The Times - UK (2022-05-26)

the times | Thursday May 26 2022 2GM 39

Business

Covid loans

ence in Birmingham. “I has been reluc-

tant to do so” but “the clock is ticking”.

The bank has claimed that data pro-

tection laws mean taxpayers should not

be told who benefited from the loans

and that a database of beneficiaries of

state assistance could give rise to “in-

formal, almost vigilante activity”.

Last month, MPs on the Treasury

committee described these justifica-

tions as “extraordinary”.

George Havenhand, of Spotlight on

Corruption, said: “It’s no coincidence

that those with the most insight into the

government’s handling of the Covid

loan schemes are calling most loudly

for transparency.”

A spokesman for the business bank

said: “Legislation places restrictions on

the processing of personal data and we

do not consider that its requirements

would be met in the publishing of a list

of all businesses that have received a

scheme loan.”

400p

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2020 2021 2022

Mar 13, 2020

Pandemic fears

cause sell-off

Nov 4, 2020

M&S records first

loss in its history

May 25, 2022

Rowe bows out saying

M&S has fundamentally

changed

Aug 20, 2021

Surprise profit upgrade

which delivers 400,000 orders a

week, typically has more affluent

customers but its warning shows

that it is not immune to challenges.

Despite the slowdown in sales,

Ocado Retail is still adding to its

portfolio of warehouses to allow it to

serve more M&S customers across

the country. Despite being the UK’s

only pure online grocer, its capacity

is dwarfed by Tesco and Asda, which

both deliver more than one million

orders a week.

Analysts noted that Ocado’s

bearish outlook was in stark

contrast to its confident forecasts

during the height of the pandemic,

and even three months ago, when

Sparks boss leaves a

problem for heirs

J

ust what Britain’s skint

shoppers need: a three-for-

one offer from Marks &

Spencer. Steve Rowe, the

retailer’s boss, is off, bowing

out with the full-year figures. His

replacement? Three different

people. Was Rowe really that good?

Yes, it’s a tribute of sorts to the

M&S lifer who took charge in April

2016, having joined as a Saturday

boy in 1983 at the Croydon store.

But his exit invites an inescapable

question. Are his trio of successors

— chief executive Stuart Machin,

co-chief executive and clothing

supremo Katie Bickerstaffe and

chief strategy & finance officer Eoin

Tonge — really inheriting a

business in far better shape?

Glance at the share price and it’s

not exactly obvious. It was about

400p when Rowe climbed into the

big M&S frock in April 2016. Now?

Just 138¾p, up 5 per cent on the

results. Hardly a vote of confidence

from the market. Even so, it would

be unfair to judge Rowe purely on

that metric — something he hints at

himself when he talks of “tackling

the underlying issues that had

eroded the strength of the business”

and handing over a group that has

“fundamentally changed”.

In a stint punctuated by Covid,

Rowe has made lots of good calls.

On the togs front, he cut ranges by

a fifth, focusing instead on buying

“popular lines” in “greater depth”.

He weaned shoppers off price

promotions — halved in clothing to

18 per cent and in food to 15 per

cent — replacing discounts with

lower prices that stuck. He doubled

output at the Castle Donington

distribution centre, without a repeat

of past delivery screw-ups, while

using the pandemic to build a far

bigger online presence. He brought

M&S food delivery clout, paying

£750 million for half of Ocado’s

retail business: a deal cleverly timed

for corona. And he shut 68 of M&S’s

underperforming bigger stores.

The latest figures show progress,

too. Pre-tax profits of £392 million,

reversing last time’s £209 million

losses, are the best since 2016. Food

sales grew 10.1 per cent. Clothing was

up 3.8 per cent and by 55.6 per cent

online. And the net debt that Rowe

inherited, excluding leases, is down

from £1.8 billion to £420 million.

M&S now delivers decent free cash-

flow: up from £296 million to £699

million last year. The board, chaired

by Archie Norman, may reinstate a

dividend, too.

Rowe’s even cut back on his

“transformation” talk: a word he

used only 21 times in the latest

results versus 29 times in 2021’s and

44 times in 2020’s. Is that a sign

M&S is finally more transformed?

Still, maybe there’s another reason

that his progress is yet to show up in

the share price, trading at just 8.8

times forward earnings on forecasts

from house broker Shore Capital.

And it’s not just that profits will be

lower this year — hit by the

inflationary squeeze on consumers,

M&S’s Russia exit and the absence

of £59.8 million of business rates

relief it should have handed back.

No, it’s that results on Rowe’s

watch have been flattered by

incessant “adjusting items”: so-

called one-off costs. They tot up to

more than £2.1 billion. Or only

£500 million less than M&S’s market

value. Happily, the latest adjusters

are the lowest yet: £131 million. But

Rowe’s trio of successors needs to

produce cleaner numbers. A fitter

M&S should focus on dressing up

the customers — not the figures.

Doing right by SSE

E

ven Rishi Sunak can’t have

missed this: full-year results

from energy outfit SSE, laced

with reasons not to hit it with a

windfall tax (report, page 42). There

was a line about the “increasingly

supportive UK policy environment”

following last month’s publication of

the government’s “energy security

strategy”: one the chancellor can’t

want to undermine with a kneejerk

levy? Then, a reminder that SSE “is

one of the UK’s biggest taxpayers”:

“16th out of the 100 group of

companies” on PwC figures.

Plus, of course, the pledge from

chief executive Alistair Phillips-

Davies to invest £25 billion this

decade into “vital UK and Ireland

infrastructure, creating thousands of

jobs and directly addressing the

energy crisis in the longer term”.

That’s up from £12.5 billion over five

years, with four-fifths split between

wind farms and electricity networks

and the rest on newer green stuff —

carbon capture, hydro and pumped

storage. As he put it: “We are

investing significantly more than we

are making in profits”.

Isn’t that what the government

wants? Yes, operating profits rose

15 per cent to £1.54 billion, including

a 91 per cent jump from its five gas-

fired power plants to £306 million

— boosted by the spike in wholesale

prices. But renewables profits fell by

22 per cent to £568 million, partly

hurt by “exceptionally still and dry”

summer weather. And SSE is a

microcosm of the challenge facing

Sunak: how to devise a tax that

captures windfall gains without

hurting the green investment

Britain needs? He must know it’s an

impossible task. Still, having fallen

8 per cent on Tuesday’s tax talk,

SSE shares rebounded 6 per cent to

£18.68. Sunak’s left the markets even

more confused than him.

Cowgill’s red card

A

row over his £3 million bonus.

An investigation into

suspected price-fixing shirts.

And a £4.3 million fine after being

caught in a car park with the boss of

Footasylum: a £90 million

acquisition that the competition

regulator had ordered him to sell.

The hat-trick of own goals has

caught up with Peter Cowgill, the

JD Sports boss turfed out with

“immediate effect”, apparently by

the controlling Rubin family. It’s a

sour end for the man who’s built the

athleisure outfit since 2004, turning

it into a FTSE-100 stock. But, even if

the shares are up more than tenfold,

they’ve halved in six months to 112p

— down 6 per cent on his exit. You

doubt he’d be going so quick if JD

didn’t fear more governance goofs.

[email protected]

business commentary Alistair Osborne

bosses suggested the crisis had led

to a permanent shift to online

grocery shopping. Before the

pandemic, online accounted for

7 per cent share of the UK’s food

market, That doubled to 14 per cent

when people were stuck at home

during lockdowns, but Ocado said

that figure had slipped back to about

11 or 12 per cent of the market.

Despite the lowering of forecasts,

shares in Ocado Group rose by 4½p,

or 0.6 per cent, to close at 769½p.

The stock has lost two thirds of its

value in a year after being caught in

a wider technology sell-off as

investors questioned the future

success of “pandemic winners”.

Frasers loses

a few bob on

sale of cheap

stores in US

Frasers Group, which recently promot-

ed founder Mike Ashley’s son-in-law as

chief executive, is selling Bob’s Stores

and Eastern Mountain Sports for

$70 million to GoDigital Media Group

(Ashley Armstrong writes).

The company bought the two dis-

count sporting goods chains out of

bankruptcy for $101 million in 2017, in

a move that pushed Frasers, then

known as Sports Direct, into the US for

the first time. However, it announced

last August that it would be launching a

strategic review of Bob’s Stores after

Nike said that it would close a string of

wholesale accounts including Bob’s.

Partly as a result of Nike’s refusal to

supply it, Frasers has taken a $30 mil-

lion hit offloading the business.

Frasers Group, which has been at-

tempting to move away from Sports Di-

rect’s former bargain basement reputa-

tion, said that Bob’s Stores estate did

not fit with the “elevation” strategy

adopted by Murray, who took over as

chief executive this month.

The company has in the past had a

tense relationship with Adidas and

Nike, because it frequently heavily dis-

counted items in order to gain market

share and put pressure on its rivals.

However, in recent years the hang-

over of Ashley’s tensions with the

sports brands has hurt Frasers Group,

as they prioritised supply to JD Sports,

its archrival.

To counter this, Murray has been fo-

cused on rolling out high end Flannels

stores, including a large store on

London’s Oxford Street selling £630

Valentino sandals and £2,250 Dolce

and Gabbana dresses, partly to demon-

strate that Frasers can look after even

expensive brands. He has also invested

in bigger Sports Direct stores, including

a recent opening in Birmingham.

Murray married Anna Ashley, Ash-

ley’s daughter, at ceremony at Blen-

heim Palace, Oxfordshire, two weeks

ago. The former nightclub promoter

joined the business in 2016 initially to

oversee Frasers’ property before been

given a bigger “head of elevation role”

and became chief executive at the start

of this month.

Frasers Group is expected to an-

nounce its results in July after blaming

constraints in the audit industry for

delaying its results for the third time in

four years.

Inquiry into tech firm deal

The acquisition of Britain’s biggest

microchip factory by a Chinese-owned

technology company last summer has

been called in for a landmark full

national security assessment after

pressure from politicians in the United

States (David Byers writes).

Kwasi Kwarteng, the business secre-

tary, said the government would exam-

ine whether the takeover of Newport

Wafer Fab in Wales by Nexperia, a sub-

sidiary of the Chinese smartphone

manufacturer Wingtech Technology,

would be a threat to national security.

“There will now be a full assessment

under the new National Security and

Investment Act,” Kwarteng said on

Twitter yesterday evening, announcing

the investigation. “We welcome over-

seas investment, but it must not threat-

en Britain’s national security.”

It is the first time the government has

deployed the act, which was passed last

year, to call in a takeover for review.

Ministers have 30 working days to

carry out their assessment and have the

power to intervene to reverse it.

The intervention came after The

Times reported that nine US congress-

men including Michael McCaul, the

lead Republican on the House foreign

affairs committee, had signed a letter

last month demanding “urgent action”

to overturn the acquisition.

They said the takeover “serves as a

critical test case” of Britain’s willingness

to “address a shared security concern

regarding critical technology”.

An analysis of Wingtech’s sharehold-

ers by Datenna, an investment screen-

ing specialist, found it was heavily

backed by the Chinese Communist

Party, according to a committee report.

Newport Wafer Fab makes slices of

semiconductors, the fundamental

components of electronic devices. It is

Britain’s biggest microchip plant and

employs 450 people.