Growing worries about Sino-US relations are giving traders in London the excuse to book some of their recent profits. Our Trader writer Neil Wilson says: 'Stocks are ending May on a slightly downbeat note, but investors have definitely been accentuating the positive this week and for the whole of May. Thank goodness, Covid-19 is getting bumped off the headlines; trouble is it’s not for good news. At last though we are seeing some caution displayed in the markets over China’s decision to impose national security legislation on Hong Kong and the ensuing ramp up in US-China tensions. US stocks were positive for most of Thursday before sharply reversing in the last hour and closing in the red, after the White House announced that Donald Trump would hold a press conference on China on Friday. ‘We are not happy with China. We are not happy with what’s happened’, he said. For Neil's full article, click here.
*From next week we are retiring this News & Tips article in its current form to allow our writers to concentrate on publishing more analysis on the stories that matter earlier in the day. We will still round up the most important stories of the morning and incorporate them in Neil Wilson's Market Outlook which will be published by 10am every morning. Click here to sign up to receive the daily Market Outlook email, or update your preferences in the My Details area of the website.' *
IC TIP UPDATES:
Shares in Rolls-Royce (RR.) have continued to tumble after it was revealed yesterday that AKO Capital divested its entire 5.2 per cent stake in the group. The hedge fund had only taken up the holding in Rolls at the beginning of April when the shares were around the 305p mark. In another blow, Standard and Poor’s has slashed the aerospace and defence company’s credit rating from investment grade, ‘BBB-’, to junk status, ‘BB’. The shares finished yesterday down 8 per cent and have fallen a further 7 per cent in early trading this morning. Sell.
A late-stage trial of AstraZeneca’s (AZN) ‘Tagrisso’ lung cancer drug showed that it reduced the risk of disease recurrence or death after surgery by about 80 per cent. The pharma giant cited a “statistically significant and clinically meaningful improvement” in disease-free survival in the treatment of patients with a type of early-stage non-small cell lung cancer after surgery. Buy.
Johnson Service (JSG) is looking to raise £85m through a placing to provide sufficient liquidity for a prolonged lockdown and strengthen its balance sheet. The 115p placing price is a 7 per cent discount to the 10-day average closing price ending on 28 May. The group says it is continuing to see significant disruption across its markets with organic revenue in the ‘hotels, restaurants and catering’ (Horeca) segment falling by 97 per cent in April. Revenue in May is expected to improve as a small number of customers reopen. As at 30 April, net debt (excluding lease liabilities) was £84.9m and the group has extended its committed banking facilities to £175m. Buy.
SIG (SHI) saw underlying revenue fall 9 per cent to £2.1bn in the year to 31 December thanks to market share losses in the UK and Germany and “poor execution” of its transformation initiatives. The group swung from a £10.3m pre-tax profit a year earlier to a £113m pre-tax loss from continuing operations. This reflects a £90m impairment of goodwill and other intangible assets and £27m in restructuring costs. Sales plunged by more than a third in March and April thanks to Covid-19, although trading is said to be returning to pre-pandemic levels across most operations. The group has unveiled a new growth strategy that repositions it as a “service-focused local sales business” and it is proposing a £150m equity raise “in the coming weeks” to fund these plans. Sell.
OTHER COMPANY NEWS:
DWF (DWF) says that disruption from Covid-19 was greater than expected in April meaning that revenue for the year to 30 April grew by 11 per cent, short of the 15-20 per cent guided. With strong billings and cash collection, net debt came in better than expected at £64.9m. Activity levels have strengthened in May with a number of new client wins. The group also announced that chief executive Andrew Leaitherland is to step down and he will be replaced by chairman Sir Nigel Knowles. Senior independent non-executive director Chris Sullivan will take up the post of interim chairman.
Anexo (ANX) is looking to raise £7.5m from a placing to expand its advocacy and specialist litigation team and invest in its fleet. The 125p placing price is a 9.1 per cent discount to the closing price on 28 May. Three directors also plan to sell 2.8m shares in a secondary placing to raise £3.5m for themselves.
Renewi (RWI) says waste volumes in Belgium fell by around 35 per cent in April with a 15 per cent drop in the Netherlands. Recyclate income was weaker thanks to lower prices and less material collected. Covid-19 is expected to reduce operating profit and cash in the first quarter to 30 June by up to €20m (£18m) compared with previous expectations. The group plans to save €15m of costs in the year to 31 March 2021 and is reducing its capital expenditure budget by €35m. Renewi has increased its net debt to cash profits (Ebitda) covenant from a multiple of 3.5 to 6 for the second half of the year.
Flutter Entertainment (FLTR) has raised £813m via a share placing. Yesterday afternoon, the gambling operator said that it intended to use the proceeds to support its US push and to shore up the business during an uncertain betting environment that has been wracked by the cancellation of sporting events.
