Maitland/AMO Morning Monitor – Friday 12 June 2020
In the news
- Centrica, the owner of British Gas, revealed today that 5,000 jobs are to be cut in an effort to cut costs by simplifying the business structure. The company is due to remove three layers of management, with more than half of the job losses falling on leadership roles.
- Heathrow Airport has agreed a voluntary redundancy programme with trade unions as it prepared for the reality of a prolonged period of reduced air travel.
- The Presidents of the EU Commission, Council and Parliament will hold a videoconference with Boris Johnson about the current state of the Brexit negotiations next Monday, amidst reports that the UK will have a much less rigorous EU border checks on imports to the UK than it initially had planned, after pressure from business. However, goods going to the EU from the UK are still likely to face full checks.
- Donald Trump will resume presidential campaigning with a rally in Tulsa, Oklahoma next week, as his rival Joe Biden pulls further ahead in the polls. Commentators immediately pointed out that Tulsa was the site of one of the worst incidents of racial violence in the country’s history, when in 1921 black people and their businesses were attacked and torched by a racist mob. It was also noted that the proposed Trump rally would be held on 19 June, known in the US as “Juneteenth”, a day usually set aside to commemorate the end of slavery.
- This Sunday marks three years since the Grenfell Tower fire. At 6pm church bells across London will ring 72 times in memory of the victims, followed by a two-minute silence.
- 9.30am ONS figures published on all UK deaths between 1 March and 30 April
- 5pm Transport Secretary Grant Shapps is expected to lead the Government daily press briefing
Stock market moves
- The FTSE 100 opened down 1.3% and the STOXX Europe 600 opened down by 1.0%.
- Asian stocks dropped in Friday trade. South Korea’s Kospi led losses among the region’s major markets, falling 2.37%. Over in Hong Kong, the Hang Seng index dropped 1.3% by the afternoon as shares of HSBC fell more than 2%. Mainland Chinese stocks also edged lower, with the Shanghai composite down 0.38% while the Shenzhen component slipped 0.437%.
- Wall Street’s S&P 500 plunged 5.9% in New York, its worst day since March 16. However, futures show the S&P 500 is expected to rise by 1.1% when trading reopens on Friday.
- Oil prices were also under pressure. Brent, the international marker, fell another 1.7% to $37.91 a barrel, adding to Thursday’s 7.6% tumble after US data showed crude inventories rose to a record high.
Corporate announcements* Maitland Client
Informa PLC Trading Update
- As part of the Group’s COVID Action Plan, 160+ brands have now been cancelled or rephased from 2020 to 2021, representing ±£300m revenue, and a further 300+ brands have committed to a digital rather than a physical event in 2020.
- In total, £400m+ of cost savings have been identified, including direct savings on events already cancelled and those that have switched from physical to digital.
- The Group continues to review other areas of potential cost savings, particularly through the reassessment of its events schedule for the remainder of 2020.
- In April, the Group successfully raised £1bn of equity, significantly strengthening its balance sheet and providing the flexibility to focus on the development of long-term brand value.
- The Group has secured the provision of committed unsecured liquidity facilities totalling £250m through to 31 December 2021.
- This comprises extension to the term of existing £150m facilities plus the provision of additional facilities totalling £100m.
- The Group currently has cash balances of £130m, having fully drawn down the existing facilities of £150m.
- Cash burn before debt service is higher than this, primarily as we pay down supplier balances, at between £30m and £35m per four-week period.
- Trading for the Group in the nine months to the end of February was in line with expectations.
- As the Group has re-opened its sales channels, it now estimates sales to be c.£270m and PBT for the year ended 31 May 2020 to be no less than £85m.
- Its cash balance as at 31 May 2020 is estimated at c. £50m and it has put in place a £25m overdraft.
- In relation to the future performance of the Group, the Board feels that it is too early to know what the continuing impact of COVID-19 is likely to be.
- The Group announces the successful pricing of the non-pre-emptive placing of ordinary shares in the capital of the Company announced yesterday.
- A total of 49,339,223 new ordinary shares in the capital of the Company at a price of 200 pence per share, representing a discount of 5.0% to the closing share price of 210.5 pence on 11 June 2020.
- Together, the Placing, Subscription and Retail Offer of new ordinary shares raised gross proceeds of approximately £100m.
- The Group announces that it has completed a three-year extension to the £125m ESG facility agreement entered into in July 2019.
- The contractual final maturity of the facility is 2025, further extending the profile of Drax’s existing facilities, which include maturities to 2029.
- The ESG facility includes a mechanism that adjusts the rate of interest paid based on Drax’s carbon emissions against an annual benchmark.
- The average all-in interest rate during the first year of the extended facility is less than 2%. The Group’s overall cost of debt is less than 4% per annum.
- LFL revenue for the five months to the end of May down around 5% compared to the same period last year.
- Sales volumes have stabilised and showing early signs of recovery in all markets.
- Demand for fresh, healthy and convenient food steadily improving from a lower base.
- Significant liquidity headroom maintained.
- FY20 NAV down at -26.7% (FY19 +2.9%).
- FY20 share price down at -29.4% (FY19 +4.6%).
- Revenue return per ordinary share down 3.1% at 27.8p (FY19 28.7p).
- Glen Suarez, Chairman, said: “These results reflect the fact that UK domestic-focused stocks continued to be out of favour for most of the year, a number of stock specific issues and the sharp falls in markets following the onset on the COVID-19 crisis and the associated lockdowns. During the past year, after further review, the Board decided that the interests of the Company and its shareholders would be better served by terminating the relationship with Invesco and appointing Majedie Asset Management Limited (Majedie) instead as its new Manager.”