Shares across London's main indices are clawing back some recent losses. Our Trader writer Neil Wilson says: 'The Federal Reserve went all in yesterday, opening the taps on an unlimited asset purchase programme that will for the first time include corporate bonds as well as US government debt. There were other measures in a broad package of support for companies that goes about as far as it’s possible to go. Today, European markets are firmer, taking their cue from a bounce in Asia and US futures trading higher. The FTSE 100 opened +4 per cent at 5200 before tapping on the 200-hour line at 5220 and slinking back to 5,135 in short order. This 200-hour SMA around 5220 looks to be the main near-term resistance. Oil & gas was lifted +4 per cent by a rally in oil prices, with WTI crude back to almost $25.' Click here for Neil's full Market Outlook.
IC TIP UPDATES:
JD Sports Fashion (JD) has closed its doors and delayed the release of its full-year results, probably until the second half of May. Virtually all of its stores in the UK, US and Europe are closed due to coronavirus although its online channels remain open. Buy.
Mulberry (MUL) announced that it was suspending all shareholder payouts after warning that coronavirus would swing the luxury handbag business into a small second half loss, having previously expected a profitable period. Sell.
Dunelm (DNLM) has scrapped its 8p interim dividend, due in April, and has decided to fully drawn down against its £165m revolving credit facility as the retailer prepares for life behind closed doors during the coronavirus outbreak. A 6.5 per cent surge in like-for-like sales in the first ten weeks of Dunelm’s third quarter were followed by an 8.8 per cent decline over the two weeks to 21 March. Under review.
Learning Technologies Group (LTG) posted a trading update in the place of its preliminary financial statements for 2019, following requests from the Financial Reporting Council (FRC) and the FCA to all listed companies to delay publications. The group has not seen a material impact on trading from the virus outbreak, but will postpone its final dividend (proposed at 0.5p per share) as well as cash bonuses for directors “until market conditions stabilise”. Performance in 2019 was otherwise strong, as sales grew by 39 per cent to £130.1m. Buy.
Redrow (RDW) has warned that despite net reservations rising a quarter during the first 12 weeks of its second-half, it was inevitable that the sales rate would be seriously impaired over the coming weeks and build output would be affected by labour and material shortages. The housebuilder has cancelled the 10.5p interim dividend due to be paid to shareholders on 9 April in order to preserve cash and is also attempting to reduce work in progress levels across its sites. Buy rating under review.
Life insurer Prudential (PRU) has said its business has been “financially resilient” throughout the recent coronavirus crisis, reflected in part by an unchanged risk-based capital ratio for Jackson, the group’s US division. Plans to list the subsidiary in a minority initial public offering remain the group’s preference, though chief executive Mike Wells today indicated that other options are on the table. Shares in the group are up 7.6 per cent in early trading, and remain a buy.
Insolvency practitioner Begbies Traynor (BEG) has not been immune to heavy share-selling pressure in recent weeks, despite the fact that 65 per cent of its income is derived from counter-cyclical business services. Today, the group reassured investors of its “strong financial position” and “significant headroom on its committed bank facilities”. Buy.
Specialist lender Secure Trust Bank (STB) has suspended its dividend, despite witnessing no change in business performance this year to date, “save for reduced demand for the group’s retail finance and motor finance products”. The inability to quantify potential impacts from the Covid-19 outbreak has also led management to pull its forward guidance for 2020. Results for 2019 – which have been delayed pending FCA advice – are still expected to be in line with market forecasts. Under review.
Shares in Alpha Financial Markets (AFM) are well up today, after the asset management consultancy said it would pause hiring and initiate “sensible cost saving measures across the business”. Though management expects its client win rate to be impacted, there was no comment on a deterioration in business, while the balance sheet is well-supported by £15m in cash and an undrawn £5m revolving credit facility. Under review.
KEY STORIES:
888 Holdings (888) warned of a potential coronavirus impact to group cash profits climbing up to “high single digit millions of dollars”, after the gambling company noted its concerns over the sustainability of consumer spending. While its poker and casino products have seen increased levels of activity, these are likely in response to the cancellation of sport worldwide, with sports betting accounting for 16 per cent of 888’s revenues in 2019.
Taylor Wimpey (TW.) added its name to the list of companies scrapping its final dividend, of 3.8p a share, along with a special dividend of 10.99p, both of which were due to be paid on 2 July. The housebuilder said while the ordinary dividend had been stress tested and is payable through a 'normal' downturn, “the global COVID-19 pandemic goes beyond normal”. Management said it was also suspending 2020 trading guidance.
Anglo American (AAL) and Rio Tinto (RIO) are among the miners affected by South African measures to stop the spread of Covid-19. The two major miners will suspend operations in the country for three weeks. Anglo has platinum group metal, coal and iron ore production, while Rio produces ilmenite there. Pan African Resources (PAF) has also shut all its operations, while Petra Diamonds (PDL) has not announced any changes to its operations despite the majority of its production coming from South Africa.
Crisis-hit Amigo Loans (AMGO) has temporarily paused all new lending activity, “except for lending to key workers in exceptional circumstances”. The guarantor loans group said the move would free up staff to assist with supporting existing customers – “particularly where customers have a need for forbearance”.
OTHER COMPANY NEWS:
RPS (RPS) has not seen a material impact from the Covid-19 outbreak in the first two months of the year. However, in anticipation of future adverse effects, the group is cancelling its final 2p dividend declared for 2019, halting all non-essential capital expenditure, deferring all 2020 salary increases and saving £5m by suspending the roll-out of its new IT system. Net debt as at 28 February had increased by 17 per cent since the year-end to £110m owing to a seasonal working capital outflow. The headroom on committed bank facilities at that time was £33m.
Wynnstay (WYN) has seen subdued trading in the first four months of the year on the back of lower farmgate prices, severe wet weather, limited sowing activities and ongoing farmer cautiousness. The group is seeking clarification over the new government guidelines on store closures, believing it provides an “essential service within the rural community and food chain”. It says the financial impact of the Covid-19 outbreak is difficult to predict at this time.
In light of the Covid-19 outbreak and new government guidelines, Smart Metering Systems (SMS) has stopped all installation of smart meters “until further notice”. It will continue to provide emergency field support and maintain the IT infrastructure which supports the existing meter and data asset base. As at 29 February, the group had index-linked annualised recurring revenue (ILARR) of £73.2m. Once it receives the £282m net cash proceeds from the sale of a minority of its meter assets, SMS will repay the outstanding amounts on its £420m debt facility and move into a net cash position.
YouGov (YOU) has delayed its half year results in line with FCA and FRC guidance. The group issued a trading update for the six months to 31 January 2020 in its place, noting that adjusted operating profit climbed up by 35 per cent to £11.4m. Its data, products and services business, which accounts for over half of total sales, was up by 17 per cent to £43.4m. Chief executive Stephan Shakespeare said in a statement that the company has not seen a material impact on the business from the virus outbreak, but it is “inevitable” that its clients will be affected.
Legal dispute financier Litigation Capital Management (LIT) has managed to close its $150m third-party LCM Global Alternative Returns Fund, following the late $10m subscription by the “asset management division of the large global investment bank”. Chief executive Patrick Moloney said the fundraise, which will be seeded with nine single case investments, was testament to LCM’s “disciplined investment approach and the growing number of opportunities available to it” as well as investors’ hunt for uncorrelated and counter-cyclical asset classes.
Mortgage Advice Bureau (MAB1) has published an abridged version of its 2019 full-year results, following FCA advice to companies to delay formal publication. Those unaudited numbers detail a strong rise in margins, profit, revenue and cash conversion – all of which would have resulted in plans to pay a final dividend of 12.8p per share. However, in light of the ongoing collapse in appointment activity and mortgage instructions, management has halved the final payment. Other self-help measures have included the full draw-down of the group’s £12m revolving credit facility with NatWest and a “seamless transition to telephone advice”, and a renewed focus on the re-mortgage and product transfer markets, which account for around two-thirds of mortgage transaction value.
