Shares in London fell back sharply this morning. Our Trader witer Neil Wilson says: 'Stimulus efforts have calmed markets, or at least induced a bear market bounce. Wall Street has notched up its best 3-day run since 1931. The close above 2630 was the highest for the S&P 500 since March 11th. US stocks rallied 6 per cent on the day despite weekly jobless numbers hitting a staggering 3.3m. The FTSE 100 broke key near-term resistance to close at 5815, also its best finish since Mar 11th.
This morning, European markets have pulled back a touch with caution being the order of the day after such a good rally. Friday rules apply – do you hold risk over the weekend? The FTSE opened under the 5700 level and moved to retest 5600. Bourses were 2-3 per cent lower in early trade.' Click here for Neil's full article.
IC TIP UPDATES:
Next (NXT) shares fell 6 per cent on the news that the retailer temporarily closed its online, warehousing and distribution orders yesterday evening, and will not now be taking online orders. Under review.
Rightmove (RMV) has scrapped its final dividend in a move that will save the company £38.3m in cash. The group also dropped its guidance for 2020 due to uncertainties caused by the impact of the virus outbreak. Sell.
Royal Mail (RMG) has reiterated guidance of adjusted operating profit of £300m-350m for the 2020 financial year although there will now be no final dividend. The ‘UK parcels, international and letters’ (UKPIL) business has seen a significant impact from Covid-19 in the last two weeks on advertising mail although business volumes have remained resilient. Parcel volumes have increased as people shift to online shopping although tracked returns for clothing have declined. UKPIL is expected to be materially loss-making next year. Meanwhile, the international GLS business has seen significant business-to-business (B2B) disruption in Continental Europe and profitability here will be “significantly reduced” in the next financial year. The ‘Journey 2024’ plan will now take longer than expected to achieve. Sell.
Supermarket Income Reit (SUPR) has reaffirmed its intention to pay a third quarter dividend, which is due to be announced on 8 April. After paying the dividend the group expects to have a loan-to-value ratio of 37.5 per cent, against a covenant of 60 per cent, an interest cover multiple of 6.8, above a covenant multiple of 2 and cash balances of £37m. The supermarket landlord also agreed two rent reviews during the first quarter, which were completed at a 13 per cent and 2.2 per cent increase on previous passing rent. Buy.
John Menzies (MNZS) says that the impact from the Covid-19 outbreak has “increased significantly and extended across all of our international operations”. The group’s international and domestic airline customers have grounded flights on an unprecedented scale, reducing the number of flights handled in the past two weeks by more than 60 per cent. Cargo volumes have fallen by a fifth. The group is continuing with its cost cutting measures, having reduced headcount by over 17,500, deferred non-essential capital expenditure and suspended dividend payments. Given the fluid situation, no guidance on the earnings impact is being provided. Sell.
C&C (CCR) has conducted a private placement in the US, issuing the equivalent of about €140m in Euro and Sterling notes. The unsecured notes – which represent the drinks company’s first-ever issue in the US private placement market (a private bond market) – have maturities of 10 and 12 years. The group said that this issue has achieved its aims of diversifying its sources of debt financing and extending their maturity out to 2032 on attractive terms. The covenants are in keeping with those of the group’s existing debt facility. Under review.
Keystone Law (KEYS) says that while it finished the year ending 31 January 2020 with £4.4m in net cash, it will not be paying a final dividend in light of the Covid-19 crisis. Trading across the first weeks of the current financial year started strongly and the group says that its model of lawyers operating remotely and accessing central services through its technology platform means it has been “substantially unaffected” by the new lockdown measures. The ongoing impact on its clients, however, remains uncertain. Buy.
Photo-Me International (PHTM) has cancelled its proposed 3.71p interim dividend payment. The group has also deferred its financial year-end from 30 April to 31 October, publishing instead a half year statement in July for an interim period ending 30 April. Coronavirus has prompted a collapse in Photo-Me’s revenues and the group believes it is well-funded until July. Sell.
In a bid to harden its balance sheet against the consumer slowdown brought by the coronavirus outbreak, City Pub Group (CPC) intends to raise up to £22m today via a £15m placing and a further £7m through an open offer of shares, both of which will price the shares at 50p a share. Once this fundraising round is complete the 44m new ordinary shares will represent around 41.6 per cent of the group’s enlarged share capital. Buy.
Howden Joinery (HWDN) says that having closed all of its UK depots and manufacturing operations, it has now reopened select depots to trade customers only. UK depot sales between 22 February and 21 March were broadly flat or slightly down on a same depot basis. The group says any future impact of Covid-19 remains unclear and it has withdrawn full year guidance. Buy.
KEY STORIES:
Domino’s Pizza (DOM) has suspended its 5.56p final dividend in response to the current volatility of its trading environment, despite an uptick in deliveries helping to grow like-for-like sales in the UK by just over 3 per cent since the start of the year.
U&I (UAI) has sold three non-core assets marginally below their aggregate book value at the end of September, as part of efforts to shore up their cash reserves. The regeneration specialist disposed of Crown Glass Shopping Centre in Nailsea, 89-107 Queen Street in Cardiff and the remaining two units at The Killingworth Centre in Newcastle. That leaves £25m in cash within the group’s facility with Aviva to invest when conditions start to normalise, management said.
Flutter Entertainment (FLTR) will propose exchanging its final dividend of 133p for more Flutter shares at its 14 May annual general meeting, as coronavirus disruption looks set to drag up its leverage following the completion of its acquisition of The Stars Group (TSG) beyond 3.5x, above its medium term target range of 1-2. Existing Flutter shareholders will also no longer be entitled to a pro-rated 2020 dividend prior to the completion of the deal. Flutter also agreed new debt arrangements totalling £1.3bn this month.
Berkeley (BKG) has warned that profits for the year to the end of April will be around £475m, behind the £775m in pre-tax profits recorded the prior year. However, the high-end housebuilder confirmed that it would pay the 99.32p a share dividend announced earlier this month and that it planned to make the next £140.1m return by 30 September via a combination of share buybacks and dividends.
OTHER COMPANY NEWS:
DWF (DWF) says revenue growth for the year ending 30 April will fall short of expectations, with total growth of 15-20 per cent and organic growth in the high single digits. This comes as the Covid-19 outbreak hits the final quarter, traditionally the most important for the group. Underlying pre-tax profit is guided to rise by double-digits but will be hindered by lower sales growth and investment to grow the platform. Net debt is anticipated to come in higher than expected and the current business environment is likely to slow collection of fees. DWF is seeking additional headroom in its borrowing facilities and a relaxation of certain covenants. The payment of a final dividend will be determined later once the outlook becomes clearer. The shares are down over a quarter in early trading.
Meggitt (MGGT) is withdrawing its final 11.95p dividend declared for 2019 in response to the Covid-19 crisis. The group says it is also taking other measures to reduce costs and manage cash flow to strengthen its financial position.
SSE (SSE) says that even before accounting for any Covid-19 impact, adjusted earnings per share for the year ending 31 March will be at the lower end of its 83-88p guided range. The group expects a high single digit decrease in adjusted operating profit across its transmission and distribution businesses, while the renewables division will see profit rise by a quarter year-on-year. The coronavirus has not yet had any material impact and so the group intends to pay an 80p full year dividend. Full year results have been delayed until the second half of June.
Mitie (MTO) expects little change in demand across its public sector work in response to Covid-19 which accounts for 30 per cent of revenue. However, discretionary project work in fire and security and technical services is being significantly deferred while demand is also falling in transport and logistics, manufacturing and property managers which together add up to over two-fifths over revenue. Demand for cleaning and security services from food and online retailers is increasing. Alongside deferring non-essential capital expenditure and trimming directors’ salaries, no final dividend will be recommended for the year ending 31 March.
Balfour Beatty (BBY) says that in light of its AGM being postponed, approval of its final 4.3p dividend declared for 2019 will be delayed. The group will keep the appropriateness of paying the dividend under current conditions under review. Balfour says it had a positive start to 2020 but Covid-19 has caused significant disruption to the global economy and the total impact on its business is as yet unclear. As at 25 March, the group had £395m of net cash and £375m of undrawn borrowing facilities.
Marshall (MSLH) is temporarily suspending some manufacturing operations but continuing to distribute product where demand exists. As at 25 March the group had £93m of net debt (excluding lease liabilities) and £72m of unutilised borrowing facilities. Given the current circumstances, it is cancelling the final 9.65 dividend declared for 2019 as well as the 4p supplementary payout, saving £27.1m. Full year market guidance has been withdrawn.
North Sea oil producer Hurricane Energy (HUR) has announced a sick worker evacuated from its Aoka Mizu FPSO ship has tested positive for Covid-19. The company did not say if any other workers were sick, but said it was working with NHS Scotland on the situation. Hurricane was down 12 per cent on the news, to 12p.
CVS Group (CVSG) half-year results revealed a 26.5 per cent boost to cash profits over the period, but the government’s guidance to focus on emergency care has prompted the temporary closure of half of the veterinary group’s small animal practices, which will dent second-half revenues.
Cairn Energy (CNE) has cut spending across the board as its earnings look set to tumble from the weak oil price. The producer and developer said it had managed a 23 per cent capex cut, taking the 2020 estimate to $475m (£389m). The biggest cut came from reducing spending at the offshore Senegal project Sangamar, which has gone from $400m to $300m. Exploration has also been slashed from $150m to $100m. Cairn maintained production guidance for the year at 19,000-23,000 barrels of oil per day (bopd). Its share price was down 5 per cent Friday morning, to 82p.
Following the implementation of social distancing rules, door-stop lender Provident Financial Group (PFG) has paused face-to-face visits, opting instead to communicate with borrowers on the phone and online. Unsurprisingly, Provident has also warned that its credit issuance and collections performance will be “adversely impacted”, and can no longer provide forward guidance for 2020. Consequently, the 16p per share final dividend recommended at the group’s full-year results has been withdrawn, saving the firm £40m and boosting a capital position which Provident self-describes as “strong”.
Mattioli Woods (MTW) expects a drop in income following the hits to client portfolios in recent weeks, though the wealth management group expects to be less exposed than peers, given the largely fee-based nature of its income. As a result, the profit outlook for the year to May remains in line with management expectations, and a previously-announced interim dividend of 7.3p per share will go ahead. Cost savings are nonetheless in focus: staff bonuses have been suspended and chief executive Ian Mattioli has taken a 100 per cent pay cut.
