Maitland/AMO Morning Monitor – Friday 15 May 2020
In the news
- BT is in talks to sell a multi-billion-pound stake in Openreach, according to reports in the F. It plans to use the cash to bankroll the £12 billion upgrade of Britain’s broadband network. The telecom group will also hope it may help reverse a downward spiral which has seen its share price fall 80% over the past five years to the lowest level since 2009.
- Transport for London, which runs the Tube and busses in the capital, is to get a £1.6billion bail-out from government. TfL had a £2bn cash buffer before the start of the crisis but it has been burning through it rapidly as Tube journeys – and therefore ticket revenue – plummeted by 95% and bus fares by 85%.
- Car parts firm TI Fluid Systems has been formally blocked from making a £27m dividend payment to investors while using the government’s furlough scheme which is funded by taxpayers.
- Nissan is in talks to shift production of two Renault models from Spain to its plant in Sunderland, securing thousands of British manufacturing jobs.
- Cananry Wharf has drawn up detailed plans to safeguard people, with around 10% of its bankers, lawyers and accountants return to work from next week. The measures include one-way walkways and limiting numbers entering lifts. A spokesman said they believe up to half the workforce could return and still maintain social distancing.
- Cancelling rent would be ‘un-Labour’, frontbencher tells party’s left amid row over Covid-19 help
- Labour demands ‘transparency and accountability’ over Covid-19 contracts handed to private sector
- Michael Gove has told Brussels there is a “serious risk” that the rights of UK nationals living in the bloc are not being protected, in an escalating row over the issue
Stock market moves
- Shares across Asia-Pacific inched higher as fresh signs that China’s economy could be recovering from the coronavirus crisis helped ease investors’ nerves over rising tensions between Washington and Beijing. Japan’s benchmark Topix index rose 0.4 per cent while Hong Kong’s Hang Seng index dropped 0.4 per cent. China’s CSI 300 of Shanghai- and Shenzhen-listed stocks was virtually flat after paring earlier losses.
- US president Donald Trump warned overnight that he could “cut off the whole relationship” with Beijing in the latest escalation of geopolitical tensions as Mr Trump seeks to pin the blame on China for the explosion of coronavirus cases in the US and elsewhere in the world. The S&P 500 closed 1.2 per cent higher overnight as shares in hard-hit US banks surged, offsetting a slide in industrial stocks. Data showed another 3m Americans had filed for unemployment benefits, taking the total to 36m in eight weeks. US Futures as of 8:30am BST point however point toward a positive open this afternoon.
- In Europe, the Eurostoxx 600 and FTSE 100 are trading up in the early hours.
Corporate announcements* Maitland Client
Royal Mail PLC COVID-19 Update and Directorate Change
- The Board and Rico Back have agreed he will step down as Group CEO, and from the Group Board, with immediate effect. Keith Williams becomes interim Executive Chair of Royal Mail Group and Stuart Simpson becomes interim CEO of Royal Mail. Keith Williams will assume the role, with immediate effect, of interim Executive Chair to lead discussions with stakeholders about an accelerated pace of change across the business. He is expected to remain in this executive role until a permanent CEO of Royal Mail is appointed.
- No bonuses will be paid to Executive Directors for 2019-20. In recognition of the role played by frontline staff, around £25m has been set aside to be paid as a cash bonus. Frontline colleagues who, since March, have been at work throughout the crisis will receive a cash recognition award of up to £200 in June.
- Following on from the year end, Scottish Mortgage’s share price increased by 23 per cent. from the end of March to close of day on 12 May 2020, driven by the strength of the portfolio’s performance. As a result, the Company reached a new milestone of over £10bn in market capitalisation.
- The Board is recommending that this year, the total dividend be increased by 4% on the level of the previous year to a total of 3.25p (2019: 3.13p).
- Professor John Kay has decided not to stand for re-election at this year’s AGM and will retire from the Board in June after twelve years’ service as a Director.
- Fiona McBain, Chair, said: “In the current difficult environment, I wish to conclude with the positive reminder that, ‘this too will pass’. While humans are generally poor at understanding and dealing with sudden change in the moment, as a group we excel at innovation and adaptation over the longer term. Collectively, we will find ways to move forward.”
- The Company announces that Pim Vervaat, Non-Executive Director of Avon Rubber plc, has been appointed Senior Independent Director of Luceco plc with effect from 1 September 2020.
- Moneysupermarket.com Group PLC announces the appointment of Peter Duffy as Chief Executive Officer. Peter will succeed Mark Lewis who, as announced in February, is stepping down as CEO.
- Peter Duffy will take up the position of CEO and join the Board on 1 September 2020, subject to normal regulatory approvals.
- Robin Freestone, Chair of Moneysupermarket, said: “After an extensive search, we’re pleased to appoint Peter Duffy as our new CEO. He has the track record we’re looking for: experience of digital businesses and a dynamic leadership style that’s been honed in fast moving trading environments, including nearly 7 years at easyJet.”
- Adjusted EBITDA up 20% from $144.4m to $172.7m, driven by the Thermal division, reflecting the Mexico CHP acquisition completed in November 2019 (+$25m), and higher availability and capacity factors in some of our power generation assets (+$5m). Adjusted EBITDA in the Renewable division of $68m was in line with the comparable period.
- Current trading is in line with the Company’s expectations. As a result, the Company reiterates its guidance for Adjusted EBITDA in the range of $710m – $745m highlighted in the 2019 Full Year Results Announcement and maintain its dividend policy of an 10% annual increase in dividend per share.
- Strong cash flow generation with Funds from Operations reaching $74.5m in Q1 2020, an 8% increase from Q1 2019, mainly explained by growth in Adjusted EBITDA, offset by higher interest expense due to Mexican CHP related interest, higher maintenance capex and higher distributions to minorities.
- Joseph Brandt, CEO, said: “I am pleased to confirm the first quarter dividend payment of 4.0591 cents per share, maintaining our commitment to a 10% annual increase in dividends and which reflects our strong and predictable cash flow generation.”
- The Company announces that it has approved a quarterly dividend, for the three months ended 31 March 2020, of USD 4.0591 cents per share, equivalent to $27.11m.
- This dividend reflects the Company’s target of 10% year-on-year growth in dividend per share, which is supported by ContourGlobal’s strong and predictable cash flow generation.
- Revenue for April is around 50% compared to the same month in 2019 which is in line with the guidance provided to investors during the recent Placing.
- Pleasingly, driven by reductions to our monthly operating costs of around £100m along with continued support from governments and customers, we generated positive EBITDA, slightly ahead of our expectations.
- We have further improved our liquidity since our last update, and now have around £1.5 billion of cash and undrawn committed facilities.
- North American School Bus: we have won our first contract (subject to school board approval) that came to market after the previous operator had the service removed following
- We have started selling UK coach tickets for a 1 July re-start – respecting government guidance and advice – of a core coach network that focuses on large and medium-sized conurbations.
- Revolving Credit Facility covenants waived for 2020 and reset for 2021, cash burn reduced to c.£15m per month and liquidity in excess of £700m.
- Online International net revenue grew 35% driven by a strong performance in gaming. Online UK grew in line with expectations as net revenue grew 7% or 6% on a pro forma basis. During the period, both NPS and customer satisfaction scores saw material increases reflecting the launch of a new gaming front end and improvements made to the user experience.
- The Company concludes the period in a strong financial position with significant headroom. The outstanding amount on the 2020 bond of £203m is scheduled for repayment in June
- Ulrik Bengtsson, CEO, said: “We reacted quickly to the cancellation of sports activities and the closure of our retail estate. We took immediate measures to save costs, reduce cash outflow and minimise non-essential expenditure by negotiating with our suppliers, cancelling pay rises and executive bonuses and suspending the dividend. We have preserved liquidity and amended the terms of our net debt covenant, leading to significant, balance sheet headroom. This will enable us to continue to invest for growth, most notably in the US, as plans there to roll out sports betting continue apace.”
- Revenue for the continuing Group was down 72% in April, resulting in a decline of 28% in the first four months of the year. On a like-for-like basis revenue was down 69% in April and down 24% in the first four months of the year.
- At the end of April our RCF facility was drawn by $49m, leaving $351m of undrawn facilities plus cash held of $74m. This represents total headroom of $425m.
- The Group will now publish its interim results for the half year ended 30 June 2020 on 8 September 2020 and not 4 August 2020 as previously communicated.
- Mark Johnstone, CEO, said: “I am extremely proud of how our Signature teams are continuing to deal with the COVID-19 pandemic, supporting their local communities and adapting every day as we have taken the necessary and appropriate action to manage our costs to best match current flying and tenant activity. Encouragingly, we have seen some early signs of an improvement in flight activity in the US in May. Our business continues to have attractive fundamentals and medium-term prospects, and our ability to both manage cost in a timely manner and deliver robust cash generation has contributed to the Group being cash flow positive in the month of April.”
- TRIG has completed the acquisition of a c.36% equity interest in Merkur, the 396MW operational offshore wind farm in the German North Sea. This follows the exchange of contracts to acquire the Project announced in December 2019, and receipt of German foreign investment approvals and EU merger clearances.
- As announced in December, TRIG intends to sell down a share of its investment to minority co-investors managed by InfraRed, leaving TRIG with an approximate 25% equity interest in the Project. This is expected to complete in July 2020 and once completed, the investment is expected to represent approximately 8% of TRIG’s portfolio value. TRIG has also partnered with the Dutch pension investor, APG, who acquired the remaining c.64% in the Project.
- TRIG has made an additional investment into Fujin SAS, a holding company that owns a portfolio of five operational windfarms in France with a gross generation capacity of 87.8MW. TRIG made an initial investment in Fujin in June 2019, and this additional investment takes TRIG’s holding in Fujin from 35% to 42%.
- 1Q20 Total NAV Return was -11.9%. LTM Total NAV Return was 0.0% reflecting the impact of COVID-19 on the portfolio’s performance with valuations negatively affected.
- 1Q20 Total Return of Private Equity was -11.6%. Derived Debt delivered Total Return of -7.7%. Derived Equity had a Total Return of -25.1%.
- AGA was 97% invested with net cash after liabilities of €27.2m.
- Ralf Gruss, COO, said: “The COVID-19 crisis has impacted AGA’s first quarter returns. Much of AGA’s portfolio is in sub-sectors that are currently less severely impacted, and we remain confident that AGA and its portfolio are well-placed to navigate through these difficult times and capitalise on new opportunities during the recovery phase.”
- boohoo has announced that, further to the announcement made on 14 May 2020 entitled “Proposed Accelerated Bookbuild to raise gross proceeds of up to approximately £200m”, the Bookbuild has closed and the Group has raised gross proceeds of £197.7m through the successful private placing of 58,140,591 Placing Shares, representing 5.0% of the company’s issued share capital, at a price of 340 pence per Placing Share.
- Application has been made for the 58,140,591 Placing Shares to be admitted to trading on AIM at 8.00 a.m. on 20 May 2020.
- Once Admission occurs, the Placing will have successfully completed.