Hints that coronavirus infections in mainlain Europe may be peaking have bolstered investor confidence today with all London's main indices posting solid gains. Our Trader writer Neil Wilson says: 'Financial markets and investors have been left bruised and battered by one of the most brutal quarters on record for equities, but the last few sessions have indicated some tentative green shoots.
Italy is finally seeing progress in its fight against the coronavirus. Stefano Patuanelli, a member of the Italian senate, says people should prepare for the end of lockdown. Getting back to normal could be as hard as isolating in the first place, but recovery is not far off. There is light at the end of the tunnel you feel.' For Neil's full write up, click here.
IC TIP UPDATES:
De La Rue (DLAR) has reiterated guidance of adjusted operating profit of £20m-25m for the year ending 27 March. Net debt is expected to be around £105m, equivalent to between 2-2.4 times cash profit (Ebitda), down from 2.72 times at the half year stage and within its banking covenant. The turnaround plan is said to be “progressing”. The group says it is too early to quantify any impact of the Covid-19 outbreak. Sell.
M P Evans (MPE) saw operating profit dip 17 per cent to $16.1m (£13.1m) in 2019 on the back of lower crude palm oil prices (CPO) and higher costs. The average CPO price last year was 5 per cent lower at $566 per tonne. Prices did increase in the last two months of the year, reaching $860 per tonne, as consumption outstripped supply. But the price for palm kernel oil fell over a third in the face of plentiful supplies of its competitor coconut oil. The final dividend has been maintained at 12.75p a share, bringing to total to 17.75p. Under review.
NewRiver Reit (NRR) announced that it had collected 60 per cent of rent due for the second quarter, as just 36 per cent of their occupiers by gross income remain trading following government advice for non-essential retail to shut. These quarterly rents represented 77% of NewRiver's retail rent due, with the remainder being monthly rents, for which the next collection date is 1 April 2020. Sell.
St Modwen (SMP) announced that it would be cancelling the planned final dividend of 5.1p a share, which was due to be paid on 3 April, in light of the decision to pause all site activity for its housebuilding business. The group said it had £169m of cash on a see-through basis, a low see-through LTV of 22.8 per cent and no significant debt maturities until December 2023. Buy.
KEY STORIES:
Royal Dutch Shell (RDSB) will make impairments of $400m (£324m) to $800m because of the decline in the oil price compared to its forecasts. The oil and gas giant said it would lose $6bn in cash flow from operations (CFFO) for every $10 lost from the average oil price for the year, although the company said this model was more applicable to smaller changes than seen recently. In 2019, the average oil price received was almost $58 per barrel (bbl), more than $30 higher than current Brent crude prices. Shell also announced it taken on a new $12bn loan, adding to a new $10bn facility from December, taking its liquidity up to $40bn.
The Competition and Markets Authority has cleared Flutter Entertainment’s (FLTR) £10bn acquisition of The Stars Group. The deal will now go to shareholders of both companies for approval next month.
Capital and Regional (CAL) received just half of its rent due in respect of the second quarter on collection day last week, compared with a typical rate of 80 per cent. At 25 March, the retail landlord said it had over £90m in cash, which is equivalent to more than one year's gross revenue. Headroom on the respective covenants for each of its asset-backed debt facilities was a minimum of 37 per cent of the respective annual income, most facilities were in the range of 37 per cent to 45 per cent.
OTHER COMPANY NEWS:
Severn Trent (SVT) remains on track for at least £25m of net customer outperformance delivery incentive (ODI) awards for the year ending 31 March. This adds to £163m of ODI payments across the current regulatory period, AMP6. The Covid-19 lockdown restrictions are likely to impact the business customers of the group’s joint venture company, WaterPlus, hindering the recovery of this unit. Severn recently raised £200m through a US private placement, extending its liquidity out to 2022, and less than 2.5 per cent of its debt requires refinancing this year.
Galliford Try (GFRD) is cancelling the 1p interim dividend declared for the six months to 31 December in response to the Covid-19 outbreak. It will consider reinstating this payout alongside a final dividend in due course. The group has also closed an unspecified number of construction sites. Average month end cash for the second half of the year is expected to remain over £100m.
The Covid-19 outbreak is yet to have a “material” impact on AA (AA.), though the motor recovery and insurance group plans to defer or reduce operating costs and capital expenditure in a bid to limit the impact on profits and cash flow. Efforts to shore up the balance sheet include the suspension of the final dividend, adding to almost £200m in available liquidity. Separately, the group published unaudited financial figures for the year to January, which show a doubling in basic earnings to 14.1p per share, and a surge in free cash flow to £83m.
James Halstead (JHD) saw revenue increase by 3.7 per cent to £130m in the six months to 31 December with UK sales up 7 per cent year-on-year. Operating profit has risen 3 per cent to £25.3m. In light of the Covid-19 outbreak, the group is declaring an interim payout of 2.125p, half of what it otherwise would have declared. It had not seen any impact from the pandemic up to 20 March, but the lockdown measures being imposed by different countries are expected to cause disruption – over 70 per cent of turnover is exported. Retailer refurbishment is expected to slow but the group is seeing higher demand from healthcare customers particularly as temporary hospitals and other facilities are set up.
Software company Blue Prism (PRSM) has withdrawn its guidance for 2020 in light of the coronavirus crisis. The company said that it is too early to assess the full impact of the outbreak, but has implemented a reduction in discretionary spending and a hiring freeze in all but exceptional circumstances.
WPP (WPP) has suspended both its final dividend and its £950m share buyback due to uncertainty caused by the coronavirus. The group withdrew its guidance for 2020 and said that it expects its performance in March to be weaker than in the preceding months. Management aims to reduce costs and capital expenditure, as well as tightening controls on working capital in order to maintain liquidity. At the end of last year the group had cash of £3bn and total liquidity, including undrawn credit facilities, of £4.8 billion. Net debt was £1.5 billion.
Trading for the first two months of the year was in line with Nichols’ (NICL) expectations. But management now expects the coronavirus pandemic to have a significant impact on its financial performance for the rest of 2020. The board is not able to provide guidance, given the level of global uncertainty, and has opted to cancel the final dividend announced on 26 February of 28p per share, which was due for approval at the upcoming AGM – with a view to being paid on 1 May. Nichols entered this financial year with over £40m of cash and no debt. It is taking steps to lower costs, re-evaluating its marketing spend, delaying non-essential hiring and stopping non-critical capital expenditure.
Gaming and broadcasting technology group Quixant (QXT) saw its revenues slide by a fifth in 2019 to $92.3m from $115.2m the year prior. The company attributed the fall to a pronounced decline in expected consumption from some of its bellwether gaming customers. Its gaming division, which accounts for more than half of sales, dropped by 28 per cent to $56.2m, which management said was due to stiff competition and a reduction in demand. The group has withdrawn its guidance for 2020 due to the impact of the coronavirus and suspended its dividend.
Michelmersh Brick Holdings (MBH) saw its shares jump up as much as 7 per cent in morning trading, as it reported a 15 per cent hike in sales to £53.5 million in 2019. Underlying operating profit bumped up 13% to £10.3 million. The specialist brick manufacturer has suspended its dividend due to the uncertain environment created by the coronavirus, as well as halting operations at its plants.
British American Tobacco (BATS) has priced an offering of $2.4bn of notes, the proceeds of which it will use for normal business purposes including the payment of upcoming maturities.
Imperial Brands (IMB) has agreed a new €3.5bn revolving credit facility, which will run until March 2023 and replace its old £3bn RCF. Imperial has not experienced an impact on trading from coronavirus.
Domino’s Pizza (DOM) has announced former Costa Coffee chief executive Dominic Paul as its new chief executive. He replaces David Wild, who retires from the company on 1 May.
