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News & Tips: BP, Capita, NMC Health & more

London's blue-chip index kicks off the week in a good mood
April 27, 2020

Oil prices fell again this morning on persisting concerns over a global crude glut as the Covid-19 crisis continues to hit energy demand. Meanwhile, optimism across Europe and the US that the coronavirus curve has begun to flatten saw the FTSE 100 open higher and higher still after PM Boris Johnson's speech this morning following his return to Number 10 on Sunday evening. Here's Neil Wilson's morning Market Outlook. And in case you missed it, Neil also penned our latest cover story looking at what the plunging oil price means for you.

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IC TIP UPDATES: 

Ashtead (AHT) says that while trading through to the second week of March was in line with expectations, it has since seen an adverse impact on its end markets. Rental-only revenue for Sunbelt US in March was 2 per cent higher year-on-year but is expected to be 15 per cent lower in April thanks to lower demand for general tools. The group is guiding that underlying pre-tax profit for the year ending 30 April will be £1.05bn. In response to the Covid-19 pandemic, Ashtead is reducing its expected capital expenditure for the 2021 financial year from £1.1bn-1.3bn to £500m, suspending acquisitions activity and paused its share buyback programme from 19 March. It expects to remain free cash flow positive over the next year and has $2.1bn (£1.7bn) of availability on its secured credit facility. Under review.

BP (BP.) says the $5.6bn sale of its Alaska assets will be adjusted because of the current market lows, with vendor financing now part of the deal. The original sale agreement with US company Hilcorp was a $4bn payment and $1.6bn to come from earn-out provisions. BP said this would be shifted in favour of less cash required upfront and a new split cash flow arrangement, as well as the vendor financing. The exact changes will be announced in BP’s March quarter results on Tuesday. Earlier this month, the Wall Street Journal reported Hilcorp was struggling to get bank financing for the deal. Sell BP

Capita (CPI) has secured a contract extension to continue administering the teachers’ pension scheme for the Department for Education. Due to start on 1 October 2021, it is worth £60m over four years. Sell.

Costain (COST) has been appointed as one of six partners in the £4.5bn smart motorway programme alliance which will deliver critical capacity and safety improvements across England's strategic road network. The ten-year framework will see the group use technology to deliver faster and more cost-effective upgrades, enabling a greater proportion of work to be undertaken off site. Sell.

Redrow (RDW) plans to reopen construction sites in a phased manner from 11 May, with work starting from 18 of that month. The housebuilder said reservations had been running at very low levels in recent weeks, following the government’s advice around moving home. The group generated £62m from legal completions so far in April and deferred some land payments until 2021, which resulted in net debt coming in at around £200m. It also has an order book of £1.3bn, of which £0.9bn is contracted. Buy

Camellia (CAM) says all agricultural operations are operating at close to normal except for in India, where some areas are using as little as 25 per cent of their workforce. The group expects to lose the majority of its lucrative first flush and potentially the second flush crop as well if restrictions continue. The overall tea price during the first quarter was “exceptionally poor”, although the group says it has seen some signs of improved demand and prices thanks to the current crisis. Results for 2020 are guided to be “substantially below those of 2019”. Sell.

Anglo Pacific (APF) has seen its revenue drop significantly in the March quarter, compared to last year, but the company is confident enough to increase its quarterly dividend 8 per cent, to 1.75p. The royalties company gets most of its income through metallurgical coal production at the Kestrel mine in Australia. Managing director Julian Treger said coal prices had been hit by Covid-19 but was pleased the mine had kept running. The dividend increase is to even out Anglo Pacific’s payout across the year, the company said. Buy

Lok’n Store (LOK) reported a 6 per cent rise in self-storage revenue during the six months to the end of January, following an 8 per cent increase in like-for-like unit occupancy. Higher cashflow from operations also prompted the self-storage specialist to recommend a 9 per cent rise in the interim dividend to 4p a share. However, new customers moving in during recent weeks had been more than offset by those departing, although that should only impact in fourth quarter numbers, management said. Buy

 

KEY STORIES: 

Admiral (ADM) will no longer pay its previously-announced 20.7p per share special dividend, after the motor insurer’s board cited “the call for heightened prudence from its regulators”. A normal final dividend of 56.3p will still be paid to shareholders on the register at the close of business on 11 May, given the group’s “significant liquidity and strong solvency position”. Chief executive David Stevens - who will donate his full normal dividend entitlement to charity – said the decision had been “very difficult”, but described it as “the prudent and right thing to do”. Shares are up in early trading.

NMC Health (NMC) has asked to de-list from the London Stock Exchange. The beleaguered hospital group’s shares were suspended on 27 February and administrators were appointed on 9 April. “Continued listing of the shares in NMC Health incurs significant cost and adds complexity in a situation where decisions need to be made quickly in partnership with the group’s stakeholders”. 

 

OTHER COMPANY NEWS: 

InterContinental Hotels Group (IHG) has secured £600m in Bank of England financing and a waiver of existing revolving credit facility covenants until the end of the year. The hotel group has total available liquidity of $2bn including $660m of undrawn facilities. IHG expects to report a 25 per cent decline in revenue per available room for its first quarter. Only 12 of its 470 Greater China hotels are now closed, while around 10 per cent IHG’s US hotels are shuttered.

RPS (RPS) saw revenue drop 7 per cent to £125m in the first quarter of 2020 with a stable performance in energy and lower levels of consulting in the UK and Ireland. Net bank borrowings as at 31 March were £103m, up from £94m at the end of 2019 thanks to a seasonal working capital outflow. The group has secured an additional £60m revolving credit facility, taking the total to £160m.