After a positive start to the day, equities in London have slipped back as traders reacted to the somewhat mixed messages on lockdown easing in the UK. Our Trader writer Neil Wilson says: 'I think we all know now that reopening the economy will be a lot harder than shutting it down. Boris Johnson last night set out a plan of sorts; one that requires individuals to make their own decisions. Even in lockdown the PM is retaining his libertarian principles. But businesses and employees want clarity and certainty. Fears of second waves in China, South Korea and Germany highlight the concern about reopening too swiftly.
Equity indices are close to the top of their recent trading ranges. The Nasdaq closed the week up for the year. The S&P 500 is less than 10 per cent off its highs after rallying 3 per cent last week. The FTSE 100 and other European indices made up some ground, pushing up 3-4 per cent. For Neil's full article, click here.
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AstraZeneca (AZN) made three announcements this morning. First, the pharma group and Daiichi Sankyo’s ‘Enhertu’ drug has been granted breakthrough therapy designation (BTD) in the US for the treatment of certain patients with a type of gastric cancer. Second, Astra has completed a previously conveyed agreement to recover the global rights to ‘brazikumab’ (formerly ‘MEDI2070’), a type of monoclonal antibody, from Allergan. The two companies have ended their previous license agreement and all rights to brazikumab. Third, Astra and MSD Inc. (known as Merck in the US and Canada) have announced that ‘Lynparza’, in combination with a treatment called ‘bevacizumab’, has been approved in the US for the maintenance treatment of certain adult patients with a type of advanced ovarian cancer. Buy.
SolGold (SOLG) will raise $100m (£81m) by selling a 1 per cent royalty on its Alpala copper and gold project in Ecuador. The deal with Franco-Nevada, which pushed up its shares 15 per cent to 30p, will help fund the feasibility study on the mine. SolGold has also borrowed $15m from the royalty company to tide it over while the closure of the deal is blocked by Covid-19 restrictions. The feasibility work will cost around $150m, and SolGold has the option to extend the royalty to 1.5 per cent for another $50m from Franco-Nevada. Buy.
Costain (COST) has raised its desired £80m of gross proceeds from a firm placing of 133m new shares. The group’s directors subscribed for 0.3m shares out of the total. It is now hoping to raise a further £20m through a four-for-thirteen open offer. The 60p offer price is a 20.1 per cent discount to the 75.1p closing price on 6 May, the day before the capital raising was announced. The latest date for receipt of completed applications for the open offer is 27 May. Sell.
Camellia (CAM) saw its underlying pre-tax profit more than halve in 2019, dropping from £38.1m to £16.1m. This reflects sustained weak tea prices throughout the year thanks to global excess supply. In light of the Covid-19 pandemic, the group says its agricultural operations are working “as close to normal as is possible”, except for India. Some tea estates there are using as little as 25 per cent of their workforce to maintain social distancing. Camellia expects to lose the majority of its lucrative first flush of tea in India and, if restrictions continue, potentially a “significant portion” of second flush as well. In response to the crisis, no final dividend has been declared for the year. However, it will consider a special payout alongside the interim dividend in 2020. Sell.
Civitas Social Housing Reit (CSH) has declared a fourth quarter dividend of 1.325p a share in respect of the three months to March and raised its annual target dividend for FY2021 to 5.4p, from 5.3p the prior year. The group has met its target of covering the dividend 100 per cent by EPRA earnings. The social housing provider had received more than 99 per cent of rent due for the first quarter and the portfolio NAV had edged-up to 107.9p a share at the end of March from 107.6p three months earlier. Buy.
Funeral provider Dignity (DTY) has experienced a 11 per cent drop in its average income from ‘full service’ funerals since the end of its first quarter as more customers opt for simple funerals, while the provision of limousines and church services has also been curtailed. Around 60 per cent of customers opted for a simple service compared to a full service in April, up from 20 per cent in Dignity’s opening quarter. Sell.
Phoenix Spree Deutschland (PSDL) collected 98 per cent of rent due by 30 April, compared with 99 per cent the same time last year, with Germany's Hartz IV welfare programme providing help with rental payments. The German landlord also received 89 per cent of commercial rents - which account for 10 per cent of rental income - compared with 96 per cent the same time in 2019. The group has confirmed that it will pay an unchanged second dividend of 5.15c a share on 3 July. After refinancing €16.4m of debt acquired as part of the share deal acquisition of the apartment complex in Brandenburg, it had net debt of €241.4 million and a net loan to value of 33.1 per cent. Buy.
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Primary Health Properties (PHP) confirmed that it had collected 98 per cent of rents due for the second quarter in the UK and 97 per cent in Ireland. The medical centre landlord said it had acquired 20 purpose-built medical centres across England and Wales for £47.1m and agreed to purchase two more for a combined £6.9m. The properties are leased to GP practices, with 91 per cent of rent government-backed.
Polypipe (PLP) has raised gross proceeds of £120m from a placing of 27m new shares, equivalent to 13.4 per cent of the group’s issued share capital prior to the placing. The 445p placing price was a 7.7 per cent discount to the closing mid-market price the day before the placing was conducted.
Diploma’s (DPLM) revenue increased by 10 per cent on a constant currency basis to £284m in the six months to 31 March. Underlying growth of 1 per cent reflects a softer industrial environment and the impact of Covid-19. Adjusted operating profit rose 9 per cent to £50m on the back of a stable 17.6 per cent margin – an improved gross margin and cost control offset negative leverage from weaker underlying sales and investment in a new US distribution facility. But the pandemic saw April revenue drop 28 per cent on an underlying basis and the second half outlook is “highly uncertain”. The interim dividend has been suspended. Excluding £35m in lease liabilities, net debt of £29.9m is equivalent to 0.2 times cash profits (Ebitda) versus a banking covenant of 2 times Ebitda.
