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News & Tips: Shares surge, Hollywood Bowl, Purplebricks & more

Vaccines hope have given equity markets wings this morning
April 17, 2020

Hopes that rapid vaccine development will help us out of our coronavirus crisis have pushed shares sharply higher in morning trading. Our Trader writer Neil Wilson says: 'V is for vaccine: stocks have taken a bit of good news and are running with it, for better or worse, whilst figures showing the economic wreckage can be discounted, by and large. Asian markets firmed up despite data showing China’s economy shrank in the first quarter, the first such decline since at least 1992 when records began, or more likely since 1976. Tokyo rallied 3 per cent, with Hong Kong up more than 1 per cent even as data showed Chinese GDP declined 6.8 per cent in Q1, while fixed asset investment was 16 per cent lower. European markets tracked the rally in Asia and US futures with ~3 per cent gains at the open on Friday. The FTSE 100 added 150+ points in early trade. 5800 is again the target before a push to the week highs at 5900.' For Neil's full article, click here. 

IC TIP UPDATES: 

Hollywood Bowl (BOWL) is aiming to raise £10.9m in a share placing today, issuing 7.5m new ordinary shares at a price of 145p per share. The proceeds will go towards strengthening the bowling operator’s balance sheet and working capital needs. Hollywood Bowl said that as of 8 April, it had £11m undrawn from its £45m revolving credit facility, which had received a £10m extension earlier this month. It had £15.6m in cash as of 31 March, and has set its monthly net cash burn at around £1.6m while its centres are closed. Buy.

Purplebricks’ (PURP) chief financial officer James Davies has informed the board of his intention to resign, with effect from 8 May. He will be replaced by Andrew Botha, who joins from online travel agency Secret Escapes and was also previously chief financial officer at ZPG, which owns brand including digital property portal Zoopla, PrimeLocation and uSwitch. Sell

Bloomsbury Publishing (BMY) will place up to 3,766,428 new ordinary shares, raising approximately £8.4m. The publisher said that based on its downside scenario, a 75 per cent decline in print revenues and gradual retailer re-openings, the additional headroom would enable it to maintain investment and remain within its banking covenants. The company has frozen recruitment, furloughed staff and reduced marketing and non-essential capital expenditure. Management noted that it will not declare a dividend for the last financial year but is considering a scrip dividend, which would be announced with its full year results. Under review.

Helical (HLCL) has agreed the sale of 90 Bartholomew Close, Barts Square, EC1 to La Francaise Real Estate Partners, acting on behalf of a French collective investment vehicle. The disposal price of £48.5m reflects a net initial yield of 3.92 per cent. The five office tenants span industries including law, software design and business consultancy. The total headline rent roll of £2.03m per annum reflects an average of £76.26 per sq/ft on the office accommodation. Buy

Assets managed by listed hedge fund Man Group (EMG) dropped from $117.7bn to $104.2bn in the first three months of 2020, thanks to negative investment movements and wild swings in foreign exchanges. Despite this, the group managed to attract $0.5bn in net new business in the period, thanks in large part to strong client flows to the AHL Target Risk fund. Notwithstanding what the group described as a resilient investment performance for its funds, there has been a “recent increase in redemptions”- which chief executive Luke Ellis blamed on an adjustment in asset allocation. At the end of the quarter, the group had $253m in cash and had taken out a new $500m revolving credit facility; the dividend and share buyback programme are continuing as planned. Sell.

Something seems awry when the broader market can rise on the same day as shares in an insolvency practitioner. But we are where we are, and as Begbies Traynor (BEG) notes in its periodic ‘red flag’ survey today, that includes a 10 per cent rise in critically distressed companies in the last quarter alone. Indeed, the group’s research strongly suggests that 509,000 UK businesses are now in significant financial distress – defined as having a minor court judgement filed against them or failing Begbies’ own credit scoring screen. The stock is trading 5 per cent higher today at 90.6p. Buy.

KEY STORIES: 

Whitbread (WTB) said that it had been confirmed as an eligible issuer under the UK government's Covid Corporate Financing Facility, with a limit of £600m. The group has not issued any commercial paper under this programme yet. It has cash reserves of £400m and undrawn committed debt facilities of £900m. 

Foxtons (FOXT) has announced plans to raise up to £22m by placing new shares, representing 19.9 per cent of the estate agency’s outstanding share capital, to help mitigate a potential “liquidity gap” if lockdown continues until the end of August and the property market is slow to recover. Management would consider returning excess cash to shareholders if the property market recovered sooner. The placing price is 40p a share, a 4 per cent premium to the mid-market price the day prior to the announcement. The group had a cash balance of £22m and a fully drawn revolving credit facility of £5m at the end of March.  Commissions earned in the first three weeks of the lockdown period were down 47 per cent on the prior year. The group has taken measures including furloughing 750 employees and entering negotiations with some landlords to defer payments.

Mediclinic (MDC) said that while trading for the year ended March 2020 was in line with expectations, the Covid-19 epidemic and suspension of non-urgent elective surgery would likely have a significant financial impact on performance during the current year. The private healthcare services group has suspended its final dividend and agreed covenant test waivers in respect of material borrowings across all three divisions up to and including March 2021. It had cash and available facilities of £515m at the end of March. 

Diversified miner Rio Tinto (RIO) says iron ore demand remained strong in the first months of 2020 despite China’s Covid-19 shutdown. The iron ore price only dipped from $90 (£72) per tonne (t) to $80/t as other commodities dived from late January onwards on the back of Chinese industrial shutdowns. Rio said there had been “solid demand from China's steel mills despite Covid-19 impacts” through the March quarter, and the price was supported by rough weather near its operations in Western Australia, limiting some exports. 

Following its approval to join the US government’s payment protection lending program, Funding Circle (FCH) has been added to the UK equivalent – the British Business Bank’s CBILS (coronavirus business interruption loans scheme). Beginning next week, these loans will be funded by the lending platform “and a combination of new and existing institutional investors” and Funding Circle has said it will “pause all non-CBILS lending from retail and institutional investors to concentrate on supporting the government’s SME stimulus programme”. However, management as cautioned that the demand from both the PPP and CBILS programme is “not certain”, and has withdrawn forward guidance until the outlook becomes clearer. Despite this, shares in the group are up another 26 per cent today.

OTHER COMPANY NEWS: 

The Gym Group (GYM) has raised £41.3m after placing 27.4m new ordinary shares at a price of 150p per share. The new shares represented 19.9 per cent of the company’s existing share capital prior to the placing.

Wealth manager Brewin Dolphin (BRW) saw a 14.6 per cent decline in its both discretionary and total funds in the three months to March, which constituted a better performance than both the FTSE 100 and the MSCI WMA Private Investor Balanced Index. Flows to discretionary mandates were also positive in the period, boosting the group’s annualised growth rate. That performance was clearly ahead of the expectations of investors, who have pushed up the stock by 12 per cent in early trading. However, management said it is still too early to ascertain the impact this may have on our full year 2020 income and profitability”.

Flutter Entertainment (FLTR) shares jumped 10 per cent after a first quarter update revealed a 16 per cent increase in turnover compared with last year, with the betting operator having achieved a 29 per cent increase in revenue prior to 15 March, preceding the mass cancellation of sports events. The group’s Paddy Power Betfair online sports revenue has fallen 65 per cent since the suspension of Irish horse racing from 25 March, while gaming turnover has lifted 15 per cent since 16 March.