Join our community of smart investors

News & Tips: Oil shares bounce, OneSavings Bank, ABF & more

Oil shares have been boosted by the leap in the price of a barrel, but overall equities are more muted
April 3, 2020

The leap in the oil price yesterday translated into a bounce in oil price shares but grim economic indicators elsewhere have hit sentiment with the FTSE 100 off more than 1 per cent and the more domestically focused FTSE250 shedding more than 2 per cent. 

IC TIP UPDATES: 

OneSavings Bank (OSB) has followed its larger peers and cut the final dividend it announced just 15 days ago. The buy-to-let focused lender said the cancellation would allow it to “help serve the needs of businesses and households through the extraordinary challenges presented by coronavirus”. The move will also lift OSB’s pro-forma CET1 ratio by 60 basis points. Buy.

Iomart (IOM) said that it had seen minimal change to its business levels despite the coronavirus and noted that its online customers may experience a hike in demand for their products over the coming months. The software company said that it expects to report a 2 per cent bump in adjusted cash profits to £42.2m in its financial year to the end of March 2020. Around 86 per cent of revenue was recurring, which provides strong levels of revenue visibility as the company enters its next financial year. Buy. 

KEY STORIES: 

The oil price bounced around following US president Donald Trump’s Thursday announcement he had convinced Saudi Arabia to cut oil production. The immediate response took Brent crude over $30 (£24) per barrel (bbl), although this came down again on Friday morning, after the Saudi government quickly said it had only agreed to talks, not the up to 15m barrels of oil per day (bopd) cut President Trump said could happen. Russia also denied any talks had taken place between President Vladimir Putin and de facto Saudi leader Mohammed bin Salman, as the US leader had said. Panmure Gordon analyst Colin Smith said a resolution to the current oversupply scenario was unlikely in the near future. 

Bus operators Stagecoach (SGC), FirstGroup (FGP) and Go-Ahead Group (GOG) welcomed a £167m funding boost from the Department for Transport, which has been awarded in response to a dramatic collapse in bus passenger numbers as a result of the coronavirus outbreak.

Great Portland Estates (GPOR) collected 62.9 per cent of rent due for the second quarter, with another 4.5 expected to be received imminently. The commercial landlord said it had 9 per cent of tenants by rent roll paying on monthly terms, but that it expected that proportion to increase as retailers and leisure companies seek to manage their cashflows. Activity on two out of three developments has been suspended but the group has a conservatively geared balance sheet, with a loan-to-value ratio of 16.1 per cent and considerable headroom within its debt covenants. 

OTHER COMPANY NEWS: 

Associated British Foods’ (ABF’s) chief executive and finance director have requested that their base pay be temporarily cut by a half. The board has accepted this proposal. Bonus pertaining to the current year will not be paid to the executive directors. The chief executive of the group’s Primark business has also requested a 50 per cent temporary pay cut. The group’s non-executive directors including the chairman have decided that their fees should be temporarily cut by a quarter. Management believes that such steps are appropriate, given that full-year earnings are now going to be much lower than envisaged at the start of 2020.

Anexo (ANX) had been due to publish its full year results on 21 April and this has now been delayed. The group continues to expect adjusted pre-tax profit will be in line with expectations. Cases settled increased by a third in 2019 and cash collections from settled cases rose 45 per cent to £84m. The group has been net cash generative in the first two months of 2020. There has been no adverse impact from Covid-19 to date but it has deferred the opening of its Leeds office and will make a decision on a final dividend at a later date. It has an £8m revolving credit facility and an £18.5m invoice discounting facility. Shares are up 9 per cent in early trading.

Fuller, Smith and Turner (FSTA) will not put a final dividend to shareholders in a bid to preserve liquidity in response to coronavirus - last year, it spent £6.8m on its final dividend. Fuller’s has furloughed most of its staff and is negotiating with its supply base to reduce costs.

Over the counter derivatives provider CMC Markets (CMCX) saw gross client income improve 12 per cent to £241m in the year to March, thanks to increased market activity in the final quarter. Operating costs climbed at a similar rate, while management has reaffirmed its commitment to pay an annual dividend of 50 per cent of post-tax profit. Shares are up 5 per cent in early trading.