It appears as though a dose of sobering reality about the pace of lockdown easing and the sheer scale of economic collapse during the coronavirus crisis has prompted sellers back into the ring as shares in London are firmly in the red. Our Trader writer Neil Wilson says: 'US Treasury yields fell and equity indices rolled over, with the S&P 500 down 1.75 per cent at 2820 and the Dow dropping 500 points as hopes for a swift recovery from the Covid-19 recession faded. Fed chair Jay Powell painted a pretty gloomy picture. He warned that additional policy measures may be needed to avoid an extended period of low productivity.' Click here for Neil's full article.
IC TIP UPDATES:
Prudential (PRU) has seen a sharp drop in annual premium sales to customers and Hong Kong and China, owing to the effects of the Covid-19 pandemic. However, sales outside those regions picked up, while in-force premiums boosted the group’s adjusted operating profit in Asia by 14 per cent for the first quarter of 2020. The life insurance giant is also capable of selling around a third of its products virtually, capital levels remain robust, and sales in the US are up a quarter year-on-year. Buy.
WH Smith (SMWH) half-year results went largely untouched by the effects of coronavirus, with the retailer experiencing an 11 per cent boost to travel trading profit in its six months to 29 February. High street trading profits contracted 8 per cent, with group pre-tax profits falling 3 per cent for the period. Under review.
Sirius Real Estate (SRE) has announced that April rent collection and service charge was at 98.8 per cent and May had been at normal levels thus far. Enquiries have returned to normal levels at 1,200 per month on average for March and April. That led to 115 new lettings in April covering 8,025 sq/m, which is better than anticipated in March. The German industrial property group also confirmed its dividend policy of paying out 65 per cent funds from operations and intends to authorise a dividend in respect of the second half of the year ended 31 March 2020. Buy.
Genel (GENL) produced an average of 34,170 barrels of oil per day (bopd) in the first quarter of 2020, in line with January’s guidance. In light of the Covid-19 crisis, the company says it has “cut its cloth appropriately”. Having spent $45m (£37m) in the first four months of the year, 2020 capital expenditure is being reduced from $160m-200m to just over $100m. Half of this will be spent on the Tawke and Taq Taq production assets in which it has a 25 per cent and 44 per cent working interest respectively. Operating expenditure will be curbed by 10 per cent from original guidance of $40m. Genel expects operating costs of $3 per barrel (bbl) this year and at an oil price of less than $30/bbl anticipates its production assets will reach cashflow breakeven. It had $106m of net cash as at 30 April. Sell.
Grainger (GRI) grew like-for-like net rental income by 3.4 per cent during the six months to the end of March, comprising 3.4 per cent growth across the core private-rented sector portfolio and 4.4 per cent across regulated tenancies. Work is taking place across the nine PRS developments, although the pipeline remained flat, reflecting the current market uncertainties. April rental growth has continued at similar levels at 3.3 per cent and rent collection was at 94 per cent. Buy.
Countryside Properties (CSP) revealed that lost completions and land sales in March dented operating profits for the sixth months ended that month by around £29m and increased net debt by around £89m. Adjusted operating profit for the first-half was down more than a third, after the margin declined 5.5 percentage points to 10.4 per cent. However, the total forward order book was up 45 per cent. Under review.
Retirement product specialist Just Group (JUST) saw its solvency coverage ratio decline from 141 to 138 per cent in the four months to 30 April, thanks to a big drop in interest rates, a modest impact in corporate bond downgrades and a 1 per cent dip in UK house prices. The group added that it was too early to assess the impact of a marked increase in the number of deaths in England and Wales in March and April, though its broader markets have remained “resilient”. As such, Just says it still expects to deliver positive organic capital generation in 2020. Buy.
Bank of Georgia (BGEO) has not abandoned its aim to generate a return on average equity of at least 20 per cent, and to grow its loan book by around 15 per cent each year. But the lender has not been immune from the economic shock of the past few months, as first quarter results today reveal. After booking a GEL241.4m (£62m) impairment charge, the group swung to a statutory loss of GEL113m, though non-performing loans are actually down year-on-year. Expected credit losses reflect the bank’s base case economic scenario that Georgian GDP will drop 2.7 per cent in 2020, though weighting has been given to a worst-case scenario in which the economy contracts by 7 per cent this year. Under review.
KEY STORIES:
Persimmon (PSN) has restored 65 per cent of its construction capacity and intends to reopen its sales sites this week, following the government’s guidance. In the eight weeks ended 10 May 2020 the housebuilder secured 1,351 gross private sales reservations, with a total of 1,300 legal completions being made in the same period. Cancellation rates stayed at historic norms, it said.
In the first four months of 2020, the asset pile administered by investment platform Hargreaves Lansdown (HL.) averaged £97.1bn. Remarkably, that’s just 6 per cent lower than the final three months of 2019, as a surge in net new business offset what chief executive Chris Hill described as an “exceptionally volatile and challenging period”. What’s more, record dealing volumes means year-to-date revenues are up 13 per cent. The shares are up 7 per cent in early trading.
OTHER COMPANY NEWS:
Wincanton (WIN) says that while revenue for the year ending 31 March grew by 5 per cent, sales in April dropped 15 per cent year-on-year. There has been a negative impact on year-to-date profitability. Volumes from grocery and consumer products customers have returned to normal after spiking at the beginning of the Covid-19 crisis. The short-term revenue uplift had a limited impact of profit due to the commercial models being used. The two-person home delivery network and the construction-focused business have seen the most disruption. In order to preserve cash, Wincanton has furloughed 15 per cent of its workforce, deferred pension recovery and tax payments, paused non-critical capital expenditure and suspended the final dividend. It has access to a £181m revolving credit facility.
A full-year trading update from Watches of Switzerland (WOSG) revealed that the watch retailer had beaten revenue guidance to post a 5 per cent boost to turnover, rising to £819.3m. The closure of all stores in the UK and US has slowed the business in its final six months of the year, although e-commerce sales rose 45.8 per cent against the prior year during this window.
Funding Circle (FCH) has signed a strategic partnership with small business-focused digital lender Starling Bank, to work together to secure £300m of lending firepower under the Treasury’s CBILS scheme. Analysts at Numis reckon the peer-to-peer lender’s participation in CBILS could “deliver material growth”. After bouncing around wildly in recent weeks, shares are up 4 per cent this morning.
Distressed debt investor Arrow Global (ARW) has withdrawn its guidance for 2020, given the difficulties in collecting loan payments, a frozen property market, and court closures. In the first quarter of 2020, investment business collections were down nearly a fifth to £85.1m, though management said this represented 92 per cent of its assumptions. The asset management and servicing arm remained resilient, though the net effect of depressed income has been a 42 per cent drop in first quarter free cash flow and an uptick in leverage net debt to 3.8 times Ebitda. That’s above the group’s target range, but below a revolving credit facility covenant level of 4.4.
Telecoms company Helios Towers (HTWS), which listed on the London Stock Exchange last October, posted an 11 per cent increase in adjusted cash profits in its first quarter compared to the same period last year. The group, whose operations are based in Africa, said that it had not seen a significant impact from coronavirus and has left its guidance for 2020 unchanged. According to broker Jefferies, consensus currently expects around 9 per cent revenue growth this year.
