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News & Tips: Markets slide again, Tristel, Royal Dutch Shell & more

London's shares deep in the red again
March 23, 2020

Equities in London slammed into reverse again this morning as the coronavirus crisis continues to spread worldwide. Our Trader writer Neil Wilson says: 'European markets finished perky last Friday but the outlook at the start of a new trading week looks uncertain and volatile. London, Paris and Frankfurt were all trading 4-5 per cent lower in early trade Monday, after US markets fell 4 per cent Friday to close the week down 15 per cent and futures hit limit down overnight Monday. Asian shares were offered across the board, with the ASX 200 down 5 per cent, and Hong Kong down more than 4 per cent. For the FTSE 100, the key 4900 low is being tested this morning.' For Neil's full Market Outlook, click here. 

IC TIP UPDATES: 

Tristel (TSTL) has entered into a deal with Byotrol (BYOT) to create a unique surface disinfectant product for hospitals, by combining the companies’ core technologies. The two groups have entered into a know-how licence and commercial collaboration, pertaining to the joint development of a biocidal formulation and the development of two additional biocidal products and formulations that will be supplied and licenced to Tristel. Tristel’s management noted that it was seeing very strong demand in all of its markets due to the Covid-19 pandemic. The shares were up by more than a fifth this morning. Buy

Speedy Hire (SDY) says revenue for the year to 31 March is expected to increase by 3.5 per cent versus the prior year, with turnover from hire and services rising by 1.5 per cent and 6 per cent respectively. Momentum among small and medium-sized enterprises (SMEs) has continued with hire revenue from these customers growing more than a quarter. The Covid-19 outbreak is starting to reduce activity levels, and so the group believes adjusted pre-tax profit will come in below market consensus of £37m. Excluding lease liabilities, net debt is guided to be between £80m-85m, around 1 times cash profits and below the group’s target range. Under review.

Aggreko (AGK) says that since updating the market with its full year results on 3 March, the impact of the Covid-10 outbreak on revenue has been limited, mostly confined to the events sector. However, the group has vulnerability with the low oil price – almost a third of revenue comes from North America and a quarter of this is derived from the oil and gas sector. Meanwhile work on the Tokyo Olympic Games continues although these could yet be cancelled. Aggreko expects to remain within its banking covenants even in a worst-case scenario but to preserve liquidity is trimming discretionary spending, freezing hiring and limiting fleet capital expenditure. It will not pay the final 18.3p dividend declared for 2019 and 2020 earnings guidance has been withdrawn. Sell.

Draper Esprit (GROW) has today provided and update on the state of its business and portfolio investments, telling investors that it has sufficient cash on hand to support the companies it works with. The venture capital group said it “started to closely track events in China at the turn of the year when news of Covid-19 first emerged”, and has since supported its portfolio companies to access the UK government’s financial assistance packages, though around 80 per cent of the group’s investments by net asset value have “strong cash balance sheets and/or the ability to adjust costs” to trade until the end of the year. Under review.

Stagecoach (SGC) said it was unlikely to propose any further dividends for its financial year running to 2 May 2020, while directors have taken a 50 per cent pay cut after coronavirus prompted a collapse in its passenger numbers. Stagecoach’s regional bus network has experienced a 40 per cent drop in commercial patronage and the group is lowering its regional bus mileage accordingly. Sell.

Card Factory (CARD) has scrapped its dividend and delayed imminent full-year results following the Financial Conduct Authority’s request of results postponements from all companies. While all stores remained open during the weekend the company is beginning to close outlets, and is also delaying capital expenditure and restricting new store openings. Card Factory’s net debt stood at £137m at the end of February, and the company has £200m in accessible funds via a revolving credit facility - it hinted at the possibility of extending this funding. Sell.

Fulham Shore (FUL), which owns the Franco Manca and The Real Greek restaurants, announced that the majority of these outlets had all been closed as of Friday 20 March following guidance from the government over coronavirus, although some sites are still providing delivery services. The company said that it was slashing its variable cost base, which includes staffing costs. Sell.

Following the closure of its pub estate, NewRiver Reit (NRR) announced that after stress testing its portfolio - assuming that it would not receive any income from pubs over the next six months and a significant reduction from its retail portfolio over the next 12 months - it would have more than £50m of cash and £45m in undrawn debt facilities. The retail and leisure landlord said it currently had £75m of unrestricted cash balances and £45m of committed undrawn credit facilities. Sell

KEY STORIES: 

Royal Dutch Shell (RDSB) has frozen its buyback programme and will cut spending by around $5bn (£4.3bn) this year in response to the Covid-19 crisis. The supermajor also said it would cut its operating costs by $3-$4bn over the next 12 months, compared to 2019, when its total operating cost was $37.9bn. Shell is almost two-thirds of the way through its $25bn buyback programme, which it said would be finished once conditions improve. Chief executive Ben van Beurden said the spending cuts would ‘protect’ staff and customers, while the company said it would be “actively managing all...operational and financial levers”.

Go-Ahead Group (GOG) has suspended its proposed interim dividend of 30.17p a share as the transport group seeks to shore up its liquidity in the face of rapidly falling passenger figures. Go-Ahead remains in negotiations over a Direct Award Contract for Southeastern rail and expects a decision by the end of the month.

Kingfisher (KGF) has scrapped its final dividend and delayed the release of its full-year results in accordance with the Financial Conduct Authority’s request for the postponement of all company results. The home improvement company’s UK stores remain open while outlets in France and Spain have closed. Kingfisher recorded a 1.5 per cent decline in like-for-like full-year revenues.

Ted Baker (TED) has agreed the £78.75m sale of Big Lobster, the holding asset of its head office, with the trustees of the British Airways pension scheme. Net proceeds of £72m will go towards reducing the retailer’s debt levels. The retailer has also agreed a short-term lease for the property. Ted Baker has also managed to increase the headroom in its borrowing facilities by £13.5m until 18 December 2020.

OTHER COMPANY NEWS: 

Breedon (BREE) has secured an eight-year contract with Transport Scotland to manage and maintain Scotland’s South East Trunk Road Unit. Estimated to be worth up to £720m, the contract will run from August 2020 until 2028 with the option to be extended to 2032.

IWG (IWG) expects to see pressure on its global business as countrywide lockdowns are implemented in response to the Covid-19 pandemic. It has decided to scrap the final 4.8p dividend payment declared for 2019 and suspend the £100m share buyback programme announced alongside full-year results in early March. It has spent £27.5m on repurchasing shares to date. Net debt stood at 0.7 times cash profits (Ebitda) as at 31 December and the group has extended the maturity date of its £950m revolving credit facility to March 2025. The group says it is too early to provide earnings guidance for the current financial year.

Pearson (PSON) has paused its share buyback as it manages the impact of the coronavirus outbreak. The majority of Pearson VUE test centres have been closed until mid-April, which it anticipates will reduce 2020 operating profit by as much as £35m. The publisher did however note an uplift in the use of its digital products and services, which it hopes will accelerate the shift to online learning. 

NCC (NCC) said that the cumulative impact of the coronavirus delays, cancellations in the Asia-Pacific region and increasing cancellations has led to a fall in revenues, specifically in its cyber assurance division. Management has withdrawn its current guidance due to the effects of cancelled or deferred projects, though it still forecasts to make a profit in March. 

Fuller, Smith & Turner (FSTA) will review its dividend after closing all of its managed and tenanted pub estate from close of business on Friday 20 March 2020, following the government’s guidance on coronavirus.

FirstGroup (FGP) withdrew its financial guidance for its year to 31 March 2020 following a slump in passenger numbers. The transport group emphasised that it had £400m in undrawn facilities and free cash at the close of February 2020.