Maitland/AMO Morning Monitor – Friday 31 July 2020

31st July 2020

In the news

  • Large parts of Northern England were ordered back into lockdown last night, after NHS data showed COVID-19 spikes in Lancashire and West Yorkshire.
  • Republican leaders in Congress have dismissed US President Donald Trump's suggestion of an election delay.
  • Economic output across the US and Germany dropped by around one-tenth in the second quarter, demonstrating the scale of economic damage from COVID-19

Politics today

  • The ONS will publish its Infection Survey results this afternoon.
  • Last night, Luxembourg was added to the UK's quarantine list.

Stock market moves

  • Global stocks and the dollar were under pressure after the US recorded its greatest GDP contraction in its postwar history, building fears of an unstable economic recovery.
  • Despite big tech companies such as Amazon and Apple earning record profits, the S&P closed 0.4% lower.
  • Futures markets tipped the US benchmark to climb 0.2%, while the FTSE 100 was set to gain 0.4%.
  • Gold was up 0.7% to $1,969.29 per troy ounce.

Corporate announcements

* Maitland Client

London Stock Exchange Group PLC Half-year Report
  • Total Revenue up 4% to £1,058m (2019: £1,018m); total income up 8% to £1,235m (2019: £1,140m).
  • Adjusted operating profit up 8% to £575m (2019: £533m); operating profit was down 2% at £391m (2019: £399m); profit before tax of £362m (2019: £363m); profit after tax of £261m (2019: £265m).
  • David Schwimmer, CEO, said: “We are making good progress on the proposed transaction with Refinitiv, securing a number of regulatory approvals and engaging constructively with authorities on remaining approvals. We also continue to make good progress on integration planning to ensure we are ready to deliver the benefits of the transaction to our shareholders, customers and other stakeholders.  We expect to close the transaction by the end of the year or in early 2021.”
BT Group PLC 1st Quarter Results
  • Revenue £5,248m, down 7% primarily due to the impact of Covid-19, including reduced BT Sport revenue and a reduction in business activity in the Company’s enterprise units.
  • Reported profit before tax £561m, down 13%, due to reduced EBITDA, higher interest expense, and higher depreciation and amortisation charges; partly offset by the gain on disposal of the Company’s Spanish operation.
  • Outlook for 2020/21: adjusted revenue down 5% – 6%; adjusted EBITDA £7.2bn – £7.5bn; reported capital expenditure £4.0bn – £4.3bn; normalised free cash flow £1.2bn – £1.5bn.
  • Philip Jansen, CEO, said: “Although uncertainties remain, we are now able to provide an outlook for this financial year. Despite our strong operational performance in the first three months of the year, it is clear that Covid-19 will continue to impact our business as the full economic consequences unfold. Beyond this year and based on current expectations, we expect to return the business to sustainable adjusted EBITDA growth, driven in part by the recovery from Covid-19.”
BT Group PLC Rob Shuter appointed CEO of BT’s Enterprise unit
  • The Company announced the appointment of Rob Shut as CEO of its Enterprise Unit and as a member of the company’s Executive Committee.
  • Rob is currently Group President and CEO at MTN Group and is expected to join by the end of the 2020/21 financial year.
  • Philip Jansen, CEO, said: “I’m delighted to welcome Rob to BT. He brings a wealth of international telecoms experience and has a track record of driving innovation in business and consumer markets. This will make him ideally suited to drive forward the support we provide to UK businesses and public sector organisations. The UK’s economic recovery will depend on their success and BT wants to play a key part in supporting these critical parts of the economy.”
British American Tobacco PLC Half-year Report
  • Revenue increased 0.8% to £12,271m (2019: £12,170m).
  • Profit from operations was up 16.4% to £5,097m.
  • Net cash generation from the Company’s operating activities increased by 52% to £3,484m (2019: £2,288m).
  • Jack Bowles, CEO, said: ” We are on track to deliver against our 2020 guidance. We maintain our medium-term post-COVID-19 guidance of 3-5% constant currency adjusted revenue growth and high-single figure constant currency adjusted diluted EPS growth. We are committed to our 65% dividend pay-out ratio.”
Natwest Group PLC Interim Results 2020
  • H1 2020 operating loss before tax of £770m and operating profit before impairment losses of £2,088m.
  • Net impairment losses of £2,858m in H1 2020, or 159 basis points of gross customer loans, resulted in an expected credit loss coverage ratio of 1.72% across the Personal and Wholesale portfolios.
  • The Company remains committed to achieving a £250m cost reduction in 2020 and expect strategic costs to be within £0.8-1.0bn guidance after recognising property-related charges in Q2 2020.
  • Alison Rose, CEO, said: “Our performance in the first half of the year has been significantly impacted by the challenges and uncertainty our economy continues to face as a result of Covid-19. However, NatWest Group has a robust capital position, underpinned by a resilient, capital generative and well-diversified business.”
International Consolidated Airlines Group S.A IAG 2nd Quarter 2020 Results
  • Second-quarter operating loss €1,365m before exceptional items (2019 operating profit: €960m).
  • Operating loss before exceptional items for the half-year €1,900m (2019 operating profit: €1,095 million).
  • Passenger capacity decreased 95.3 percent on 2019 and for the six months down 56.2 percent on 2019.
  • Willie Walsh, CEO, said: “We continue to expect that it will take until at least 2023 for passenger demand to recover to 2019 levels. Each airline has taken actions to adjust their business and reduce their cost base to reflect forecast demand in their markets not just to get through this crisis but to ensure they remain competitive in a structurally changed industry.”
International Consolidated Airlines Group S.A IAG's chairman succesion
  • The Company’s Board of Directors has approved the succession plan for its Chairman, Antonio Vázquez.
  • Having reached nine years in office last January, Antonio Vázquez announced his intention to retire in early January 2021, stepping down from his position as member and Chairman of the Board of Directors.
  • The Company’s Board has unanimously approved the appointment of independent director Javier Ferrán as his successor.
  • Willie Walsh, CEO, said: “Antonio has shown great leadership in his management of the Board and has succeeded in getting the best out of everyone in good times and bad. Together we have created a group that has become a benchmark in the aviation industry. I thank Antonio for his friendship, his dedication during all these years, and for his work and defence of the company’s interests and that of its shareholders.”
Pets at Home PLC* Q1 Trading Statement
  • First eight weeks saw a 13.5% fall in Group like-for-like revenue as stockpiling unwound, pet sales were put on hold and services such as grooming stopped.
  • Strong recovery in second-half of the period with Group like-for-like sales up 12% to end the quarter ahead of expectations.
  • Omni-channel revenue up 71% helped by innovations such as “Call and Deliver to Car.”
  • Colleagues received a one-off ‘thank you’ bonus of £1.9m, on top of annual bonus.
  • Investing £48m in a new hi-tech distribution centre to support omni-channel growth and efficiency.
  • Peter Pritchard, CEO, said: “In spite of the rapid, wide-ranging and devastating effects of the pandemic, we have remained open for our customers throughout the period and we are emerging as a stronger business. The inherent resilience in our pet care model and the underlying pet care market, as well as encouraging signs of increased pet ownership, all underpin our confidence in seizing the future and progressing specific, strategic priorities. The significant investment in our omni-channel business is a good example of this, representing an important milestone, not just for our business and customers, but also as part of our commitment to longer term regional job creation and retention.”
Babcock International Group PLC Directorate Change
  • The Company announced the retirement of Franco Martinelli as Group Finance Director.
  • A process will start to appoint his successor.  Franco will remain in his role until his successor is in place.
  • Ruth Cairnie, Chair, said: “I would like to thank Franco on behalf of the Board for his many years of dedicated service. He has made a valuable contribution to Babcock throughout his distinguished career, and has played a significant role in the strategic development of the Group. We all wish him the very best for his retirement.”
Law Debenture Corporation PLC Half-year Report
  • The Company’s 2020 dividend to be at least equal to 2019 level of 26.0p per share.
  • On-going charges remain low at 0.48% compared to the industry average of 1.04%.
  • Denis Jackson, CEO, said: “I am grateful to our talented team for their incredible work and best in class client service through the pandemic. Despite the difficult macroeconomic backdrop, our IPS business grew revenues by 6.5% and earnings per share by an impressive 6.6%.”
Scottish American Investment Co PLC Half-year Report
  • Income including dividends and interest decreased to £9,579m (2019: £9,910m).
  • EPS fell to 6.09p (2019: 6.58p).
  • Dividends paid and payable per share rose to 6.00p (2019: 5.88p).
  • Outlook: “We are as optimistic as ever about your portfolio’s long-term prospects for resilient income growth. After the most incredible stress-test for dividends we could have devised, the portfolio’s income has held up well. Where operational performance has been affected, companies have generally taken appropriate action to harbour their resources and behave responsibly towards their employees, customers and suppliers. The long-term prospects of the holdings therefore remain bright, and we have been able to augment the portfolio by adding some new names which we have long admired, at attractive prices.”
Paragon Banking Group PLC Trading Update
  • Total advances decreased 12.9% to £619.4m (2019: £709.4m).
  • The Buy to Let pipeline dropped 11.1% to £651.3m (2019: £732.7m).
  • Net loans increased 5.1% to £12.6bn (2019: 12.0bn).
  • Nigel Terrington, CEO, said: “Our people and operations have shown considerable resilience, agility and adaptability during this difficult period. New business flows have picked-up from their April lows and with improving performance in customer payments no additional overlay provision has been required. There may well be further challenges to come from this crisis, which we are well placed to deal with. We have strong levels of capital and liquidity and are well placed to develop our core businesses as well as make the most of any potential opportunities that will arise in future.”
London Stock Exchange Group PLC LSEG All Share Acquisition of Refinitiv - Update
  • In the context of the European Commission’s Phase II review, LSEG confirms that it has commenced exploratory discussions which may result in a sale of its interest in MTS or potentially the Borsa Italiana group as a whole.
  • There can be no certainty that LSEG will decide to proceed with a transaction relating to either of these businesses.
  • LSEG also confirms today that the United States Department of Justice has closed its antitrust investigation of the transaction without remedies.
  • LSEG expects to close the Refinitiv transaction by the end of 2020 or early in 2021.