Now we know what DP World means by its “mission to reimagine the global supply chain” — sacking 800 crew at its P&O Ferries’ operation at a moment’s notice, bringing chaos to key UK ports and shipping routes.
The move by the Dubai owner of the Dover and Hull ferry services is, as the Nautilus International union put it, “scandalous”. Maybe summary dismissal is the way things get done in Dubai. But over here? It brings some context to the ridiculous claims by DP World’s boss Sultan Ahmed Bin Sulayem that “good governance is core to our business”.
It’s the sort of governance that’s just seen P&O Ferries order its ships back to port and fire workers via a pre-recorded video message, so that they can be replaced by cheaper labour. Yes, the ferry business is losing money — £100 million a year, the company says, on top of the £86 million in 2020, when Covid struck, and 2019’s £39 million. But, it was only last week that DP World, also a big global owner of container terminals, was announcing “record results”, with sales up 26 per cent to $10.8 billion and ebitda rising 15 per cent to $3.8 billion.
The company routinely pays dividends too. So, the idea that it needed urgent mass sackings is absurd, whatever its claims that the ferry operation’s “survival is dependent on making swift and significant changes now”.
DP World bought the business barely three years ago, paying £322 million, with bin Sulayem expressing his joy at purchasing “a strong, recognisable brand”. Covid and Brexit haven’t helped, with P&O Ferries axing more than 1,000 staff during the pandemic. But this is the same DP World that was happy to pocket £33 million of emergency government funding during the corona crisis to keep the ferries afloat. And the same group whose London Gateway port is earmarked for lucrative freeport status. The government needs to tell bin Sulayem that this sort of behaviour stinks.
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Rate-setters stuck in their own trap
That’s what you call “transitory” inflation: price growth heading for 8 per cent by next month, followed by something potentially double-digit by October. Blame soaring energy prices and Vladimir Putin’s invasion of Ukraine if you like. But, at root, this is a monumental screw-up by the Bank of England governor Andrew Bailey and his eight fellow rate-setters on the monetary policy committee.
They’ve really only got one job: hitting the 2 per cent inflation target. And they’re out by at least a factor of four. There aren’t many businesses where the management survives that sort of miss. Yes, Britain’s central bank is far from alone in having sleepwalked into an inflationary spiral. But by leaving things too late, the MPC is now playing catch-up at anything but an ideal moment. December’s rate rise from 0.1 per cent to 0.25 per cent coincided with the uncertainty over Omicron. February’s extra quarter point increase came with Ofgem’s £693 hike in the energy price cap to £1,971 a year. And now Ukraine provides the backdrop for the return to a pre-pandemic 0.75 per cent.
True, Bailey is right that “monetary policy is unable to prevent” the sort of “large shock” to the economy that comes with Putin’s assault on Ukraine, with rocketing energy prices and gummed-up supply chains adding an extra inflationary twist. But the MPC had lost control of prices long before that. Now it can do little more than warn that, come October when the energy price cap could easily reach £3,000 a year, inflation could climb “several percentage points” above the peak 7.25 per cent that it forecast in February.
Unlike the US Fed, it’s unclear too whether the MPC has the stomach to get serious about soaraway prices. America’s rate-setters hawkishly signalled six more rises this year. Yet the MPC voted only 8-1 for an increase, with the deputy governor Sir Jon Cunliffe voting against, while the Bank’s tone was notably more doveish than in February. Perhaps Bailey & Co will be proved right that the present squeeze on household incomes will tame inflation, while oil and gas prices will start to abate. But on past form you wouldn’t bank on it.
Paying for punters
Of course, Rishi Sunak had heard of Deliveroo. What else would anyone expect from the “pig out to peg out” supremo, always keen to tuck in? No sooner did he get wind of the kangaroo-eared brand’s 390p-a-share float a year ago than he popped up to hail it “a true British tech success story”: a point it’s been proving since, what with the shares now down to 124p, even allowing for the 5 per cent bounce on the full-year results.
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Not everyone, however, has the chancellor’s encyclopaedic knowledge of the takeaway sector, as one stand-out figure highlights: a 75 per cent jump in Deliveroo’s “marketing and overheads” spend to a stonking £629 million. Its chief executive, Will Shu, says it was to support “the acquisition of new customers and retention of existing” ones, boost “brand awareness” and invest in technology. But it’s a meaty sum, with the increase above the 70 per cent rise, at constant currencies, in gross transaction value (GTV) to £6.63 billion. No surprise pre-tax losses widened from £213 million to £298 million.
Buying customers is a pricey way to do business. So it’s lucky Shu expects marketing spend, as a percentage of GTV, to “moderate”. Much of the increase, he says, was catch-up after investment slowed in 2020, thanks to both Covid and the competition inquiry into Amazon’s $575 million stake. And since 2019, total monthly active customers are up 123 per cent to 8 million, with 4.1 million in the UK and Ireland; proof of Deliveroo’s enduring post-lockdown appeal.
Yet the costs of keeping the punters need to come down. And not least when Deliveroo’s cutting its guidance for 2022 GTV. It’s now forecasting a wide range of 15 per cent to 25 per cent growth versus the previous 20 per cent minimum, partly due to the extra “inflationary pressures” hitting consumers, “exacerbated by the grave crisis in Ukraine”.
Yes, Deliveroo is in land-grab phase. And Shu has shown investors a path to some sort of profitability: “adjusted ebitda breakeven” by no later than the first half of 2024. The shares no longer look pricey either: the group’s £2.15 billion market value includes £1.3 billion of balance sheet cash. But Shu will still have to pedal pretty hard to live up to the chancellor’s pre-float hype.
Return flight
Another day, another corporate retreat from Russia. This time it’s Raven Property, the Moscow warehouse outfit run by Anton Bilton and Glyn Hirsch. Having floated in 2005 and followed up a year later with a £310 million fundraising at 115p, the best the duo can now come up with is to cancel the listing. The shares today? Suspended at 3.82p.
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Raven’s interests in Putinland are now being “divested” to a Cypriot company owned by the local Russian management. In return, Raven’s got a “put option”, which may enable it to retain an “economic interest” in the Russian business. It’s mainly via £678 million of newly issued preference shares, ostensibly paying a 10 per cent annual coupon: a heroic sum for a group valued at £21.6 million. The catch? Given the sanctions regimes, even Raven is “unable to assess” the real value of the prefs or whether the coupon will ever be paid.
Bilton and Hirsch are also behind Sabina Estates, the outfit that’s developed “Ibiza’s first ecologically inspired private villa estate”: luxury pads complete with “uninterrupted sea and sunset views”. The least they could do is put up Raven’s skint shareholders for free.
alistair.osborne@thetimes.co.uk
