The Investment Column: Shell
Thursday 16 December 1999
In a market that fell almost a 70 points yesterday, Shell rose 25.5p to 499.5p.
Shell said an an upbeat trading statement that it is meeting all its targets in its savage cost-cutting and disposals programme. Over the last year, since it announced its restructuring plans, crude oil prices have more than doubled and the company is now recovering its reputation among investors.
It had been slow to realise the need for radical change compared with its nimbler rivals BP Amoco and Exxon Mobil, which cut costs and then hit the acquisitions trail.
It is playing catch-up and on yesterday's evidence it is progressing well. Some two-thirds of the work in its restructuring is now done, Shell said yesterday.
Total proceeds from disposals will be $12bn (pounds 7bn) by 2001 and 18 per cent of the workforce will be cut by that year leading to at total of 18,000 job losses.
But what really excited the market yesterday were a couple of nice surprises pulled out of the bag.
The target for year-on-year savings by 2001 was raised from $2.5bn to $4bn. Shell also flagged up a plan to return capital to shareholders. It said it was considering a "multi-year" share buyback.
This is currently made unappealing by Dutch tax law and Shell would have to persuade the government there that change is necessary. That process is in train and the company is sounding confident that a solution can be achieved. BP Amoco has already said that it expects to buy back shares next year.
Shell maintained its conservative target for 2001 of 14 per cent for return on average capital employed (ROACE), but analysts fully expect the company to surpass that.
Consensus forecasts for the full year are for profits of pounds 1.8bn, which puts the shares on a foward multiple of 27.
This is a 20-25 per cent discount to BP Amoco and there must be a good chance it will close that gap. With surging crude oil prices and Shell's good spread of assets, analysts are talking about 600p a share. Buy.
- 2 Mystery man who gave mum heart-warming note on train 'wanted to put a smile on her face'
- 5 Amal Clooney gives excellent answer to fashion question at European Court of Human Rights
Mystery man who gave mum heart-warming note on train 'wanted to put a smile on her face'
Michelle Obama highlights harsh restrictions faced by Saudi women after meeting King Salman without wearing a headscarf
Mafia's wall of silence broken: Victim of Cosa Nostra's extortion rackets in its Corleone heartland co-operates with authorities for the first time ever
Amal Clooney gives excellent answer to fashion question at European Court of Human Rights
Sir David Attenborough interview: The one question about life that still baffles him
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
Louise Mensch says 'F**K YOU' in explosive tweets about David Cameron, Saudi Embassy and the Queen over King Abdullah tributes
iJobs Money & Business
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...
Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...
£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...