further
dramatic recovery from 2020, when
dividends were cut by about 10 per cent
as businesses from banks to energy
companies slashed payouts to conserve
cash. After adjusting for special divi-
dends and exchange rate movements,
the underlying growth in first-quarter
dividends was was even stronger, at
16.1 per cent, Janus calculated.
Total payouts by UK-listed compa-
nies faltered in the first quarter, but this
was because of a special dividend by
Tesco in the previous period. On an
underlying basis, UK dividends grew by
14.2 per cent.
The dividends gusher contrasted
sharply with the overall direction of
share prices, which dived in many
stock markets. In the United States the
S&P 500 fell by 6 per cent in the quarter
and has tumbled further since.
Dividends are an important source of
income for pensioners, indirectly
through pension schemes and in some
cases directly through shares held
personally.
Jane Shoemake, a Janus portfolio
manager, said the overall dividend
number was “slightly ahead of our
expectations owing to particular
strength from a handful of companies
and sectors, especially oil and mining”.
Payouts globally have more than
doubled since 2009, when the study
was begun. The surveyed companies
account for 90 per cent of all listed
company dividends.
Sensible dividend coming back into
favour, Patrick Hosking, page 37the business has recently overhauled
management teams at the Castorama
and Brico Dépôt chains and has
restructured its pricing position and
logistics to improve performance.
James Grzinic, an analyst at Jefferies,
said that while Kingfisher’s shares had
underperformed, “the suspicion is
growing that, like in the United States,
demand for home improvement could
remain elevated post-Covid”.
Tempus, page 42Thierry Garnier, left, saying people want to do work themselves to save money
Windfall tax comes
with heavy price