Covid-19: Corporate Updates: 23 April 2020

by Emma Burdett | 23rd April 2020

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Summary

The following companies in the FTSE 350 released Covid-19 specific updates today; Compass Group, Croda International, Meggitt, Anglo American, Vistry Group.

As mentioned at the beginning of the week, we are seeing a declining number of Covid-19 specific updates, however a high proportion of these specific RNS’s lead with employees and safety (Compass Group). On the back of this we are seeing a common theme emerging and a shift in focus around businesses (big & small) finding ways to evolve and partially reopen with appropriate social distancing in place (Taylor Wimpey, Aston Martin, Nissan). Nissan are trialling around 50 workers for key parts returning to work as an experiment that will pave the way for a complete reopening of their 6,000-strong factory.

Taylor Wimpey: “We took an early decision at the end of March to close our sites while we assessed in detail how to build homes without compromising on health and safety or quality. We are now confident that we have clear plans and processes in place so we can safely start back on site in a phased way beginning on 4 May.”

Aston Martin: “Further to the 24 March update on operations, over the past weeks Aston Martin Lagonda has been working closely with employees and trade unions to develop and implement protocols to protect employee health and safety in its production facilities so that they are able to return to work.”

A key takeaway to note is how companies are communicating this partial back to work, placing emphasis on employee welfare.

Compass Group provided a nice example of a further Covid-19 update thanking colleagues for their dedication and initiatives around the world as they prepare and distribute food to help those most in need. The announcement utilised a bad situation (Covid-19) to highlight successful adoption of procedures, the value their employees add and their corporate purpose. The RNS format was as follows; 1) CEO statement, 2) People, 3) Purpose, 4) Performance.

AGM updates: Bodycote was the only FTSE 350 company to release an AGM RNS today, they gave notice of their AGM and provided additional details due to Covid-19. Interestingly they are not offering shareholders the opportunity to ask questions to the board.  “The AGM will be a closed meeting and Shareholders will not be permitted to attend in person. Please do not travel to the meeting, as you will not be permitted to enter the building.”, “There will be no business update or Q&A.”

The new generic format of AGM RNS’s in our current Covid-19 era seem to follow: 1) Notice of AGM, 2) Statement of wellbeing of employees/ UK government law (stay at home measures), 3) AGM is closed, shareholders are not permitted to enter, 4) Legal note around articles of association (meeting quorum), 5) Proxy voting encouraged, 6) Q&A logistics & AGM call details (listen in only – if applicable).

Views from the investment community

  • Sustainability – The Wind and the Sun

Canaccord Genuity: We believe we are at the beginning of a radical change, effected over two decades, that will deliver lower costs, dramatically lower urban air pollution, close to zero carbon, and maintain the UK’s enviable record of grid reliability. At the centre of this change is the shift of transport and heating to being powered by electricity by default, and hydrogen for storage and certain specialist applications.

The driver of this change is, as it nearly always has been for energy, total cost of ownership. After decades of public support and technical innovation, wind and solar PV are already the lowest cost source of energy in the UK (as well as elsewhere) – beating coal & gas (before CO2 costing), nuclear and alternative renewables. We expect install rates of both to accelerate further in the next 5 years.

Aesop’s fable is about the superiority of persuasion over force: we see electricity gaining market share through customer preference, not blunt regulation. We expect an overwhelming shift to electric vehicles, and electrically powered heat pumps, over the next 15 years, both in new installations and the installed base. Beyond 2030, we expect hydrogen to grow sharply as intermittent renewable generation becomes dominant on the grid and electricity is available at low cost.

The UK is fairly typical in a European context, and we see oil & gas demand here down55% and 85%, respectively, over the next 20 years. However, Europe has been shrinking its share of the oil & gas market for decades, and we still see attractive opportunities for the Exploration & Production industry both as a niche provider in Europe and for fuel internationally.

  • Income – What next for the equity income investor?

Société Générale: Equity income investors have had a rough ride in recent years. Their requirement for a consistently growing dividend stream, an above-average dividend yield and a generally lower risk portfolio has been challenged by the overall increase in demand for higher-quality and less volatile equity. Less exciting and often slower-growing but typically lower-beta stocks that were the bread and butter of most equity income funds have been bid up on the back of lower bond yields and an overall chase, not necessarily for dividend yield per se, but for “safer bond-like” equity. And in the quest for dividend yield, equity income investors have had to venture beyond their usual comfort zone, buying into cyclical sectors such as Oil & Gas, Mining and Banks, and in well publicized cases into less liquid assets…That in part hurt their defensive nature in 2020, and this lack of defensiveness during the market rout has been a concern.

Dividend outlook: US and Japanese dividends remain resilient, with the average forecast only down about 3% since the beginning of the year, whilst Europe and Asia-Pacific ex Japan are still the two most affected regions. Asia-Pacific ex Japan dividends in particular have come under more pressure in recent weeks, with an overall -20% move ytd.

Regulation and Corporate Governance

There has been no new update. Please find the previous 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.
  • 21/04/2020: 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.
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About the Author

Emma Burdett

eburdett@maitland.co.uk

Emma has worked at Maitland/AMO for 10 years and sits on the Board of the Investor Relations Society and is also Chair of the Policy Committee

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Peter Hamid

phamid@maitland.co.uk

Peter joined Maitland/AMO in 2017 as a senior consultant in the capital markets and investor relations team

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Li Zhao 赵立

lzhao@maitland.co.uk

A Chinese native, Li is a consultant in Maitland/AMO’s capital markets team. Li works closely with UK and international clients on media relations and investor relations (IR) projects, specialising in media and market research and analysis.

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