Shares in London have staged a rally this morning after US shares leapt overnight following a torrid week. Our Trader writer Neil Wilson says: 'US stocks staged a mighty comeback and closed at the highs as beaten-up financials managed to recover ground. The S&P 500 traded under the 50 per cent retracement level at 2790, dipping as low as 2766 as US jobless claims rose by another 3m, before rallying to close up 1 per cent at 2852. Financials, which have failed to really take part in the rally since March, led the way as Wells Fargo rose 6.8 per cent and Bank of America and JPMorgan both rallied 4per cent. Energy stocks also firmed as oil prices rallied.
European indices were softer on Thursday but managed to recover a little ground in early trade on Friday. The FTSE 100 rose over 1 per cent to clear 5,800, with the DAX up a similar amount and trying gamely to recover 10,500. Asian shares have largely drifted into the weekend with no clear direction.' For Neil's full article, click here.
IC TIP UPDATES:
Royal Mail (RMG) has announced that chief executive Rico Back will step down with immediate effect. Non-executive chairman Keith Williams will be bumped up to executive chairman on an interim basis. The group saw revenue from its UK parcels, international and letters (UKPIL) business fall by £22m in April while costs increased by £40m thanks to absences, social distancing measures and the need for protective equipment. Letter revenue was down 23 per cent although this was partially offset by a 20 per cent increase in parcels revenue. The general logistics systems (GLS) business has seen significant volatility with a shift from business-to-business to business-to-consumer parcels across markets. Executive directors will not receive a bonus this year while £25m has been set aside to reward frontline staff. Total liquidity is around £1.8m including undrawn facilities. Sell.
KEY STORIES:
Shares in BT (BT.A) jumped up as much as 8 per cent in morning trading, following a report by the FT that the telecom giant is in talks to sell a multibillion-pound stake in Openreach to infrastructure investors. The stake sale could value the division at around £20bn, according to people briefed on the talks. BT declined to comment. Last week the group suspended its dividend until 2022, and warned that it expected its pension deficit to have worsened due to market volatility. It did however accelerate its fibre-to-the-premises (FTTP) target to 20m by the mid to late-2020s, from an initial ambition of 15m, including a “significant build” in rural areas.
OTHER COMPANY NEWS:
Petrofac (PFC) says Covid-19 has caused significant disruption to its engineering and construction projects with material delays that will not be recovered in 2020. The collapse in oil prices has spurred clients to review their future investment plans and Petrofac anticipates the majority of this year’s tenders will be delayed to 2021. The company is now targeting further savings, expecting to reduce overhead and project support costs by at least $125m (£102m) in 2020 and by up to $200m in 2021. Suspending the final dividend and a 40 per cent reduction in capital investment have conserved $145m of cash flow. Excluding lease liabilities, net debt was $241m as at 30 April and gross liquidity of $1.2bn comprised $700m of cash and $500m of undrawn committed facilities.
Direct Line (DLG) has appointed non-executive director Danuta Gray to succeed Mike Biggs as chairperson. Investors will hope that Ms Gray, who joins after a year of senior executive changes at the company, will help to arrest several years of drift in the insurer’s earnings performance.
Changes to accounting rules and a deterioration in credit notwithstanding, Arbuthnot Banking Group (ARBB) expects to have greater surplus capital at the end of 2020 than originally planned. But signs of capital strength and resilience elsewhere – including stable liquidity, rising current deposits and modest declines in assets under management – should be seen in the context of a large spike in payment holidays on mortgages and asset finance lending. Clearly, private banks are far from immune from the stresses seen among high street lenders.
Contour Global (GLO) saw adjusted cash profits (Ebitda) increase by a fifth to $173m (£142m) in the three months to 31 March. This benefitted from last year’s acquisition of a combined heat and power portfolio in Mexico and higher availability and capacity in some of its thermal power generation assets. Funds from operations rose 8 per cent year-on-year to $74.5m. The company has not seen any material impact from the Covid-19 pandemic. It will pay a 4.0591c dividend for the first quarter on 26 June – the ex-dividend date is 4 June – and is maintaining adjusted cash profit guidance of $710m-745m for the full year.
Boohoo (BOO) has raised £197.7m via a share placing, at a price of 340p per share.
William Hill (WMH) notes a “material impact” to trading this year owing to the cancellation of live sport and the closure of retail outlets in the UK and US, forced by social distancing measures. Between 11 March and 28 April, total net revenue fell 57 per cent, compared with a 5 per cent decline in the preceding period for 2020. But the gambling operator’s shares were up 9 per cent this morning on the news that it had liquidity stretching beyond £700m and a reduced monthly cash burn of around £15m, while product development has continued with an online casino set for launch in the second half of the year.
National Express (NEX) shares bounced 13 per cent after announcing its April revenues sat around 50 per cent down on last year, which was in line with expectations, while a reduction in operating costs helped it secure positive cash profits for the month. It has started selling UK coach tickets for a 1 July restart, while the operator has also won a five-year North American school bus contract.
Shares in Computacenter (CCC) climbed up as much as 9 per cent in morning trading, after the company said in a trading update that it believes the first half of 2020 will be considerably ahead of the same period last year. Management said business had accelerated following its last update in April, and since then has secured some technology sourcing contracts.
Shareholders of TI Fluid Systems (TIFS) have voted against paying a 5.2p final dividend for 2019. According to The Times, US private equity giant Bain Capital objected to the payout plan amid criticism that the company was rewarding shareholders while cutting pay and furloughing workers.
