Drug disappointment and more dire economic data, this time on UK retail sales, has hit confidence among UK traders this morning. Our Trader writer Neil Wilson says: 'US stocks faded and European equity markets are broadly weaker following on reports Gilead’s Remdesivir drug isn’t what it was cracked up to be. It had been indications of early positive results for treating Covid-19 patients with the drug that sent markets up at the tail end of last week. We should note these are all leaked reports and the data is sketchy at best. What it shows is how the market is prepared to read into positive vaccine or anti-viral news with extreme optimism, setting the bar high for disappointment. Data on the economy isn’t offering any disappointment – the bar is already so low that nothing can really be really upsetting. US initial jobless claims rose by more than 4m again, taking total unemployment claims to 26m from Covid-19. UK retail sales fell by a record 5.1 per cent in March, but a drop of this magnitude was widely anticipated. Consumer confidence didn’t decline, but held steady at an 11-year low at -34.' For Neil's full article, click here.
IC TIP UPDATES:
HSBC (HSBA) has appointed Microsoft veteran Steven Guggenheimer as a non-executive director, in a bid to add board-level perspective on “digital transformation, AI and cloud computing”. Mr Guggenheimer, who also joins the lender’s risk and corporate governance committees, has worked at the US tech giant for more than 25 years. Sell.
Gem Diamonds (GEMD) will re-open its Letseng mine in Lesotho on 27 April. The company said Lesotho had continued with its lockdown policy but has given it permission to restart, a month after operations stopped at Letseng. The diamond industry has all-but stopped due to Covid-19, because of its international rough trade which sees buyers flying between Europe and India and Africa. Gem was able to keep selling later into the pandemic than others because of the smaller group of buyers for its larger stones. The last auction was finished in the first week of April, raising $6.7m. (£5.4m). Sell.
SIG (SHI) has appointed Steve Francis as permanent chief executive officer. Mr Francis had been appointed to the position on an initial contract in February. He is the former head of Patisserie Holdings, the parent company of the Patisserie Valerie bakery chain. Sell.
KEY STORIES:
Following announcements from Taylor Wimpey (TW.) and Vistry (VTY) yesterday, Persimmon (PSN) has said it will begin reopening its construction sites from 27 April. The housebuilder also revealed that it made 820 gross private sales reservations in the five weeks ended 19 April 2020n and said that cancellation rates remained at historically low levels.
Mirroring both market volatility and client trading habits, online trading outfit IG Group (IGG) says revenues have been “exceptionally high” since the last week of February. The group’s top line hit £173m in the first 36 days of the current quarter, equivalent to 69 per cent of the entire first half of the financial year, though operating expenses have been revised up again to £300m for the year to May. This, says IG, reflects the impact of growth in the client base and “an increase in the provision for bad and doubtful debts”. Employees are also getting their pay day – with the variable remuneration pool set to jump 68 per cent to £42m. Shares are flat today, and in positive territory for the year-to-date.
OTHER COMPANY NEWS:
Pearson (PSON) has seen a 5 per cent decline in underlying sales growth in its first quarter, as expected. Its north American courseware and international divisions both declined by 10 per cent, although this was in part offset by growth in its online learning business. The publisher noted that it had seen a ‘significant uplight’ in the use of its digital products and services. The group’s net debt stands at around £1.4bn up from £1.2bn in the same period last year, primarily due to higher opening debt at the beginning of 2020 and the impact of the recently paused share buyback. The company has still proposed its final dividend, which will be payable on 7th May 2020.
Senior (SNR) says the Covid-19 pandemic is causing significant disruption to its end markets and supply chains. The civil aerospace, land vehicle and oil and gas businesses have been most impacted while defence and industrial power and energy have been more resilient. Amid lower customer demand, the group has furloughed 17 per cent of its employees, taking advantage of government support schemes where possible. The group believes it has sufficient liquidity with £305m of committed borrowing facilities as at 31 December and £159m of headroom. Net debt was £230m, including £84m in lease liabilities. It had decided not to divest its aerostructures division which had been under a strategic review.
DWF (DWF) has secured a £15m revolving credit facility (RCF), adding to its existing £80m RCF. The group says it “does not anticipate an immediate need to use this additional facility” but it provides additional liquidity “at a time when the normally high level of seasonal cash collections could be impacted by Covid-19”. It now has access to £122m of working capital facilities. The leverage covenants for the next test dates have been relaxed to 2 times cash profits (Ebitda) in April and July 2020 and 1.75 times cash profits in October 2020 and January 2021.
Gary Hoffman, the former chief executive of Hastings (HSTG), has announced his intention to step down as chairman of the insurer’s board at next month’s AGM. In the immediate term, he will be replaced by senior independent director Tom Colraine while the group looks for a long-term replacement.
The fallout from Covid-19 has failed to dent the demand for esoteric reinsurance contract transfers, as Randall & Quilter’s (RQIH) latest announcement suggests. The group has signed a transfer agreement and a loss portfolio transfer reinsurance contract with an insurance subsidiary of U-Haul owner AMERCO. R&Q’s group head of M&A Paul Corver said the deal reflected a strong legacy pipeline “despite the current turmoil”.
Quilter (QLT) has confirmed the pricing for its odd-lot offer, in which equity investors with fewer than 100 shares will have the option to sell their stock at a premium. Those on the UK shareholder register can sell their stock at 120.24p each, which represents a 5 per cent premium to this week’s volume weighted average price.
