Equities in London subsided at the open as traders booked some of their recent rebound gains. Our Trader writer Neil Wilson says: 'Wall Street posted its first day of back-to-back gains in a month, as the US Senate got its act together and passed the $2tn stimulus package. But Asian equities have failed to carry through and US futures are weaker.
European shares opened a fair bit softer After moving briskly higher into the close yesterday to threaten the March 13th swing highs at 5700, the FTSE 100 came off 200 points, or 3.5 per cent, on the open to trade below 5500 before trimming losses and driving off the lows towards 5550. Near-term support emerges around yesterday’s lows at 5400.' For Neil's full write up click here.
IC TIP UPDATES:
SIG (SHI) anticipates underlying pre-tax profit for 2019 will be in line with guidance of around £42m. Full year results are due to be reported on 27 April. As challenges from last year persisted, the first two months of 2020 have seen an operating loss of £9m, with like-for-like sales down 11 per cent. The group says it has not experienced any significant sales impact from the Covid-19 outbreak in the UK to date and the majority of its European trading sites remain open. However, given the difficulties it is facing and what could come, there will be no final dividend for 2019 and SIG will not return any proceeds from recent disposals to shareholders. Sell.
Knights (KGH) says trading to date has been in line with expectations for the year ending 30 April. With all employees working from home since 13 March, the group says its investment in technology platforms has enabled business continuity and minimised disruption to client service levels. Knights is deferring all non-essential capital expenditure and implementing salary cuts from 1 April – board members will be paid 30 per cent less while staff earning £30,000 and above will see their pay reduced by 10 per cent. The revolving credit facility was recently extended to £40m until June 2023, giving £23m of undrawn committed facilities. Full year net debt is expected to come in at £17m, equivalent to 1 times cash profits. Buy.
Avon Rubber (AVON) has received another order under the $333m (£279m) framework to supply body armour to the US Defence Logistics Agency announced yesterday. The contract is worth $20m and deliveries will commence in early 2021. Buy.
Aveva (AVV) has acquired production accounting software from South Korean based company MESEnter as part of its value chain optimisation strategy. The software, now rebranded as AVEVA™ Production Accounting, can improve accuracy of planning models, manage operations performance and identify loss detection. Buy.
Capital and Counties (CAPC) has temporarily suspended its share buyback programme to boost its cash reserves as many of its Covent Garden retail and food and beverage tenants remain closed. The landlord said it was trying to assist those tenants, which would involve moving from quarterly rental payments in advance to alternative arrangements and the deferral of rental payments in certain cases. With a loan-to-value ratio of 16 per cent across the portfolio and interest cover of 2.9 on Covent Garden, the group remains within its debt covenants. Sell.
KEY STORIES:
Topps Tiles (TPT) does not envisage paying its interim dividend this year, having ceased normal store activities in response to the government’s step-up in coronavirus measures. The retailer has fully drawn down its committed £39m revolving credit facility and has £20m in cash available, along with an £11m accordion facility. The business rates holiday will save the company £9.5m while government’s deferral of the VAT quarter payment will improve cash flow by £3.1m. In the event of a 12 week closure period followed by a quarter of significantly lower sales, Topps expects its cash reserves to support the business for the rest of the financial year.
British Land (BLND) has announced it will halt dividend payments, including the FY20 Q3 dividend due to be paid in May, in order to conserve capital as just 12 per cent of its trading units remain open. The commercial landlord said it was releasing its smaller retail, food & beverage and leisure customers from their rental obligations for three months at a total cost of £3m. The group has also extended its debt facilities by completing its first ESG revolving credit facility at £450m and said it retained significant headroom within its covenants, with a loan-to-value ratio of 31 per cent across the portfolio.
Intu (INTU) revealed that it had received just 29 per cent of its rent on 25 March quarterly payment date, compared with 77 per cent the same time last year, as its shopping centres have been operating on a semi-closed basis. The group had available cash and undrawn debt facilities of just £184m, dwarfed by a debt pile of almost £5bn, and now expects the £95m in proceeds from the sale of intu Puerto Venecia to be delayed until mid-May.
Big Yellow (BYG) said increased demand from students urgently needing storage facilities had been outweighed by businesses that have been forced to close moving out. The self-storage group has given rent holidays and deferrals to tenants on a case-by-case basis but occupancy had fallen to 81.6 per cent, from 83.4 per cent at the end of September. The group has cash and available undrawn committed facilities of £38m and the interest cover multiple was in excess of 9 for the current quarter against a covenant of 1.5.
Hostelworld (HSP) has scrapped its final dividend in a move that will save the group €2m, and has lifted its forecast coronavirus impact on its first quarter’s cash profits to around €5m, from a previous range of €3-€4m.
Weir (WEIR) has cut its final dividend of 30.45p, saving £79m, and will reduce spending significantly in response to the Covid-19 crisis. The services company has also “withdrawn” guidance issued last month. The hardest hit part of the company is its North American oil and gas services, which it had already flagged an intention to sell off. In today’s trading update, Weir said it would lay off 25 per cent of its North American workforce, as part of a $30m cut in spending in its oil and gas division, on top of the 20 per cent reduction last year. The company also said its mining business was “robust” and its Chinese production facilities were coming back online. Weir shares are trading at just over half their pre-9 March level, at 712p.
OTHER COMPANY NEWS:
Independent Oil and Gas (IOG) has put out its audited 2019 results, covering a tumultuous year where it fought off a takeover bid, saw its main lender go bust and then teamed up with Berkshire Hathaway subsidiary CalEnergy Resources to develop the Core gas project in the North Sea. The North Sea-focused company made a series of deals last year to finance its gas project, including a €100m (£92m) bond issue as well as the CalEnergy deal. Chief executive Andrew Hockey said IOG would go ahead with developing Core despite the Covid-19 outbreak. He even said there could cost savings because of the oil price crash as the company hands out contracts for the project. IOG was trading up 9 per cent to 12p on the results.
James Fisher (FSJ) says group trading in the first two months of 2020 was ahead of last year, however the future impact of the Covid-19 outbreak on its business is difficult to predict. As such, the group is suspending the final 23.4p dividend declared for 2019. It is also deferring discretionary capital expenditure, instigating a hiring freeze and reducing board members’ salaries and fees by 20 per cent. Excluding lease liabilities, net debt was £203m at the end of 2019 and a new £30m revolving credit facility was agreed on 20 March.
Senior (SNR) says the Covid-19 outbreak is causing macroeconomic disruptions to its end markets and their respective supply chains. While the first two months of trading in 2020 have been in line with expectations, the rest of the year will likely be adversely impacted and so it is suspending its full year guidance. To preserve cash, it is also cancelling the final 5.23p dividend declared for 2019.
Dixons Carphone (DC.) is still mulling over whether to pay its final dividend, due September, and will wait for further clarity over the impact of the coronavirus outbreak before arriving at a decision. The retailer expects to save over £200m from the government’s suspension of business rates and its support of salaries, while the VAT deferral reduces its short-term cash outflow by around £140m.
Renewi (RWI) is guiding that results for the year ending 31 March will be in line with expectations. Excluding lease liabilities, net debt is expected to be below €500m (£459m), equivalent to 3 times cash profits. It is taking a €15m provision as the European Commission investigates allegations the company received state aid for landfill activities in Belgium. In terms of the Covid-19 outbreak, Renewi says waste management has been designated an essential service by national governments and wage and VAT tax payment deferrals should help offset any reduction in waste volumes. The group expects this will hit next year’s results and is implementing cost cutting measures to save over €40m.
Breedon (BREE) is suspending production at its UK sites, with the exception of its Hope cement plant and any operations that serve critical supply needs. Trading up until this week had been in line with management’s expectations, however the government’s new lockdown measures have brought “an immediate and significant reduction in demand”. As at 25 March, the group had drawn down £335m from its committed facilities, with a further £220m undrawn, and £60m of cash. The CEMEX acquisition may take longer than anticipated, but including this purchase, stress testing suggests the group has sufficient headroom to weather the challenging conditions.
Boku (BOKU), a carrier commerce company, saw its sales grow by 42 per cent to $50.1m in 2019, with adjusted cash profits 17 per cent higher to $7.4m. The group reported a maiden profit after tax of $0.4m. Management said that it had seen a strong start to the current year, with significant increases in new users of its payments platform, especially for streaming video services and gaming in countries that have been hit hardest by Covid-19.
