After the gyrations of recent days a modest reversal in the main UK indices is welcomed as a sign of potential stability. Our Trader writer Neil Wilson says: 'The European Central Bank (ECB) loves inelegant acronyms. To LTROs and TLTROs we can now add PEPP - the Pandemic Emergency Purchase Programme. As cumbersome as it sounds, the €750 billion fund looks more like a bazooka than anything they've done thus far. Christine Lagarde and co knew they had to step it up and have. The asset purchase programme will loosen existing rules to cover non-financial commercial paper. The spread between Italian and German bond yields came back in to 188bps, after blowing out to 320bps. Italian yields have tumbled and across Europe sovereign bonds yields are lower. Ms Lagarde, I feel, realises it is indeed her job to prevent spreads widening and it seems she has finally got the message through to the market that the ECB is going to do 'whatever it takes'. For Neil's full article, click here.
IC TIP UPDATES:
Next (NXT) stands to lose as much as £1bn in sales under its coronavirus stress tests, and is on the verge of increasing its banking facilities by £200m as it prepares to battle an “unprecedented” crisis, in the words of chief executive Simon Wolfson. Last year’s retail numbers suggest Next is in for a torrid time on the high street, although growth in its online and finance segments offset a 23 per cent slump retail profits. Under review.
Asia-focused life insurance group Prudential (PRU) has signed a 15-year bancassurance partnership with Thailand-based TMB Bank, in a bid to expand the group’s client footprint in the largest mutual fund market in south-east Asia. The deal follows a similar tie-up inked in January. Buy.
Burberry (BRBY) disclosed that since 24 January, trading “with comparable retail stores” is down between 40 per cent and 50 per cent. Around 40 per cent of its stores are closed globally, with around 85 per cent of its shops in the Americas shut. Burberry expects it sales for the final few weeks of its financial year to drop between 70 per cent and 80 per cent on last year with Q4 sales down 30 per cent overall. Under review.
Pennon (PNN) has agreed to sell its waste management business, Viridor, to US private equity group Kohlberg Kravis Roberts (KKR) for an enterprise value of £4.2bn. This is more than 18 times the adjusted cash profits recorded by Viridor last year. Net cash proceeds from the disposal will be £3.7bn, with £0.5bn of debt remaining with Viridor. Some of the proceeds will be returned to shareholders, likely in the form of a special dividend. Pennon’s dividend policy of 4 per cent growth above retail price inflation (RPI) will remain unchanged for the current financial year and a policy for the new regulatory period between 2020 and 2025 will be announced in June. Buy.
National Express (NEX) is reconsidering awarding a final dividend of 11.19p at its May AGM, given the current turmoil created by coronavirus. The transport group also confirmed that it had £500m in undrawn facilities along with more than £1.3bn in fixed borrowing facilities. National Express shares soared 16 per cent in early trading. Under review.
NewRiver Reit (NRR) has scrapped its fourth quarter dividend in order to preserve £17m in cash as further declines in footfall seem likely. The retail landlord also said it would be suspending all non-essential capital expenditure projects, which it hopes will improve cashflow over the next 12 months by £24m, with another £4m to be gained by the suspension of business rates and marketing in its pub estate and shopping centres. The group has £72m of unrestricted cash reserves and £45m of undrawn revolving credit facilities. Sell.
In a set of full-year results which Numis describes as “solid but largely irrelevant”, OneSavings Bank (OSB) today confirmed that its loan book more than doubled on a statutory basis in 2019. That was largely due to the tie-up with Chartercourt Financial Services, which partly explains the dip in statutory basic earnings per share. Disconcertingly, the group behind Kent Alliance has today pulled its forward guidance for 2020, given the profound uncertainty now dominating the economy and the UK housing market. Under review.
KEY STORIES:
Crest Nicholson (CRST) has cancelled its final dividend of 21.8p a share, anticipating a significant impact on visitor levels and trading performance at its sites amid the coronavirus outbreak. It has also made arrangements to fully draw its £250m revolving credit facility, resulting in available cash of £185m. The housebuilder has also suspended all other financial guidance as the outbreak develops.
Direct Line (DLG) has scrapped its share buyback programme in a bid to strengthen its balance sheet amid the Covid-19 crisis. Since the scheme was launched at the group’s full-year results, £29m of a proposed £150m-worth of shares have been retired. The insurer also expects a reduction in motor claims this year, following the UK government’s advice to suspend non-essential travel, though travel claims – a potential pinch point for the sector – increased from £1m to £5m in the first two weeks of March alone.
Shares in the IG Group (IGG) are down 10 per cent this morning, despite posting a 31 per cent increase in revenue to £135m from the sale of over-the-counter derivatives in the three months to 29 February. In the first 12 days of March, revenue has rocketed to £52m, in what the spread-betting platform described as “unprecedented” levels of volatility and client trading. Consequently, the group no longer believes it is possible to accurately predict revenues for the remaining 42 days of the current quarter.
OTHER COMPANY NEWS:
Meggitt (MGGT) says that trading in January and February was in line with expectations and further detail will be provided in its quarterly update in April. Outlook for near term demand for its products and services is “uncertain”, but the group has implemented cost cutting measures to ensure liquidity over the coming months. Given the volatile macroeconomic backdrop, it says it is too early to provide full year earnings guidance. In response to the government’s request, the group is leading a consortium of UK aerospace suppliers to develop and produce medical ventilators in large volumes.
Jadestone Energy (JSE) has put its Vietnam gas project on hold to cut spending as oil prices keep sinking. The Canadian company relies on the Montara oil operation in Australia for its cash flow. The freeze on work at the Nam Du and U Minh fields will save around $90m (£78m), or half of expected 2020 capex. Jadestone does not yet have full government approval to go ahead with the gas projects, which had been forecast to go into production by the end of next year. The company said the rest of its expansionary spending, used for infill drilling, could also be reduced. The company is trading 58 per cent lower than a month ago, at 30p, and fell 6 per cent on the Nam Du and U Minh delay news.
Auto Trader (AUTO) will suspend its charges for advertising packages for its retailer customers during April and will allow its customers to defer payment of their March advertising costs by 30 days. The auto website anticipates a £6m-7m operating loss in April as a result. The company noted in an update that its full year results ending 31 March 2020 will be broadly in line with expectations, but given the wider market conditions it cannot guide for 2021.
Shares in BATM Advanced Communications (BVC) jumped up as much as 25 per cent in morning trading after it announced a partnership with Novamed Ltd, for the joint development and marketing of a home diagnostic kit for COVID-19. The company also said that it has started to ship its new diagnostic kit for the coronavirus, developed by Adaltis, for use by medical facilities. Initial customers are European, with delivery to Italy as the current focus.
Gym Group (GYM) shares rose 9 per cent after full-year results revealed the group’s response to coronavirus, which included plans to withdraw its final dividend. Gym Group has drawn down the remaining £20m from its revolving credit facility, leaving it with £28.9m in cash, and while new gyms under construction will be completed others will be put on hold. Withholding the dividend will allow it to keep a further £1.6m in cash. Its results also showed a 23.6 per cent increase in full-year revenues, with adjusted pre-tax profits up 36 per cent to £14m.
Ocado (OCDO) has closed its webshop after selling all of its delivery capacity yesterday for the coming days. In the 13 weeks to 1 March 2020 the online delivery group recorded a 10.3 per cent jump in retail revenue to £441.2m. Ocado shares fell 5 per cent.
ESG-focused active manager Impax Asset Management (IPX) has said its funds and accounts have “generally performed in line with the market” this month, following an 8 per cent increase in assets under management in the five months to February. Net flows were also described as “slightly negative”, though the group’s potential new business remains strong and largely unchanged.
Sanne (SNN) stock rocketed this morning, after the corporate business services group said it had seen minimal impact on client service delivery. Full-year results reveal a 7 per cent rise in underlying operating profit, to £44.3m
