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Company announcements are getting back to a more normal pattern and starting to focus on the future beyond lockdown and how their businesses will recover.
CRH plc, a building materials business, releases its trading update with a positive outlook statement. It says its prospect would benefit from “significant financial strength and resilience together with a portfolio of high-quality assets in attractive markets”. It says the construction industry is expected to be among the key beneficiaries of any future stimulus measures from governments and central banks. Beazley PLC and Hiscox Ltd highlight geographic diversification in the outlook narrative, with the former saying the diversified businesses in the US and Lloyd’s “should stand us in good stead as opportunities arise”.
Bellway announces a 20% reduction in basic salary and fees of the board of directors for two months, which will be donated to various charities.
The Unite Group, a student accommodation developer, highlights its view on high education sector in its outlook, with supporting data. It says, “we expect Universities to offset a potential reduction in first-year international student intake by recruiting additional UK students from surplus applications, which totalled 101,000 in the 2019/20 academic year.”
Johnson Matthey plc issues a statement on stakeholder engagement, showing its support for colleagues, customers and suppliers, communities and shareholders. It notes the impact of COVID-19 on science education for children and young people. It announces to commit a £1 million fund to local and regional areas where it operates, to improve access to a quality science education. In addition, the company’s chairman, CEO, CFO and non-executive directors announce to donate equal to 20% of their salaries and fees to provide support to the company’s special fund for science education.
In AGM updates; Weir Group plc released a further RNS in regards to their AGM (first announcement was on the 31 March 2020), due to the UK and Scottish governments ‘Stay at Home Measures’ this year’s AGM will be convened with the minimum necessary quorum of two shareholders, “Other Shareholders should not attend the AGM in person and any Shareholders that seek to attend will unfortunately not be admitted”. Drax Group released results of AGM. Smurfit Kappa Group released an update to their AGM plans “The Company considers the well-being of shareholders, attendees and employees as well as its responsibility in slowing the spread of COVID-19 as top priorities. In light of the Irish Government’s extension of the restrictions to minimise the spread of COVID-19 to 5 May 2020, it will not be possible for shareholders to attend this year’s AGM in person. The AGM will proceed with the minimum number of Directors and officers in attendance to satisfy the quorum requirements.”
Views from the investment community
- UK Economy – What Can Real-time Data Tell Us This Week?
Jefferies: Our Jefferies UK Economic Activity Radar (EAR) appears to have hit a floor, with UK activity at 32% of pre-COVID levels, unchanged on last week. The EAR combines a number of government and alternative datasets.
EAR consistent with ONS indicators: Although cautioning about reading directly across from the Jefferies UK Economic Activity Radar indicator to UK GDP and making direct international comparisons, as so much will depend on the ability of the economy to work on-line and the UK should score relatively well here. Moreover, the UK government’s decision to help underwrite furloughed workers will limit the fallout for the labour market, at least for now. But our proprietary indicator is certainly consistent with UK GDP falling by between 20% and 35% in Q2, a view also reinforced by our analysis of the faster indicators now being released by the UK ONS.
Lessons from abroad: Our Chinese indicator, for example, did not fall as much as the UK or US and, seasonally adjusted, Chinese GDP fell by almost 10% in Q1. It also worth highlighting that many of the measures tracked by our indicator – traffic congestion, international travel, hiring – were falling significantly at least one week before the official lockdown itself (24 March) suggesting that the hit to GDP may have started earlier than some were thinking (ONS release date for UK GDP for Marchand Q1, 12 May).
- Energy Services – 2020 a year of assessment. 2021 a year of M&A. More clarity likely by Nov. 2020
Société Générale: Sixteen themes for the day after. 1) Deglobalisation; 2) Remote working; 3) Local supply chains; 4) Less travel; 5) Data services in all aspects of life; 6) “Big is beautiful”; 7) Private equity; 8) M&A: defensive/financial/industrial; 9) Protectionism; 10) Resilience vs profitability;11) Strategic industries;12) “Prisoner’s dilemma”;13) OPEC +; 14) Saudi Arabia: $84/bbl oil balances budget.15) Russia: $42/bbl oil balances budget;16) Renewables: $35/bbl oil may accelerate switching. As the world emerges from COVID-19, we expect many if not all of these themes to also shape the future of the Energy Services sector.
2020: a year of assessment. The good news is that Energy Services companies are generally in better shape than in 2014. This crash, however, may prove to be more severe. Having a low proportion of fixed (vs variable) costs would therefore be critical, particularly at the SG&A level. We expect overall sector revenues to drop by 16% in 2020, 16% in2021 and 9% in 2022 and fixed costs to come down by 8%, 20% and 9%, respectively.
- European Civil Aerospace (ECA) – Too early to buy ECA stocks; cutting EPS and price targets again
J.P. Morgan: The three Cs – has the golden age passed for ECA? In the last decade ECA was one of the best-performing sectors in the market. But it is possible these returns may not be repeated. (1) COVID-19 is a major multi-year challenge. (2) Climate Change: through the 2020s civil aero companies will need to make huge investments in new technology as regulators and passengers insist on lower CO2emissions. (3) In a few years China’s first modern commercial jet will enter service. We would expect China’s government to insist its airlines use the plane; by the end of the 2020s China’s demand for Western planes is likely to be reduced.
Regulation and Corporate Governance
Please find the latest news on UK regulation below:
- 22/04/2020: The Financial Times reports that Legal & General Investment Management, has warned companies it will “hold them to account” if they fail to treat employees and suppliers well. The asset manager said it would pay close attention to how boards respond to the coronavirus after it voted against more than 4,000 company directors at annual meetings last year.
- 21/04/2020: FRC publishes further guidance on modified auditors’ opinions and reports during Covid 19 crisis.
- 21042020: The Financial Times reports Chris Woolard, interim chief executive of the Financial Conduct Authority, says that coronavirus is first serious test of post-2008 banking rules. But he admits that FCA’s ability to take action over lenders’ behaviour remained “limited”.
- 20/04/2020: The Financial Times reports that ShareAction, the responsible investment charity, has called on all FTSE 100 companies to hold virtual AGMs in 2020. The charity found that two out of three of the index’s annual meetings announced so far are set to be held with just the minimum of participants, with no opportunity for shareholders to question the board in real time.
- 20/04/2020: The Financial Times reports that regulators across Europe are asking asset managers for new information about their ability to meet investor redemptions as they seek to stave off a liquidity crunch sparked by the coronavirus market sell-off. The French and German financial watchdogs have started demanding daily updates of investor withdrawals from open-ended funds, while the regulators of Luxembourg and Ireland have also stepped up their monitoring of the sector.
- 20/04/2020: The Times reports that some of the most senior figures in the City, including Peter Hargreaves, Andy Bell, Sir Brian Williamson and Martin Gilbert, are calling for listed companies seeking equity capital in the weeks to come to try to accommodate private investors. In an open letter to plc chiefs, to be published today, the owners of investment platforms, small investor groups and mainstream fund managers have united to express deep concern that private investors are being disadvantaged and short-changed.